Klarna Aims to Offload $516 Million in Credit Risk to Fund Growth

Klarna is working on a significant risk transfer (SRT) that will enable it to offload credit risk tied to buy now, pay later (BNPL) loans and free up capital, Bloomberg reported Tuesday (July 14), citing unnamed sources.

The SRT is tied to about 5 billion kroner (about $516 million) of loans originated by Klarna’s Swedish unit, and the transaction may be completed by the end of the quarter, according to the report.

Reached by PYMNTS, Klarna declined to comment on the report.

SRTs, which are also known as synthetic risk transfers, allow investors to earn regular payments in return for taking on credit risk from a lender’s portfolio.

Klarna is working on its SRT while looking to roll out new products and grow its business in several countries, especially the United States, at a time when its shares are trading at about half the price they achieved in the company’s September initial public offering, according to the Bloomberg report.

An SRT would enable Klarna to undertake new lending, acquisitions or shareholder payouts, per the report.

Klarna announced in April that it entered into a new SRT that covers $1.7 billion in euro-denominated loans and frees up capital to support continued growth. The company said the deal was its sixth SRT transaction.

“This is our largest and most efficient SRT transaction to date,” Klarna Chief Financial Officer Niclas Neglén said in an April 1 press release. “These transactions allow us to maximize every unit of capital to support our continued momentum.”

Klarna said during a May earnings report that in the first quarter, its revenue increased 44% year over year to reach $1 billion and its gross merchandise volume rose 33% to $33.7 billion.

PYMNTS reported at the time that Klarna pushed deeper into everyday spending during the quarter as consumers used BNPL for everything from groceries to larger-ticket purchases and as deposits, debit usage and point-of-sale financing accounted for a greater part of the company’s growth story.

Klarna announced July 6 that it applied to establish Klarna Bank USA, its proposed Utah-chartered industrial bank. The company has been licensed as a bank in Europe since 2017 and offers banking services in the U.S. through a network of partners.