The AI middleman expanding in the consumer-bond bonanza
Pagaya Technologies, the AI-powered consumer-lending firm, is issuing its first bond backed by loans made to online shoppers, part of a surge in financial engineering by Wall Street that is accelerating the flow of credit to U.S. consumers.
The firm, founded in 2016 by Israeli entrepreneurs, acts as a financial middleman between the bond market and consumer lenders such as U.S. Bank and the Swedish financial-technology firm Klarna.
Pagaya is set to issue $300 million of bonds Thursday that will be used to fund buy now, pay later, or point-of-sale, loans offered by Klarna. JPMorgan Chase and Atlas, the asset-backed finance arm of Apollo Global Management, are arranging the bond sale, a person familiar with the matter said.
Over the past 12 months, Pagaya has issued about $5 billion of bonds, according to the data provider Finsight. The bonds were backed by bundles of unsecured personal and auto loans that Pagaya has previously focused on.
Pagaya is moving into buy now, pay later loans because that is one of the fastest-growing segments of consumer lending, accounting for an estimated 8% of holiday-season purchases last year. That puts the company in head-to-head competition with Affirm, the dominant fintech company in buy now, pay later lending.
Affirm focuses on lending to consumers with high credit scores. In contrast, Pagaya has grown quickly by financing 'second look" loans to borrowers with modestly lower credit scores that partners such as Klarna would otherwise reject. Pagaya says it uses artificial intelligence to analyze large data sets of loans and borrower behavior in underwriting the loans.
While Pagaya is making the loans and bundling them into its bonds, its lending partners get the appearance of approving more borrowers, said Pagaya President Sanjiv Das. 'The merchant is happy because they get more approvals and that is very significant for Klarna," he said.
The extra firepower is fueling expansion at Klarna, which is trying to place its initial public stock offering. Affirm has made buy now, pay later loans to Walmart's online shoppers since 2019. Klarna recently said it would start financing for the retailer's customers. The new business for Pagaya is boosting its stock price.
For now, bond investors are demanding much higher yields to buy bonds issued by Pagaya than by its competitors. A $220 million portion of the bonds will be rated triple-A by Kroll Bond Rating Agency and will yield about 1.75 percentage points more than benchmark Treasury bonds, the person familiar with the matter said. A bond Affirm issued recently yielded 0.95 percentage point over Treasurys, according to Finsight.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hindu
27 minutes ago
- The Hindu
India's goods, services exports may cross $900 billion this year: Piyush Goyal
India's goods and services exports during 2025-26 are expected to cross $900 billion despite the global economic uncertainties, Commerce and Industry Minister Piyush Goyal has said. Despite uncertainties due to the Russia-Ukraine conflict, Israel-Hamas war and the Red Sea crisis, the country's overall exports touched an all-time high of $825 billion in 2024-25 against $778 billion in 2023-24. "We have crossed $825 billion exports last year, we are surely to cross $900 billion this year in all this global turmoil," he has said here while addressing the Indian business delegation last night. The Minister is in Stockholm on an official visit to meet his Swedish counterpart and companies for promoting trade and investments between the two countries. Apex exporters' body FIEO has projected that the country's overall goods and services exports are expected to grow by over 21% year-on-year to $1 trillion during 2025-26.
Time of India
29 minutes ago
- Time of India
India's goods, services exports may cross $900 billion this year: Piyush Goyal
Commerce and Industry Minister Piyush Goyal anticipates India's goods and services exports to surpass USD 900 billion in 2025-26, even amidst global economic uncertainties. Despite challenges like the Russia-Ukraine conflict and the Red Sea crisis, India's exports reached a record USD 825 billion in 2024-25. Tired of too many ads? Remove Ads India's goods and services exports during 2025-26 are expected to cross USD 900 billion despite the global economic uncertainties Commerce and Industry Minister Piyush Goyal has uncertainties due to the Russia-Ukraine conflict, Israel-Hamas war and the Red Sea crisis, the country's overall exports touched an all-time high of USD 825 billion in 2024-25 against USD 778 billion in 2023-24."We have crossed USD 825 billion exports last year, we are surely to cross USD 900 billion this year in all this global turmoil," he has said here while addressing the Indian business delegation last minister is here on an official visit to meet his Swedish counterpart and companies for promoting trade and investments between the two exporters' body FIEO has projected that the country's overall goods and services exports are expected to grow by over 21 per cent year-on-year to USD 1 trillion during 2025-26.
