Oportun Completes $200 Million Asset Backed Securitization
- Oportun (OPRT) successfully issued $200 million of fixed rate asset-backed notes.
- The offering included four classes of notes with ratings from KBRA.
- The weighted average coupon on the transaction was 8.434%.
- Investor confidence in Oportun's consumer loans was reflected in the significant demand and pricing of the securitization.
- None.
Insights
The issuance of $200 million in asset-backed notes by Oportun is a strategic move that could indicate a strengthening of the company's balance sheet. The diversification of note classes with different ratings and yields caters to a range of institutional investors, suggesting a broad-based confidence in the company's credit portfolio. The weighted average coupon rate of 8.434% is relatively high, which could reflect the current interest rate environment or a premium demanded by investors for the risk associated with Oportun's consumer loans.
In the short-term, this capital infusion is likely to provide Oportun with the liquidity necessary to fund operations and potentially expand its loan offerings. Over the long-term, the success of this securitization could lower the company's cost of capital and enhance its profitability, assuming the performance of the underlying loans remains stable. However, investors should monitor the performance of these asset-backed notes given the varying credit quality indicated by the tranche ratings from KBRA.
The ratings assigned by KBRA to the four classes of notes—ranging from AA- for Class A to BB- for Class D—reflect a structured credit approach, where the higher-rated notes are likely to be senior in the capital structure, offering more protection to investors but at a lower yield. The lower-rated notes, while offering higher yields, carry a greater risk of default. The spread between the coupons of the different classes indicates a market that is currently risk-averse, especially given the double-digit coupon for the Class D notes.
Investors should consider the implications of the macroeconomic environment on unsecured and secured installment loans, particularly in scenarios of economic downturns where default rates can increase. The securitization process allows Oportun to transfer some of the credit risk to investors, but the quality of the underlying loan pool will be a determinant factor in the performance of these notes. The credit quality of Oportun's consumer loans will need to be monitored closely, as it will impact the recovery rates and overall return for investors.
The participation of prominent institutions like Morgan Stanley, Goldman Sachs, J.P. Morgan Securities and Jefferies as initial purchasers and co-managers signals a strong market interest in fintech credit instruments. The fact that these notes were placed with institutional investors rather than through public offerings may also indicate a targeted fundraising strategy by Oportun, which could result in a more efficient capital raising process with potentially lower transaction costs.
Market trends show an increasing appetite for asset-backed securities, particularly as they offer higher yields in a low-interest-rate environment. However, the high coupons on Oportun's notes suggest that there may be perceived higher risk in fintech lending platforms, or that these institutions are seeking higher returns for their investment in a potentially volatile market segment. It is important for stakeholders to compare these rates with industry benchmarks to assess the competitiveness and risk-adjusted returns of Oportun's offering.
SAN CARLOS, Calif., Feb. 13, 2024 (GLOBE NEWSWIRE) -- Oportun (Nasdaq: OPRT), a mission-driven fintech, today announced the issuance of
The offering included four classes of fixed rate notes: Class A, Class B, Class C, and Class D. KBRA rated all classes of notes, assigning ratings of AA-, A-, BBB-, and BB-, respectively. All classes of notes were placed with four institutions as the initial purchasers: Morgan Stanley, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, and Jefferies. Morgan Stanley also served as the sole structuring agent and bookrunner. Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, and Jefferies served as co-managers.
The weighted average coupon on the transaction was
“The significant demand for and pricing of this securitization reflects investor confidence in the credit quality of Oportun’s consumer loans and our business model,” said Jonathan Coblentz, Chief Financial Officer at Oportun. “The closing of this deal positions Oportun to enhance its profitability in the current environment while advancing our mission to help our hardworking members build a better future.”
For more information visit oportun.com.
This press release does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
About Oportun
Oportun (Nasdaq: OPRT) is a mission-driven fintech that puts its 2.1 million members' financial goals within reach. With intelligent borrowing, savings, and budgeting capabilities, Oportun empowers members with the confidence to build a better financial future. Since inception, Oportun has provided more than
| Oportun Investor Contact Dorian Hare (650) 590-4323 ir@oportun.com | Oportun Media Contact Usher Lieberman (650) 769-9414 usher.lieberman@oportun.com |
FAQ
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