Klarna has secured a deal to offload BNPL loans that it originates in the UK to the US hedge fund Elliott , in a deal that will free up as much as GBP 30 billion for new loans. The deal with a subsidiary of the hedge fund Elliott Investment Management provides Klarna with GBP 30 billion in fresh funding over the next few years to fuel its global expansion.

According to the announcement, the company is focusing its growth strategy on the US, where it has signed partnerships with merchants including Apple and Uber Eats. It was regularly profitable until 2019, when it decided it would accept some credit losses in order to pursue US expansion. Klarna expands loan strategy Officials from Klarna emphasised in a statement that by managing assets more efficiently, the company can better utilise shareholder equity.

Klarna has developed a platform to sell off loans from its balance sheet to global investors. This strategy frees up capital, allowing the fintech giant to issue new loans more easily. In Klarna’s deal, a special purpose vehicle (SPV) has been created to buy UK receivables, with Elliott’s subsidiary being the sole equity investor.

The deal is expected to start in October 2024, with Elliott’s SPV making monthly purchases. This deal is reminiscent of a similar one between KKR & Co. and PayPal last year, where KKR agreed to purchase up to EUR 40 billion in buy-now-pay-later loan receivables from PayPal’s operations in Europe.

Klarna’s pay in three and pay in 30 loans allow customers to pay in either three monthly instalments or in a single instalment within 30 days. These offerings make up the vast majority of Klarna’s lending activities in the UK. Klarna also previously struck a significant risk transfer deal with Elliott on its German loan book two years ago.

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