OneMain expects leverage to rise to normal level after Covid pandemic

By Devika Patel

Knoxville, Tenn., Feb. 9 – OneMain Holdings, Inc. expects its leverage to increase in future quarters, returning to more normalized levels after the Covid-19 pandemic brought the company’s leverage down to 4.3x as of Dec. 31, on the low end of its targeted range of 4x to 6x.

“We finished 2020 at the lower end of our leverage guidance and our longer-term target range of 4x to 6x,” executive vice president and chief financial officer Micah Conrad said on the company’s fourth quarter and year ended Dec. 31 earnings conference call on Tuesday.

“We anticipate future quarters will be closer to the mid-point of this range in line with our leverage level going into the Covid crisis,” Conrad said.

The company plans to keep managing its liabilities proactively, extending debt maturities.

“We continue to benefit from proactive liability management that has provided a material benefit to our cost of funds while extending our maturities,” Conrad said.

“We expect this trend to continue,” he said.

The company redeemed some bonds this year using funds from last quarter’s 10-year bond sale.

“During the quarter, we again took advantage of a favorable credit market, issuing an $850 million 10-year bond at 4%,” Conrad said.

“In early January, we used proceeds from that bond to redeem $650 million of 7¾% bonds that were originally scheduled to mature in October of this year.

“Our next bond maturity is now May of 2022,” he said.

The company has good liquidity.

“We continue to maintain significant sources of liquidity,” Conrad said.

“With $2.1 billion of available cash, $7.2 billion in undrawn conduit capacity and $9.2 billion of unencumbered receivables,” he said.

OneMain had $2.3 billion of cash and cash equivalents at year-end. As of Dec. 31, the company had $18.1 billion of outstanding principal debt balances, 43% of which was secured and 57% of which was unsecured.

On Dec. 8, OneMain priced an upsized $850 million issue of senior notes due Sept. 15, 2030 (Ba3/BB-//Kroll: BB+) at par to yield 4% in a drive-by.

The issue size increased from $500 million.

The yield printed 12.5 basis points tighter than yield talk in the 4¼% area. Initial guidance was 4 3/8% to 4½%.

Lead left bookrunner RBC Capital Markets LLC will bill and deliver. Active bookrunners were Deutsche Bank Securities Inc. and Natixis Securities Americas LLC.

Passive bookrunners were Barclays, BNP Paribas Securities Corp., Citigroup Global Markets Inc., Citizens Capital Markets Inc., Goldman Sachs & Co. LLC, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC, NatWest Markets Securities Inc., Regions Securities LLC and SG Americas Securities LLC.

The Evansville, Ind.-based financial services provider, formerly known as Springleaf Holdings, earmarked the proceeds, together with cash on hand, to redeem $650 million of its outstanding 7¾% senior notes due 2021 and for general corporate purposes.

© 2015 Prospect News.
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