Klarna is selling the bulk of its UK “buy now, pay later” (BNPL) loan portfolio to US hedge fund Elliott, in a deal that could free up £30bn for new loans, according to a report by the Financial Times citing unnamed sources familiar with the transaction.
The agreement with Paul Singer’s $70bn hedge fund is expected to strengthen Klarna’s capital position, enabling the fintech company to pursue its aggressive growth ambitions ahead of a much-anticipated US initial public offering (IPO). As part of the transaction, Elliott has purchased a junior note in the vehicle holding the loans.
Klarna, which has operated as a licensed bank in Sweden since 2017 and is regulated by German and UK financial authorities, will continue to handle loan underwriting and customer service for borrowers. The company is increasingly focusing on expanding its footprint in the US, where it has forged partnerships with major retailers such as Apple and Uber Eats. While Klarna was consistently profitable until 2019, it has since accepted some credit losses as part of its US growth strategy.
The report quotes Klarna’s Chief Financial Officer, Niclas Neglen, as saying that the deal will help support the company’s global expansion. “By efficiently managing our assets, we can deploy shareholder equity more effectively,” he stated.
This isn’t the first time BNPL loans have been sold to investors, with private equity major KKR last year agreeing to purchase up to €40 billion worth of PayPal’s loans in Europe. Klarna also previously struck a similar risk transfer deal with Elliott regarding its German loan portfolio two years ago.