Why Klarna Sold £30 Billion in Debt to Elliott and What It Means for Both Sides

Klarna, the Swedish fintech giant known for its buy-now, pay-later (BNPL) services, has recently made headlines by selling a substantial portion of its UK loan book, valued at around £30 billion, to Elliott Advisors. This deal is a strategic move for Klarna as it aims to free up capital for its global expansion and streamline its financial operations ahead of a highly anticipated IPO in 2025. Here’s a closer look at why Klarna made this move, what’s in it for Elliott, and how it impacts the BNPL landscape.

Why Klarna Sold the Loans

The primary reason Klarna sold this debt is to free up capital and bolster its balance sheet. By offloading a significant portion of its BNPL receivables, Klarna can deploy its shareholder equity more effectively to fuel its ambitious global growth plans. The company has been expanding rapidly, especially in the UK, where its merchant network grew by over 30% in the last year . Selling off the loans helps Klarna minimize the credit risk on its books and reduces the regulatory capital it must hold as a buffer, allowing it to operate with more flexibility and efficiency .

This strategy is part of a broader trend in the fintech world, where firms seek to manage assets efficiently while shifting some of the risks to institutional investors. Klarna had been working on building this capital offloading platform for three years, and the deal with Elliott mirrors similar moves by other major players like PayPal .

What’s In It for Elliott?

For Elliott Advisors, the deal provides access to a large and growing asset class: BNPL loans. While Klarna’s BNPL loans are interest-free for consumers, the hedge fund can still benefit from various fees or discounted purchasing arrangements. The BNPL sector is booming, and owning Klarna’s UK receivables gives Elliott exposure to a profitable, consumer-driven credit stream . Additionally, such investments diversify Elliott’s portfolio with relatively stable, short-term loans, which can help hedge against volatility in other markets.

This type of strategic financial play also allows Elliott to potentially capitalize on the growing BNPL trend, which is increasingly favored by consumers in e-commerce transactions .

Klarna Retains Underwriting: What Does It Mean?

Despite selling the loan book, Klarna retains the underwriting and servicing of the loans. Underwriting refers to Klarna’s ability to evaluate the creditworthiness of its users. Essentially, Klarna still controls who is eligible to use its BNPL services by applying its credit assessment models. This allows Klarna to continue growing its consumer base and refining its credit systems, while Elliott bears the financial risk of the loans defaulting.

In this way, Klarna can focus on scaling its operations without taking on as much credit risk, while Elliott steps in as the financial backer.

Conclusion

Klarna’s £30 billion deal with Elliott Advisors represents a calculated move to support the company’s ambitious growth trajectory. By transferring the financial liability of its UK loan book, Klarna frees up capital, reduces risk, and prepares for a major IPO. Meanwhile, Elliott gains access to a profitable, consumer-driven loan portfolio, positioning itself to benefit from the continued rise of BNPL. As Klarna continues its global expansion, this deal exemplifies how fintech firms are leveraging strategic partnerships with institutional investors to scale efficiently in a competitive market.