Sixth Street is set to invest up to $4bn (£3.1bn) in loans originated by buy-now-pay-later lender Affirm, the largest capital commitment secured by the fintech to date.
The investment firm will provide the capital through its asset-based finance platform, under a three-year, forward-flow agreement, whereby it agrees to buy loans before they have been originated.
The two firms said that the funding will enable Affirm to extend up to more than $20bn in loans over the next three years as it continues to scale its payment network.
Read more: Asset-backed finance special report: Riding the wave
“We are honoured to establish this new long-term partnership with Sixth Street as we continue to strengthen and diversify our platform to support our ambitious growth plans with capital efficient funding,” said Brooke Major-Reid, chief capital officer at Affirm. “Sixth Street’s expertise in asset-based finance, long-term capital and collaborative approach make them an ideal partner for Affirm. Over the last several years, we have been extremely thoughtful in working with a diverse mix of world-class investors as we empower more consumers and merchants with our honest financial products.”
Michael Dryden, partner and head of asset based finance at Sixth Street, added: “Affirm’s ability to provide flexible, scalable financing solutions is unparalleled, and we see tremendous opportunity in this partnership.
“We look forward to being a key funding partner for Affirm and continuing to build on this relationship to support the company’s growth in the years to come.”
The asset-based finance market, which includes car loans and residential mortgages, is growing at a rapid pace. KKR expects the market to grow from its current size of $5.2tn, to $7.7tn by 2027. Goldman Sachs believes the ABF market is already worth more than $15tn.
Private credit firms have been tapping into this opportunity, with a wave of new strategies and products.
Earlier this year, Ares Management announced a $1.5bn joint venture to fund prime new vehicle leases with Certified Automotive Lease Corp. Around the same time, SEC filings revealed that Pacific Investment Management Co (Pimco) had raised more than $2bn for its asset-based lending strategy over the summer months.
