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Citigroup to spin off OneMain Financial lending unit

OneMain Financial Holdings, Citigroup’s subprime consumer-lending arm that has operations in Irving, filed for a $50 million initial public offering.

The amount is a placeholder used to calculate fees and may change. OneMain has a value of at least $4 billion, people with knowledge of the matter have said, and Citigroup is also considering an outright sale. Citigroup is the only adviser on the IPO, according to a regulatory filing Wednesday.

Citigroup Chief Executive Officer Michael Corbat said in May that the bank could exit OneMain through a sale or public offering by the end of this year or early 2015 because the unit doesn’t fit its business model. Exploring both a sale and an IPO, known as a dual-track process, can help propel a deal by pressuring buyers to act before a stock offering puts the company in the hands of public investors.

OneMain is part of Citi Holdings, the unit Citigroup created after the financial crisis to house unwanted assets. The business includes the former Irving-based Associates, which Citi acquired in 2001, and it makes personal loans of $3,000 to $15,000 to people with less-than-stellar credit from more than 1,100 branches.

Consumer finance companies have raised more than $5 billion in U.S. share sales this year, data compiled by Bloomberg show. Auto lenders Santander Consumer USA Holdings and Ally Financial are down more than 15 percent since their IPOs. Synchrony Financial, the consumer-lending business spun off by General Electric in a July IPO, is up about 8 percent since its debut.

“We view the sale of OneMain Financial as a positive given the business is not considered core and a sale would quicken the winding down of Citi Holdings, which is a positive for the stock longer term,” Brian Kleinhanzl, an analyst with Keefe, Bruyette & Woods, wrote in a note to clients.

Citigroup tried to sell OneMain more than two years ago, failing to reach a deal with bidders including Centerbridge Capital Partners, Leucadia National Corp. and Berkshire Hathaway, a person familiar with the matter told Bloomberg News at the time.

Since then, the bank has issued at least two bond deals backed by its personal loans, proving that the business can fund itself.

OneMain does not intend to pay dividends, according to Wednesday’s filing. Citigroup, which will continue to control OneMain after the IPO, has been prevented from increasing shareholder payouts by the Federal Reserve.

OneMain may be subject to those and other banking rules until regulators decide that Citigroup no longer controls the firm, a subjective decision that could be reserved until the lender’s ownership stake falls below 5 percent, the firm said.

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