Affirm (AFRM) recently confirmed a $4 billion financing partnership with Sixth Street, marking a significant investment by a private credit firm into a fintech company. Following the announcement, Affirm's shares recorded a 2% increase during intraday trading on Friday. This partnership involves Sixth Street funding a vehicle that will acquire Affirm's loans over a span of three years. Labelled as the largest capital commitment ever obtained by the 'buy now, pay later' firm, this move enables Affirm to extend more than $20 billion in loans within the next three years.
Similar alliances in this sector have escalated over recent years, with fintech businesses turning to the rapidly expanding private credit industry for capital. In the previous year, PayPal struck an agreement with private equity firm KKR that permitted the latter company to buy PayPal's BNPL loans in Europe. Likewise, SoFi Technologies partnered with Fortress Capital in a $2 billion arrangement to boost its personal loans venture. Furthermore, last year, Affirm's competitor Klarna sold its UK BNPL portfolio to Elliott Investment Management, a US hedge fund. This transaction reportedly equipped Klarna to fund around 30 billion pounds ($38 billion) in loans.
The value of Affirm's shares has more than doubled over the past six months, highlighting the marked growth of businesses in the BNPL sector.