OneMain Financial, a subprime lender specializing in auto and personal loans, is actively soliciting buyers for a takeover bid, according to news outlets citing sources familiar with the matter.
This proposed acquisition is the latest in a long line of successions. Citigroup’s former consumer lending arm, CitiFinancial, renamed itself OneMain in 2011 following the financial crisis. Then Springleaf Financial, an online personal loan lender, acquired OneMain in 2015 and converted its branding under the OneMain name.
There are a number of parties interested in buying the company, including rival lenders and private-equity firms, according to anonymous sources cited by The Wall Street Journal.
OneMain did not respond to a request for comment by press time. Notably, the request was made during a bank holiday and this article will be updated appropriately.
Although the company does not break out auto loans in its earnings, President and Chief Executive Jay Levine said that auto comprised 24% of the company’s total originations in the second quarter, up from 18% in the fourth quarter of 2016. Given that the company’s total consumer and insurance originations totaled $3 billion in 2Q, that would place auto originations at roughly $720,000, according to the company’s latest earnings report.
OneMain’s growth in the auto sector has hinged on its direct lending product and title loan program.
“We are not in the auto finance business as the industry generally defines it,” Levine said back on the company’s first-quarter earnings call. “Our basic loan product continues to be the traditional installment loan, which — in certain cases — may be secured by the borrower’s title vehicle. Our loans are underwritten against the borrower’s ability to repay, and the presence of collateral serves to reduce the bulk frequency with law severity eating much less in the back.”
OneMain is one of the only companies on the secondary market securitizing this type of specialty loan, which makes it an entity to watch, Amy Martin, lead analyst for Auto ABS at S&P Global, said at the 2017 Nonprime Auto Financing Conference.
“The OneMain deal is very different from the others listed here,” she said. “These individuals did not go and secure the loan at the time they bought the vehicle; this is basically cash-out refinancing, so this is really a new type of financing being securitized and we do not consider it the same as title lending.”
OneMain also does not break out auto loan outstandings, but Levin said during the 2Q earnings call that the company holds $2.5 billion of secured direct auto loans representing 40% of the total portfolio.
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