KKR to purchase PayPal's BNPL loans of upto 40 billion euros in Europe

KKR has announced the purchase of PayPal’s current and future Pay Later loans from Europe worth upto 40 billion euros. PayPal will still be in charge of the customer-facing activities.

KKR-PayPal’s deal

In the deal between PayPal and private equity company - KKR, the latter is set to acquire BNPL loan portfolio on PayPal’s balance sheet in Germany, Italy, Spain, the UK, and France. This also includes future loan originations. On the other hand, PayPal will still be responsible for customer-facing activities like underwriting and servicing its BNPL products in Europe.

PayPal’s senior vice president, Gabrielle Rabinovitch stated, “Buy now, pay later has become a major asset of 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. ”

The transaction in question is expected to close within 2023’s second half. With a successful transaction, PayPal expects to generate about $1.8 billion in initial proceeds. The amount will be utilized for general corporate use as well as increasing the stakeholders’ capital returns.

What’s more, the company intends to allocate about $1 billion to incremental share repurchases for the current year. This will result in about $5 billion worth of share repurchases in 2023. In fact, the payments giant has already taken the transaction with KKR into account in its 2023 full-year guidance for GAAP and non-GAAP EPS as well as the non-GAAP operating margin released on 8th May.

With regard to the deal, KKR Capitals Markets were responsible for arranging and structuring the debt while Morgan Stanley was PayPal’s financial advisor. At the same time, Latham & Watkins LLP acted as KKR’s legal counsel while PayPal’s legal team included Allen& Overy Luxembourg, Perez-Llorca, and Freshfields Bruckhaus Deringer LLP.