KEY TO REMEMBER
- Affirm has entered into a $4 billion financing partnership with Sixth Street, in the latest commitment by a private lending company to a financial technology company.
- Sixth Street is investing the money in a vehicle that will repurchase Affirm’s three-year loans in a deal the companies say is the largest capital commitment guaranteed by the buy now, pay later company ( BNPL).
- This investment will in turn give Affirm the ability to lend more than $20 billion in loans over the next three years, they said.
Affirm (AFRM) has entered into a $4 billion financial partnership with Sixth Street, in the latest commitment by a private lending company to a financial technology company.
Shares of Affirm rose about 2% in intraday trading Friday following the announcement.
Sixth Street is investing money in a vehicle that will repurchase Affirm’s three-year loans in a deal the companies say is the group’s largest guaranteed capital commitment. buy now, pay later (BNPL) farm.
This investment will in turn give Affirm the ability to lend more than $20 billion in loans over the next three years, they said.
Fintech companies use private credit to obtain funds
Fintech companies have tapped the growing private credit sector for funds in recent years. Last year, PayPal (PYPL) has entered into an agreement with private equity firm KKR (KKR) allowing the private equity farm to buy back BNPL loans from fintech in Europe.
In October, SoFi Technologies (SOFI) hit a $2 billion deal with Fortress Capital to develop its personal loans business.
Affirm rival Klarna, which has filed for an IPO in the United States last monthsold its UK BNPL portfolio to the US hedge fund Elliott Investment Management also struck a deal in October that it said would fund 30 billion pounds ($38 billion) of loans.
The value of Affirm shares has more than doubled in the past six months, highlighting the explosive growth companies in the BNPL space.