PayPal Holdings Inc (NASDAQ:PYPL) said it has reached a multi-year agreement to sell up to €40 billion ($4.37 billion) of its European buy now, pay later (BNPL) loan receivables to private equity firm KKR.
Under the deal, the payments company said KKR's private credit funds and accounts will acquire substantially all the European BNPL loan portfolio held on PayPal's balance sheet at the close of the transaction and will also acquire future originations of eligible BNPL loans.
The agreement covers loans originated by PayPal in France, Germany, Italy, Spain, and the United Kingdom and it will remain responsible for all customer-facing activities, including underwriting and servicing, associated with its European BNPL products, the company added.
Since launching its first BNPL offering in 2020, PayPal said it has become an industry leader with its PayPal Pay Later products, issuing more than 200 million loans to over 30 million customers in eight markets around the world.
In 2022, it processed more than $20 billion of BNPL payment volume globally, up approximately 160% from 2021.
"Buy now, pay later has become a major asset to PayPal's checkout experience, driving engagement, payment volume growth, and repeat use while delivering high-value customers to our merchants," commented PayPal senior vice president and acting CFO Gabrielle Rabinovitch.
"Our collaboration with KKR will allow us to accelerate our PayPal Pay Later originations alongside market demand in Europe while preserving free cash flow for other strategic initiatives. This transaction is yet another example of our disciplined approach to capital allocation."
KKR said it is funding the transaction through its private credit funds and accounts.
"We are thrilled to deepen our footprint in consumer finance through this transaction and to work with one of the leading players in this space," said Vaibhav Piplapure, a managing director at KKR.
"We believe that PayPal Pay Later offers a differentiated experience that positions PayPal to capture additional share in this growing market."
Subject to certain conditions, PayPal said the transaction is expected to close in the second half of 2023.
Upon closing, it expects to initially generate approximately $1.8 billion of proceeds to be used for a combination of increased capital return to shareholders and general corporate purposes.
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