Time of India
an hour ago
- Time of India
Piyush Goyal says addressing non-tariff barriers key to India-EU trade pact
Finding solutions to address non-tariff barriers would be important for the proposed free trade agreement (FTA) between India and the European Union (EU) and both sides are actively working on resolving these issues, Commerce and Industry Minister Piyush Goyal said on Thursday. He said the two sides are "pretty" close to finalising the talks for the proposed free trade pact. "Significant progress has been made. More than half the chapters are ready. In terms of content, I would say we are almost 90 per cent ready for market access. The important issues to be addressed are non-tariff barriers and how we will make it smoother, easier, and better to do business between the EU and India," Goyal told reporters here. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Undo He added that both India and the EU are in active discussions to find solutions to make business smooth for companies of both sides. Also Read: US trade pact set for early finish: Piyush Goyal Live Events "Unless countries recognise that over regulation and barriers to trade will be met with reciprocal action, everybody suffers. We are committed to deregulation, to finding solutions to the high cost of regulation, the non-tariff barriers that these regulations cause and the impediments to free trade. I am quite hopeful that we will find very robust solutions to this problem," the minister said. He is here on an official visit to meet his Swedish counterpart and companies for promoting trade and investments between the two countries. Sweden is a member of the 27-nation EU bloc. Key Indian exports that routinely face high barriers in the EU include -- chillies, tea, Basmati rice, milk, poultry, bovine meat, fish, chemicals products. Most non-tariff measures (NTMs) are domestic rules created by countries with an aim to protect human, animal or plant health and environment. NTM may be technical measures such as regulations, standards, testing, certification, pre-shipment inspection or non-technical measures like quotas, import licensing, subsidies, government procurement restrictions. Also Read: Challenging times for global trade; India will certainly cross USD 825 bn exports this fiscal: Piyush Goyal When NTMs become arbitrary, beyond scientific justification, they create hurdles for trade and are called NTBs (non-tariff barriers). India's exports are far below potential as they face NTBs in regions, including the EU, the US, China, Japan, and Korea. According to think tank GTRI, the EU has set MRL (minimum residual limit) for tricyclazole, a fungicide in rice, to 0.01 mg per kg as against the ten times higher limit earlier. Similarly, the EU has set MRL for aflatoxins B1 level in chilies and other spices at 5 to 10 ppb (parts per billion). The minister said negotiations on services and rules or origin have started. To give an impetus to the ongoing talks for the FTA, EU Commissioner for Trade and Economic Security Maros Sefcovic is expected to visit New Delhi on June 28-29. On the Carbon Border Adjustment Mechanism (CBAM), Goyal said this measure is "not good" as it is also a kind of a non-tariff barrier. This carbon tax, if imposed, will do injustice to Indian industry, he said, adding that if the EU will take any such step, India will have to respond to that. FTA talks are happening in a good environment and it will not be good to impose carbon tax on Indian goods, he added. "Our talks are going on the issue to find ways to deal with this," the minister said, adding that some good solutions will come out on this. On February 28, Prime Minister Narendra Modi and European Commission President Ursula von der Leyen agreed to seal a much-awaited free trade deal by this year amid rising concerns over US President Donald Trump 's policy on tariffs. In June 2022, India and the 27-nation EU bloc resumed the negotiations after a gap of over eight years. It stalled in 2013 due to differences over the level of opening up of the markets. India's bilateral trade in goods with the EU was USD 136.4 billion in 2024-25 (exports USD 75.75 billion, imports USD 60.65 billion), making it the largest trading partner of India for goods. The EU market accounts for about 17 per cent of India's total exports, while the EU's exports to India make up 9 per cent of its total exports. EU's investments in India are valued at over USD 117 billion with around 6,000 European companies present in India. India's investments in the EU are valued at around USD 40 billion.
