Klarna Secures Deal with Hedge Fund Elliott, Freeing Up £30 Billion for Global Expansion

October 2024
Klarna, the global leader in Buy Now, Pay Later (BNPL) services, has announced a strategic deal to sell a significant portion of its UK loan book to a subsidiary of the US hedge fund Elliott Investment Management. This transaction is set to free up as much as £30 billion, which will be redirected towards new loan issuance to fuel Klarna’s global growth ambitions.
This deal will allow Klarna to better manage its balance sheet by selling off BNPL loans it originates in the UK. The move follows a similar risk-transfer agreement that Klarna made with Elliott two years ago, which involved its German loan book. With the creation of a special purpose vehicle (SPV) to purchase UK receivables, Elliott will act as the sole equity investor, enabling Klarna to focus on efficiently utilizing shareholder equity and expanding its lending capabilities.
The transaction mirrors a recent industry trend, such as the EUR 40 billion deal struck between PayPal and KKR & Co., where KKR agreed to purchase a significant portion of PayPal’s BNPL loan receivables across Europe.
Accelerating US Expansion
Klarna has reaffirmed its focus on the US market, which has become a key part of its growth strategy. The company has already secured high-profile partnerships with merchants such as Apple and Uber Eats, aiming to solidify its position as a leading payment provider. Klarna has historically been profitable but began accepting some credit losses starting in 2019 in order to aggressively expand in the US.
With the newly secured funding, Klarna is well-positioned to continue providing its “pay in three” and “pay in 30” loans in the UK, which allow consumers to split their purchases into three monthly payments or pay in full within 30 days. These products account for the majority of Klarna’s lending activities in the region.
Strategic Vision
The move to offload UK receivables to Elliott is part of Klarna’s broader strategy to manage its capital more effectively while maintaining the flexibility to issue new loans. The deal is set to commence in October 2024, with monthly purchases made by Elliott’s SPV. This arrangement will support Klarna’s objective to meet the growing demand for BNPL services, especially in key markets such as the US and Europe.