Regional Management Corp. Completes $187 Million Asset-Backed Securitization

Rhea-AI Summary

Regional Management Corp. (NYSE: RM) has successfully completed a $187.3 million asset-backed securitization, its tenth such transaction. The notes, issued under Regional Management Issuance Trust 2024-1, come with a weighted-average coupon of 6.19%, a 132 bps improvement over the prior issuance. The securitization is backed by $215.7 million in receivables and features a 3-year revolving period. The Class A notes achieved a top 'AAA' rating from Standard & Poor’s and Morningstar DBRS. According to CEO Robert W. Beck, this transaction strengthens the company’s balance sheet, diversifies funding sources, and reduces interest rate risk. The company now has 87% fixed-rate debt with a weighted-average coupon of 4.1% and a revolving duration of 1.2 years. The offering was private and not registered under the Securities Act of 1933.

Positive

• Completed $187.3 million asset-backed securitization.
• Achieved a 6.19% weighted-average coupon, a 132 bps improvement over prior issuance.
• Class A notes received 'AAA' ratings from Standard & Poor’s and Morningstar DBRS.
• Securitization backed by $215.7 million in receivables.
• Features a 3-year revolving period.
• Transaction strengthens the company's balance sheet.
• Diversifies funding sources.
• Reduces interest rate risk.
• 87% of total debt is fixed-rate with a weighted-average coupon of 4.1%.
• Weighted-average revolving duration of 1.2 years.

Negative

• The transaction was a private offering, not registered under the Securities Act of 1933.

Insights

Financial Analyst

The completion of a $187.3 million asset-backed securitization by Regional Management Corp. is notable, especially given the improved cost of capital compared to their previous securitization. The improved weighted-average coupon of 6.19%, which is 132 bps better than the previous issuances, signifies enhanced investor confidence and reduced cost of borrowing for the company.

This transaction is particularly significant in the context of the company’s broader financial strategy. By securing $215.7 million of receivables with top-rated notes, Regional Management Corp. fortifies its balance sheet and diversifies funding sources, which can offer substantial financial stability. Furthermore, having 87% of their debt in fixed-rate instruments with a weighted-average coupon of 4.1% positions them well against interest rate volatility.

Key points for retail investors include the strong credit ratings from Standard & Poor’s and Morningstar DBRS, which suggest a lower risk of default. This securitization should provide Regional Management Corp. with more predictable cash flows and potentially higher margins due to lower financing costs. However, investors should also note the 3-year revolving period, which means the transaction has a certain level of flexibility and potential periodic adjustments.

Market Research Analyst

The successful completion of this securitization reflects a favorable market environment for asset-backed securities. It also underscores investor confidence in Regional Management Corp.'s underlying asset pool. The issuance of AAA-rated Class A notes is particularly important, as it implies a high level of creditworthiness and security for investors, which can attract further investments and bolster the company's market standing.

The 132 bps improvement over the prior issuance can be seen as a positive trend, suggesting that the company is leveraging its reputation and consistent performance to negotiate better terms. This transaction also illustrates a broader trend in the consumer finance sector where companies are increasingly using securitization to manage funding costs and diversify their capital sources. This diversification of funding sources is a strategic move to mitigate risks and ensure long-term financial stability.

Retail investors should be aware that while the securitization improves short-term liquidity and reduces funding costs, it also depends on the future performance of the underlying receivables. Any downturn in the consumer finance market could impact the expected returns from these securitized assets.

GREENVILLE, S.C.--(BUSINESS WIRE)-- Regional Management Corp. (NYSE: RM), a diversified consumer finance company, announced today that it has completed a $187.3 million asset-backed securitization, marking its tenth successful securitization.

The Regional Management Issuance Trust 2024-1 (RMIT 2024-1) notes were issued at a weighted-average coupon of 6.19% (a 132 bps improvement over the prior RMIT 2022-2B issued notes), secured by $215.7 million of receivables, with a 3-year revolving period. The Class A notes of the securitization received a top rating of “AAA” from Standard & Poor’s and Morningstar DBRS.

“We are pleased to complete our latest securitization at an improved cost of capital compared to our prior securitization, which is a continued testament to the market’s confidence in Regional,” said Robert W. Beck, President and Chief Executive Officer of Regional Management Corp. “The securitization fortifies our balance sheet, further diversifies our funding sources, and moderates our exposure to interest rate risk. As of the transaction’s closing, our fixed-rate debt as a percentage of total debt was 87%, with a weighted-average coupon of 4.1% and a weighted-average revolving duration of 1.2 years. We remain well-positioned to execute on our strategy to deliver sustainable returns and long-term value to our shareholders.”

