PayPal expects to buy back $5 billion after BNPL's deal with KKR

PayPal Holdings announced a deal whereby KKR-managed funds and accounts would buy up to €40 billion of buy-now, subsequent loan repayments originating in Europe, that would allow more shares to be bought back this year by the payments company.

PayPal (Stock ticker: PYPL) said in the news launch On Tuesday, KKR’s private credit funds and accounts will receive nearly all of the European BNPL loan portfolio held on PayPal’s balance sheet, and will also receive future facilities for eligible BNPL loans.

The digital payments company also said the deal was already reflected in its full-year earnings guidance, but when the deal closes it expects to allocate an additional $1 billion to share buybacks in 2023. PayPal now expects $5 billion in total share buybacks for the year.

The transaction is expected to close in the second half of 2023.

BNPL is a type of loan that divides payment for a consumer product into multiple installments spread over several months. PayPal gives customers the option to use BNPL With a 4-pay option and a monthly payment plan. Pay 4 allows shoppers to divide purchases into four bi-weekly payments. Pay Monthly breaks down payments into smaller amounts for up to 24 months.

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“Buy now, pay later has become a key asset to the PayPal payment experience, driving engagement, payments volume growth, and repeat use while delivering high-value customers to our merchants,” said Gabrielle Rabinowitz, Acting Chief Financial Officer at PayPal.

“Our collaboration with KKR will allow us to accelerate our PayPal Pay Later creations in tandem with market demand in Europe while preserving free cash flow for other strategic initiatives,” Rabinowitz added.

PayPal shares were up 2.1% in pre-market trading Tuesday. Heading into Tuesday’s trading, the stock is down 6.7% this year.

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Write to Angela Palumbo at [email protected]