Finding good quality private credit assets to invest in is currently the biggest bottleneck for private credit investors.
Private credit funds have been popular with end investors and have raised large amounts. There is now a lot of competition to deploy those funds.
This deal between Liberty Mutual and Affirm is an example of a type of deal where large managers, with the ability to do large-sized deals and with in-house expertise, can have a competitive advantage in deploying funds.
The deal
Liberty Mutual has upsized its asset-backed funding facility to Affirm.
Affirm is a San Francisco-based buy new pay later (BNPL) lender. It is the largest BNPL lender in the US.
Liberty Mutual Investments is the asset management arm of the insurance group Liberty Mutual Group.
Under this deal, Liberty Mutual Investments provides an asset-backed funding facility to Affirm for BNPL loans.
The facility is for up to $750m of funding at any point. As loans are paid off by Affirm’s consumer borrowers, the facility can be drawn on again to fund new loans.
The facility runs to June 2027. The total amount invested by Liberty Mutual through this facility by June 2027 is expected to be up to $5bn.
Liberty Mutual Investments
Liberty Mutual appears to be working to do more deals like this.
John Kim, Head of Alternative Credit at Liberty Mutual Investments: “Liberty Mutual Investments’ ability to invest across the capital structure with a single-client focus allows us to flexibly provide solutions and scale to our long-term partners, like Affirm”.
Affirm
This private credit funding facility is part of Affirm’s funding mix.
Affirm funds its BNPL loans through warehouse facilities, term asset-backed funding facilities, and public securitization deals. Their investor base across these channels is over 130 institutions.
Affirm says it is working to add borrowing capacity across these funding channels. They have grown their borrowing capacity (funded and committed funds) by 50% over the last two years to close to $17bn (September 2024).
Having warehouse facility, term asset-backed funding facility, and public securitization programs in place lets Affirm shop for the best pricing and terms across markets. It also gives Affirm some protection in case one of these markets is out of capacity or temporarily closed.