PayPal Rallies on KKR Deal for BNPL Loans

PayPal (PYPL:US) stock added around 4% on Tuesday after the payment company said it agreed a deal with the private equity giant KKR & Co (KKR:US) for the latter to buy up to €40 billion ($44 billion) of buy-now-pay-later loan receivables.

As a result, PayPal said it expects its stock buyback program will increase by $1 billion this year, totalling roughly $5 billion in total share repurchases expected for this year.

The agreement also includes a €3 billion replenishing loan commitment. Loans in question are those originated by PayPal in Western European countries, such as France, Germany, Italy, Spain, and the United Kingdom.

"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," said Gabrielle Rabinovitch,  Senior Vice President, acting Chief Financial Officer of PayPal. 

"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."

The payment company said it issued over 200 million loans to over 30 million customers in eight countries around the world. Last year, it processed more than $20 billion of BNPL payment volume globally, which represents an increase of roughly 160% from 2021.

Several Lawmakers, including Tommy Tuberville, Ro Khanna, Josh Gottheimer, and Earl Blumenauer, traded PayPal shares in the month of May. 

The stock is down around 7.63% year-to-date.