KKR Acquires €40 Billion in Loans from Paypal
American financial investor KKR has announced its acquisition of receivables from payment service provider Paypal. The loans acquired by KKR amount to a total of €40 billion, according to a statement from Paypal.
The receivables are known as Buy Now Pay Later Loans (BNPL) and originate from Germany, France, Great Britain, Italy, and Spain. KKR emerged as the successful bidder among several other interested parties.
KKR plans to invest €3 billion in the portfolio over the coming years, with €1.8 billion to be invested immediately. The financial investor aims to profit from the above-average interest rates charged by Paypal for BNPL. Paypal intends to use the proceeds from the deal for various purposes, including share buybacks. The company has enlisted the services of Morgan Stanley as a financial advisor. The transaction is still subject to certain conditions but is expected to be finalized in the second half of the year.
BNPL is a complex product that has seen rapid growth in sales. Paypal, which holds a full banking license in Luxembourg, has been offering BNPL to its customers since 2020. Since its launch, Paypal has issued over 200 million loans to more than 30 million customers across eight markets worldwide. In the past year alone, the payment volume in this segment has increased by 160% compared to the previous year, reaching approximately €18 billion.
Legally, the BNPL business involves a unique type of loan securitization. The claims that arise over time are continuously securitized over several years in a process known as forwarded flow.
KKR has been advised by law firm Latham & Watkins, with Jeremiah Wagner and Patrick Leftley leading the team. Other members of the team include Suzana Sava-Montanari, Thomas Vogel, Ellen Marks, Karl Mah, Ulf Kieker, Ivan Rabanillo, Fernando Colomina, Jonathan Parker, Becky Critchley, Etienne Gentil, Frank Bierwirth, Boin Cheong, Mathilde Deschanet, Delyth Hughes, Alima Laminu, Niamh Uileagoid, Aaron Bradley, Sam Duncan, Johannes Lieb, Juan Rodríguez, Sean Wells, Jaime Hall, Florana Benabid, Aurelien Lorenzi, Veronika Miskovichova, Huberto Sanchez-Tabernero, Paloma Arizón, Elliot Bromagen, James Mathieson, Calum Docherty, and Nara Yoo.
On the other hand, Paypal has been advised by its in-house legal team, led by General Counsel Kelly Moses. The company has also sought the assistance of law firm Freshfields Bruckhaus Deringer, with Andrew Heathcote and Emma Rachmaninov leading the team. Other members of the team include Dr. Alexander Gloss, Dr. Robin Helmke, Dr. Janina Heinz, Marc Perrone, Fabrice Grillo, and Francesco Lombardo, along with associate Dr. Daniel Klingenbrunn.
The acquisition of these loans marks a significant move for KKR and highlights the growing popularity and profitability of BNPL services in the financial industry.KKR Acquires €40 Billion in Loans from Paypal
June 22, 2023 – 10:32
The American financial investor KKR has acquired receivables from the payment service provider Paypal. The loans taken over amount to a total of 40 billion euros, according to a statement from Paypal.
The receivables are so-called Buy Now Pay Later Loans (BNPL) from Germany, France, Great Britain, Italy, and Spain. In addition to KKR, there were a number of other bidders who had expressed an interest in the BNPL.
KKR will have the portfolio cost three billion euros in the coming years, of which 1.8 billion should flow immediately. The financial investor wants to earn money from the above-average interest rates that PayPal charges for BNPL. Paypal hopes to use the proceeds of the deal to finance share buybacks, among other things. Paypal hired Morgan Stanley as a financial advisor. The transaction is still subject to certain conditions but is expected to be finalized in the second half of the year.
The online payment service, which has a full banking license in Luxembourg, has been offering BNPL to its customers since 2020. Since its launch, Paypal says it has issued more than 200 million loans to over 30 million customers in eight markets around the world. In the past year alone, the payment volume in this segment has increased by 160 percent compared to the previous year, to the equivalent of around 18 billion euros.
From a legal point of view, the business is associated with a special type of loan securitization: the claims that arise over time are securitized continuously and over years in the so-called forwarded flow – and not just once.
KKR’s acquisition of these loans highlights the growing popularity and profitability of the BNPL market. With the increasing demand for flexible payment options, companies like Paypal have seen significant growth in this segment. The deal with KKR will provide Paypal with the necessary funds to further expand its operations and continue offering innovative financial solutions to its customers.
The transaction is expected to have a positive impact on both KKR and Paypal, as they capitalize on the lucrative BNPL market. As the financial landscape continues to evolve, investors and companies are exploring new opportunities to meet the changing needs of consumers.
How does KKR plan to capitalize on the higher interest rates charged by Paypal for BNPL loans in the portfolio
Interested parties bidding for the loans, but KKR emerged as the successful bidder.
Under the terms of the deal, KKR plans to invest 3 billion euros in the portfolio over the next few years, with 1.8 billion euros to be invested immediately. The financial investor aims to capitalize on the higher interest rates charged by Paypal for BNPL loans. Meanwhile, Paypal intends to use the proceeds from the deal for various purposes, including share buybacks. To navigate the complex transaction, Paypal has enlisted the services of financial advisor Morgan Stanley. The deal is still subject to certain conditions but is expected to be finalized in the second half of the year.
BNPL loans have experienced significant growth in sales, and Paypal, which holds a full banking license in Luxembourg, has been offering this product to its customers since 2020. Since its launch, Paypal has issued over 200 million BNPL loans to more than 30 million customers across eight markets globally. In the past year alone, the payment volume in this segment has increased by 160%, amounting to approximately 18 billion euros.
Legally, the BNPL business involves a unique type of loan securitization. The claims that arise over time are continuously securitized over several years through a process known as forward flow.
KKR has received legal advice from law firm Latham & Watkins, with Jeremiah Wagner and Patrick Leftley leading the team. Paypal, on the other hand, has received legal advice from its in-house legal team, led by General Counsel Kelly Moses, as well as law firm Freshfields Bruckhaus Deringer, with Andrew Heathcote and Emma Rachmaninov leading the team.
The acquisition of these loans represents a significant strategic move for KKR, highlighting the growing popularity and profitability of BNPL services in the financial industry.
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This acquisition by KKR highlights the growing importance of the Buy Now Pay Later industry. With a 40 billion euro deal, it will be interesting to see how KKR utilizes these loans and navigates this evolving market.
This is a significant move by KKR to expand its portfolio and tap into the growing popularity of buy now pay later loans. The 40 billion euros acquisition from Paypal highlights the potential for huge profits in this sector.