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Klarna is seeking buyers for a portfolio of US “pay in four” instalment loans in a bid to unlock capital for growth ahead of a public listing in New York.
The Swedish buy now, pay later group is in talks about a sale of the loan book, according to people familiar with the matter. Banks including Citigroup, RBC, Nordea and Société Générale are involved in the discussions about the sale, three of the people said.
The transaction would help free up capital for loan growth needed to satisfy potential IPO investors, ahead of one of the year’s most hotly anticipated stock market listings.
It comes after Klarna last year offloaded its UK buy now, pay later portfolio to investment fund Elliott Management in a similar deal to unlock capital for £30bn worth of new loans.
Klarna’s “pay in 4” option allows consumers to split purchases at retailers’ checkouts into four interest-free payments, paid every two weeks.
The model is similar to the “pay in 3” credit product Klarna offers in the UK, where payments are made every 30 days.
But its buy now, pay later US loans are less established, and so could suffer higher defaults, one of the people said.
A study by the US Consumer Financial Protection Bureau, published on Monday, found that in 2022 nearly two-thirds of buy now, pay later loans went to borrowers with lower credit scores, and most borrowers took out multiple loans at the same time at some point over the year.
Klarna and other consumer lending financial technology companies such as SoFi and Affirm have in recent months partnered with or sold loan books to private credit groups.
The companies have used demand from investors — including insurers — to offload loans on their balance sheet, giving them new ammunition to lend.
Investment groups including KKR, Carlyle, Sixth Street and Fortress have all announced large loan portfolio purchases, as they search out higher-returning debt.
In several cases, private credit firms have agreed to provide the capital before loans are underwritten, giving firepower to groups such as Upstart Holdings to lend in the years ahead.
Klarna, which is regulated as a bank in Sweden, also previously completed a significant risk transfer in order to lower its exposure to potential loan losses and increase lending in 2022.
Klarna, Citi, RBC and SocGen declined to comment. Nordea did not respond to a request for comment.
Led by Sebastian Siemiatkowski, the Swedish group was regularly profitable until 2019 when it decided it would accept some losses to fuel international growth. It has since embarked on an expansion plan in the US, where it has filed for an IPO.
Klarna is expected to float in the first half of the year with a target valuation of about $15bn, one of the highest profile listings after a moribund period for equity capital markets in 2024.
The lender was briefly Europe’s most valuable start-up after it secured a $46bn valuation in a 2021 fundraising round. But a year later its valuation crashed to $6.7bn, when a rise in interest rates damped investor confidence in the sector.
The fintech reported a net profit of SKr216mn ($19mn) in the three months to the end of September. However, it was lossmaking overall in the first nine months of the year, with a net loss of SKr116mn.
Additional reporting by Simon Foy in London
