PayPal and KKR Announce Exclusive Multi-Year Relationship for European Pay Later Receivables
*June 20, 2023*
PayPal Holdings, Inc. (NASDAQ: PYPL) and KKR, a leading global investment firm, have recently unveiled a groundbreaking multi-year agreement that is set to transform the landscape of buy now, pay later (BNPL) services in Europe. Under this exclusive partnership, KKR will purchase up to €40 billion of eligible current and future PayPal Pay Later loans originated in France, Germany, Italy, Spain, and the United Kingdom.
The agreement entails KKR's private credit funds and accounts acquiring the European BNPL loan portfolio from PayPal, including future originations of eligible BNPL loans. PayPal will continue to handle customer-facing activities such as underwriting and servicing for its European BNPL products.
BNPL has gained significant popularity in recent years, and PayPal has been a key player in this space since 2020. With more than 200 million loans issued to over 30 million customers in eight markets worldwide, PayPal's Pay Later products have revolutionized the checkout experience, driving growth and repeat use for its merchants. In 2022 alone, PayPal processed over $20 billion in BNPL payment volume globally, reflecting a substantial increase of approximately 160% from the previous year.
Gabrielle Rabinovitch, Senior Vice President and Acting Chief Financial Officer of PayPal, highlighted the strategic significance of the collaboration with KKR: "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. 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."
The funding for the transaction will be provided by KKR's private credit funds and accounts. Dan Pietrzak, Global Head of Private Credit at KKR, expressed enthusiasm about the partnership, stating, "Having the ability to work exclusively with a scaled and high-quality strategic partner like PayPal is a testament to the strength and maturity of our Asset-Based Finance business. We look forward to growing our relationship further and serving the financing needs of consumers across Europe through this transaction."
While the transaction is expected to close in the second half of 2023, subject to certain conditions, PayPal anticipates generating approximately $1.8 billion in proceeds upon completion. These funds will be used for increased capital return to shareholders and general corporate purposes. In addition, PayPal's updated outlook for 2023 includes allocating approximately $1 billion to incremental share repurchases, bringing the total share repurchases for the year to approximately $5 billion.
As with any investment opportunity, it is crucial to exercise caution and conduct thorough research before making any financial decisions. The following disclaimer should be acknowledged:
The information provided in this blog post is for informational purposes only and does not constitute financial advice or a recommendation to invest. Investing in financial products and markets involves risk, and individuals should carefully consider their financial situation and consult with a professional advisor before making any investment decisions. The content of this blog post is based on information available at the time of writing and is subject to change without notice. PayPal Holdings, Inc., KKR, and their affiliates do not guarantee the accuracy or completeness of the information provided, and they shall not be held liable for any errors, omissions, or investment losses resulting from reliance on the content of this blog post. Investors are solely responsible for their investment decisions and should perform their due diligence before investing in any financial product or market.