PayPal partners with KKR for European Pay Later Receivables

By Gloria Methri

PayPal Holdings and KKR, a global investment firm have signed a multi-year agreement for a €3 billion replenishing loan commitment.

Under the terms of the agreement, 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.

PayPal will remain responsible for all customer-facing activities, including underwriting and servicing, associated with its European BNPL products.

Since launching its first BNPL offering in 2020, PayPal Pay Later products have issued more than 200 million loans to over 30 million customers in eight markets around the world. In 2022, PayPal processed more than $20 billion of BNPL payment volume globally, up approximately 160% from 2021.

Gabrielle Rabinovitch, senior vice president, acting chief financial officer of PayPal said, “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.”

KKR is funding the transaction through its private credit funds and accounts.

“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,” said Dan Pietrzak, global head of private credit at KKR. “We look forward to growing our relationship further and serving the financing needs of consumers across Europe through this transaction.”

Subject to certain conditions, this transaction is expected to close in the second half of 2023. Upon closing, PayPal expects this transaction 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.

Following closing, PayPal expects to allocate approximately $1 billion to incremental share repurchases in 2023, contributing to an updated outlook of approximately $5 billion in total share repurchases this year.