PayPal consumer credit portfolio “sells” Synhrony for $7 billion

According to US financial website MarketWatch, payment service provider PayPal said on Thursday that it has agreed to sell nearly $6 billion in loan portfolios to financial company Synchrony Financial, a long-awaited deal that will be offered to PayPal. Bring a lot of cash to carry out M&A transactions or buy back shares.

In November 2017, PayPal announced its agreement to sell $5.8 billion in consumer credit receivables to Synchrony Financial as part of an expanded partnership between the two companies.

Now, the deal has finally ended, Synchrony actually received $7.6 billion in accounts receivable, including a total of $6.8 billion at the end of the trading PayPal us consumer credit portfolios, as well as non-affiliated third parties hold about $800 million to participate in the rights and interests.

The two companies have been partners since 2004, when they teamed up to provide PayPal’s branded credit card, allowing PayPal users to shopping both online and offline.

Along with the completed, as part of the sales of consumer credit accounts receivable business transactions, the two companies have to involve PayPal Extras mastercard and PayPal Cashback mastercard credit card agreement extension to 2028.

In addition, Synchrony will become the exclusive issuer of the PayPal Credit online consumer financing program in the United States by 2028.

Although the sale means PayPal lost interest of loan may be produced, but the company in strategy, to release billions in cash, used for other business growth, including the ability to generate higher returns.

For example, it can make acquisitions with cash. In fact, it bought iZettle in May for $2.2 billion in cash, and Hyperwallet in June for $400。

“We are pleased to have completed the sale of the U.S. consumer credit receivables portfolio,” PayPal President and CEO Dan Schulman said in a statement. “Our agreement with Synchrony fulfills every goal we set for our asset appreciation strategy. Synchrony is looking forward to working with Synchrony to double the innovative consumer credit experience we offer our customers and realize portfolio earnings growth over time”

Synchrony, as part of the deal, will agree to finance future PayPal loans to online consumers, John Rainey, chief financial officer, said in an interview. He added that PayPal would receive about $5.8 billion in cash from selling its existing loan portfolio, or the face value of the loan portfolio.

The deal will allow PayPal to arrange loans for their clients, at the same time without having to take on a lot of credit risk, the danger is once appear, the situation of the economic downturn, will probably make default rates have risen sharply, causing erosion PayPal created by main business income.

In addition, rainie said and Synchrony between a continuous loan facility will be released every year to around $1 billion in cash, so as to make the PayPal without using the cash to make loan financing, and would allow the company to expand lending activity, at the same time, will not lead to their balance sheets under pressure.
Source: QQ, MarketWatch