The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities law. All of such securities having been sold, this announcement of their sale appears as a matter of record only.

About Regional Management Corp.

Regional Management Corp. (NYSE: RM) is a diversified consumer finance company that provides attractive, easy-to-understand installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. Regional Management operates under the name “Regional Finance” online and in branch locations in 19 states across the United States. Most of its loan products are secured, and each is structured on a fixed-rate, fixed-term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. Regional Management sources loans through its multiple channel platform, which includes branches, centrally managed direct mail campaigns, digital partners, and its consumer website. For more information, please visit www.RegionalManagement.com.

Forward-Looking Statements

This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent Regional Management Corp.’s expectations or beliefs concerning future events. Forward-looking statements include, without limitation, statements concerning financial outlooks or future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “outlook,” and similar expressions may be used to identify these forward-looking statements. Such forward-looking statements speak only as of the date on which they were made and are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. As a result, actual performance and results may differ materially from those contemplated by these forward-looking statements. Therefore, investors should not place undue reliance on forward-looking statements.

Factors that could cause actual results or performance to differ from the expectations expressed or implied in forward-looking statements include, but are not limited to, the following: managing growth effectively, implementing Regional Management’s growth strategy, and opening new branches as planned; Regional Management’s convenience check strategy; Regional Management’s policies and procedures for underwriting, processing, and servicing loans; Regional Management’s ability to collect on its loan portfolio; Regional Management’s insurance operations; exposure to credit risk and repayment risk, which risks may increase in light of adverse or recessionary economic conditions; the implementation of evolving underwriting models and processes, including as to the effectiveness of Regional Management's custom scorecards; changes in the competitive environment in which Regional Management operates or a decrease in the demand for its products; the geographic concentration of Regional Management’s loan portfolio; the failure of third-party service providers, including those providing information technology products; changes in economic conditions in the markets Regional Management serves, including levels of unemployment and bankruptcies; the ability to achieve successful acquisitions and strategic alliances; the ability to make technological improvements as quickly as competitors; security breaches, cyber-attacks, failures in information systems, or fraudulent activity; the ability to originate loans; reliance on information technology resources and providers, including the risk of prolonged system outages; changes in current revenue and expense trends, including trends affecting delinquencies and credit losses; any future public health crises, including the impact of such crisis on our operations and financial condition; changes in operating and administrative expenses; the departure, transition, or replacement of key personnel; the ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support Regional Management’s operations and initiatives; changes in interest rates; existing sources of liquidity may become insufficient or access to these sources may become unexpectedly restricted; exposure to financial risk due to asset-backed securitization transactions; risks related to regulation and legal proceedings, including changes in laws or regulations or in the interpretation or enforcement of laws or regulations; changes in accounting standards, rules, and interpretations and the failure of related assumptions and estimates; the impact of changes in tax laws and guidance, including the timing and amount of revenues that may be recognized; risks related to the ownership of Regional Management’s common stock, including volatility in the market price of shares of Regional Management’s common stock; the timing and amount of future cash dividend payments; and anti-takeover provisions in Regional Management’s charter documents and applicable state law.

The foregoing factors and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management will not update or revise forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law. Regional Management is not responsible for changes made to this document by wire services or Internet services.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240613784629/en/

Investor Relations

Garrett Edson, (203) 682-8331

investor.relations@regionalmanagement.com

Source: Regional Management Corp.

FAQ

What is the value of Regional Management Corp's recent securitization?

The recent securitization by Regional Management Corp. is valued at $187.3 million.

What is the weighted-average coupon rate for RM's latest securitization?

The weighted-average coupon rate for Regional Management Corp's latest securitization is 6.19%.

How did the rating agencies grade RM's Class A notes?

The Class A notes received 'AAA' ratings from Standard & Poor’s and Morningstar DBRS.

What is the receivables backing the latest securitization of RM?

The latest securitization by Regional Management Corp. is backed by $215.7 million in receivables.

How long is the revolving period for RM Issuance Trust 2024-1?

The revolving period for the Regional Management Issuance Trust 2024-1 is 3 years.

What percentage of RM's total debt is fixed-rate after the latest securitization?

After the latest securitization, 87% of Regional Management Corp's total debt is fixed-rate.

What is the weighted-average coupon of RM's fixed-rate debt?

The weighted-average coupon of Regional Management Corp's fixed-rate debt is 4.1%.

Was RM's recent securitization publicly offered?

No, Regional Management Corp's recent securitization was a private offering and not registered under the Securities Act of 1933.