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Item 2.01
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Completion of Acquisition or Disposition of Assets.
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On November 15, 2015 (the “Closing Date”), pursuant to the Stock Purchase Agreement, dated as of March 2, 2015 (the “Stock Purchase Agreement”), by and between OneMain Holdings, Inc. (formerly, Springleaf Holdings, Inc.) (the “Company”) and CitiFinancial Credit Company (the
“Seller”),
the Company, through a wholly-owned subsidiary, Independence Holdings, LLC, completed its previously announced acquisition of OneMain Financial Holdings, LLC (the successor to OneMain Financial Holdings, Inc.) (“OneMain”) from the Seller (the “OneMain Acquisition”) for $4,493,290,609 in cash after accounting for certain estimated adjustments at closing. OneMain is a leading consumer finance company in the United States, providing personal loans to primarily middle income households through a national, community based network of 1,139 branches as of September 30, 2015, serving approximately 1.3 million customer accounts across 43 states.
The foregoing description of the Stock Purchase Agreement is qualified in its entirety by reference to the full text of the Stock Purchase Agreement, a copy of which is attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on March 3, 2015 and incorporated by reference herein.
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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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As of the Closing Date, OneMain became an indirect wholly-owned subsidiary of the Company. A description of OneMain’s indebtedness follows:
Securitization Financings
On April 17, 2014, OneMain completed its initial securitization transaction in which OneMain Financial Issuance Trust 2014-1, a wholly owned special purpose entity of OneMain, issued fixed-rate funding notes with an initial principal balance of $760 million. The notes mature in June 2024 and have a twenty-three month revolving period. These notes are collateralized by a pool of secured and unsecured fixed rate personal loans with an aggregate unpaid principal balance of $995 million as of November 13, 2015. The indenture governing the notes contains customary early amortization events and events of default, which, if triggered, may result in the acceleration of the obligation to pay principal and interest on the notes. As of November 13, 2015, the weighted average interest rate for the notes was 2.57%.
On July 30, 2014, OneMain completed a securitization transaction in which the OneMain Financial Issuance Trust 2014-2, a wholly owned special purpose vehicle of OneMain, issued fixed-rate funding notes with an initial principal balance of $1.2 billion. The notes mature in September 2024 and have a twenty-three month revolving period. These notes are collateralized by a pool of secured and unsecured fixed rate personal loans with an aggregate unpaid principal balance of $1.3 billion as of November 13, 2015. The indenture governing the notes contains customary early amortization events and events of default, which, if triggered, may result in the acceleration of the obligation to pay principal and interest on the notes. As of November 13, 2015, the weighted average interest rate for the notes was 3.09%.
On February 5, 2015, OneMain completed a securitization transaction in which the OneMain Financial Issuance Trust 2015-1, a wholly owned special purpose vehicle of OneMain, issued fixed-rate funding notes with an initial principal balance of $1.2 billion. The notes mature in March 2026 and have a thirty-five month revolving period. These notes are collateralized by a pool of secured and unsecured fixed rate personal loans with an aggregate unpaid principal balance of $1.4 billion as of November 13, 2015. The indenture governing the notes contains customary early amortization events and events of default, which, if triggered, may result in the acceleration of the obligation to pay principal and interest on the notes. As of November 13, 2015, the weighted average interest rate for the notes was 3.88%.
On May 21, 2015, OneMain completed a securitization transaction in which the OneMain Financial Issuance Trust 2015-2, a wholly owned special purpose vehicle of OneMain, issued fixed-rate funding notes with an initial principal balance of $1.3 billion. The notes mature in July 2025 and have a twenty-three month revolving period. These notes are collateralized by a pool of secured and unsecured fixed rate personal loans with an aggregate unpaid principal balance of $1.3 billion as of November 13, 2015. The indenture governing the notes contains customary early amortization events and events of default, which, if triggered, may result in the acceleration of the obligation to pay principal and interest on the notes. As of November 13, 2015, the weighted average interest rate for the notes was 3.25%.
On September 29, 2015, OneMain completed a securitization transaction in which the OneMain Financial Issuance Trust 2015-3, a wholly owned special purpose vehicle of OneMain, issued fixed-rate funding notes with an initial principal balance of $293 million. The notes mature in November 2028 and have a fifty-nine month revolving period. These notes are collateralized by a pool of secured and unsecured fixed rate personal loans with an aggregate unpaid principal balance of $325 million as of November 13, 2015. The indenture governing the notes contains customary early amortization events and events of default, which, if triggered, may result in the acceleration of the obligation to pay principal and interest on the notes. As of November 13, 2015, the weighted average interest rate for the notes was 4.31%.
6.75% Notes and 7.25% Notes
On December 11, 2014, OneMain and certain of its subsidiaries entered into an indenture (the “OneMain Indenture”), among OneMain, the guarantors listed therein and The Bank of New York Mellon, as trustee, in connection with OneMain’s issuance of $700 million aggregate principal amount of 6.75% Senior Notes due 2019 (the “2019 Notes”), and $800 million in aggregate principal amount of 7.25% Senior Notes due 2021 (the “2021 Notes”, and, together with the 2019 Notes, the “Notes”). The Notes are OneMain’s unsecured senior obligations, guaranteed on a senior unsecured basis by each of its wholly owned domestic subsidiaries other than certain subsidiaries, including its insurance subsidiaries and securitization subsidiaries. The 2019 Notes mature on December 15, 2019 and bear interest at a fixed rate of 6.75% per annum. The 2021 Notes mature on December 15, 2021 and bear interest at a fixed rate of 7.25% per annum. Interest on the Notes is payable semi-annually in arrears on June 15 and December 15 of each year beginning on June 15, 2015. The proceeds were used to repay debt owed to Citigroup Inc., the indirect former owner of OneMain.
