Klarna NYSE:KLAR, a Stockholm-based specialist lender focused on buy now, pay later financing, is working on a significant risk transfer transaction tied to around 5 billion Swedish kronor ($516 million) of loans originated by its Swedish unit. The deal may be completed later this quarter and would provide credit protection on a junior portion equal to roughly 10% of the reference portfolio, while Klarna would retain the first-loss piece. The structure could allow Klarna to release capital and improve its solvency position without turning to potentially less shareholder-friendly measures such as issuing new equity.
The proposed transaction comes as Klarna looks to expand its banking products across several countries and support the recovery of a stock trading at around half its September initial public offering price. The lender is particularly focused on expanding in the U.S., where it currently operates through a partner bank and has applied for a banking license. By reducing the amount of capital tied to the loan portfolio, the transaction may provide Klarna with additional flexibility for new lending, acquisitions, shareholder distributions, or broader international growth.
The potential deal would follow Klarna's April transaction with investors led by Varde Partners, an investment firm, covering $1.7 billion of euro-denominated loans and marking the lender's sixth significant risk transfer agreement. Blackstone NYSE:BX, an alternative asset manager, and Sona Asset Management, an investment firm increasing its exposure to these instruments, are among the investors benefiting from rising demand for significant risk transfers, which may offer coupons above 10%. Banco Santander, a Spanish banking group, also discussed a similar transaction involving around 500 million of loans made by its digital banking arm Openbank to customers in Germany, suggesting the market is expanding beyond traditional corporate lending into more specialized credit portfolios.