Klarna Offloads £30bn in Loans to Hedge Fund Elliott
Klarna sells £30bn in "buy now, pay later" loans to U.S. hedge fund Elliott, freeing up capital for growth ahead of its anticipated U.S. IPO. The deal strengthens Klarna's position in the expanding U.S. market while it continues to service and underwrite the loans.
Klarna has sold a significant portion of its UK "buy now, pay later" (BNPL) loans to U.S. hedge fund Elliott, led by financier Paul Singer. The deal, though its terms are undisclosed, is expected to free up £30 billion for new lending opportunities as Klarna prepares for a U.S. IPO.
By transferring the loans, Klarna will gain flexibility for future growth while retaining the responsibility for underwriting and servicing the loans. Elliott, a $70 billion hedge fund, has acquired a junior note in the deal, securing a stake in the loan vehicle's returns and risks.
This strategic move is part of Klarna’s broader push to expand in the U.S. market, where it has partnered with major brands like Apple and Uber Eats. Klarna’s CFO, Niclas Neglen, emphasizes that the transaction will improve global asset management, giving the company a stronger financial footing as it eyes a U.S. public listing in the near future.
Klarna's BNPL offerings have made it a leader in the short-term credit space, allowing customers to split retail purchases into zero-interest payments. However, as BNPL remains unregulated in the UK, Klarna's strategic shift comes as it navigates a rapidly growing yet challenging regulatory landscape. This move mirrors a trend seen in other major BNPL players like PayPal, which also sold loans to private investors in recent years.
Klarna’s IPO is expected in 2024, as it continues to seek rapid growth while adhering to capital requirements, especially ahead of the holiday season when demand for BNPL is at its peak.