The OneMain Indenture contains restrictive covenants that limit, among other things, OneMain’s ability and the ability of most of its subsidiaries to incur additional debt; create liens securing certain debt; pay dividends on or make distributions in respect of its capital stock or make investments or other restricted payments; create restrictions on the ability of its restricted subsidiaries to pay dividends to OneMain or make certain other intercompany transfers; sell certain assets; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with affiliates. The OneMain Indenture also contains customary events of default which would permit the trustee or the holders of the Notes to declare the Notes to be immediately due and payable if not cured within applicable grace periods, including the nonpayment of principal, interest or premium, if any, when due; violation of covenants and other agreements contained in the OneMain Indenture; payment default after final maturity or cross acceleration of certain material debt; certain bankruptcy and insolvency events; material judgment defaults; and the failure of any guarantee of the notes, other than in accordance with the terms of the OneMain Indenture or such guarantee.
The OneMain Indenture also includes a change of control repurchase provision pursuant to which if (x) a change of control of OneMain occurs and (y) both Standard & Poor’s Ratings Services (“S&P”) and Moody’s Investors Services, Inc. (“Moody’s”) downgrade or withdraw the ratings of a specific series of Notes attributable to such change of control, OneMain is required to offer to purchase all of such series of Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to but excluding the date of repurchase, subject to the right of holders of such series of Notes of record on the relevant record date to receive interest due on the relevant interest payment date. The closing of the OneMain Acquisition resulted in a change of control of OneMain under the OneMain Indenture and S&P has downgraded the rating of the Notes following the
closing of the OneMain Acquisition. However, Moody’s affirmed the rating of the Notes and therefore the change of control repurchase provision has not been triggered.
Warehouse Facility
On February 3, 2015, OneMain entered into a $3 billion revolving warehouse facility backed by personal loans. The objective of the warehouse facility is to provide a bridge to future term securitizations and to provide liquidity to fund new originations.
The facility has a securitization structure whereby OneMain Financial Warehouse Trust, a wholly owned statutory trust, has issued variable funding notes that are secured by personal loans to a number of financial institutions, which may from time to time include asset-backed commercial paper conduits administered by certain of these financial institutions. From time to time during the revolving period of the facility, OneMain may sell personal loans originated by its subsidiaries into the warehouse facility and the issuer may draw advances against the value of such personal loans, subject to meeting required overcollateralization levels. The lenders will make advances to the issuer against the notes on a revolving basis through December 31, 2017. The initial maximum principal balance of $3 billion will be reduced by $500 million on January 30, 2016 and by an additional $1 billion on January 30, 2017. The notes mature on January 18, 2025. Advances funded by commercial paper conduits through the issuance of promissory notes issued in the commercial paper market will bear interest at a rate equivalent to the weighted average annual rate of all commercial paper notes issued by such conduit purchaser to fund its advances, plus 2.15%. Advances funded by lenders that are not commercial paper conduits, or by commercial paper conduits funded through means other than the commercial paper market, will bear interest at a rate based on a formula using LIBOR, plus 2.15%. The interest rate may be increased under certain circumstances, including upon an event of default under the warehouse documentation, if the credit ratings of the notes are withdrawn or downgraded or upon the termination of the revolving period. The issuer must also pay facility, commitment, administrative and structuring fees in connection with the facility. During the revolving period, the outstanding note balance may be redeemed, in whole or in part, at OneMain’s option and the issuer may reborrow such redeemed amounts up to the maximum principal balance. The issuer may also reduce the maximum principal balance in whole or in part at any time. If any of OneMain’s subsidiaries acting as a servicer of the loans securing the notes breaches certain of its representations and warranties under the warehouse documentation, such servicer may be required to repurchase loans it has sold into the securitization.
Under the warehouse documentation, OneMain must (i) maintain minimum consolidated tangible shareholders’ equity of not less than $1 billion and (ii) not permit OneMain’s consolidated debt to tangible shareholders’ equity ratio to exceed 6 to 1 if a minimum draw condition exists. The warehouse documentation contains customary events of default that could result in the acceleration of payment of amounts owed to the lenders under the facility and early amortization events that could result in the inability to draw on the facility. The warehouse facility is not subject to scheduled amortization during the revolving period, but during the continuation of an early amortization event, all cash collections on the pool of personal loans backing the warehouse facility must be used to repay outstanding amounts due to the lenders. Such events include the failure to satisfy the financial covenants described above, payment defaults or acceleration events under OneMain’s other debt, and a change of control of OneMain (other than certain dispositions of OneMain by Citi, including the OneMain Acquisition). In addition, under the warehouse facility, a disposition by Citi of its interests in OneMain could constitute an event of default if OneMain does not deliver to the administrative agent thereunder certain financial statements within 120 days after the end of the fiscal quarter and fiscal year during which such disposition occurs. If an event of default occurs and continues, the notes issued under the indenture become immediately due and payable.