Item 1.01. Entry into a Material Definitive Agreement.
On November 16, 2017 PayPal Holdings, Inc. (the Company) announced an arrangement (the
Transaction
) under
which Synchrony Bank, a federal savings association (
Synchrony
), will acquire the U.S. consumer credit receivables portfolio held by certain affiliates of the Company (the
Portfolio
), which totaled approximately
$5.8 billion in receivables as of October 2017. The purchase price is subject to a post-closing
true-up
to reflect trailing transactions and mischaracterized accounts, in addition to an adjustment for any
unbilled accrued deferred interest on the principal balance of deferred interest promotional
pre-closing
purchases realized over the 6 months following the closing.
In connection with the Transaction, each of Bill Me Later, Inc., a Delaware corporation and indirect wholly-owned subsidiary of the Company
(
BMLI
), and PayPal (Europe) S.À R.L. et CIE, S.C.A., a Luxembourg registered credit institution registered with the Luxembourg trade and companies register under number R.C.S. Luxembourg B118 349 and an indirect
wholly-owned subsidiary of the Company (
LuxCo,
and together with BMLI, the
Sellers
), entered into a purchase and sale agreement (each, a
Purchase Agreement
), dated as of November 10,
2017, with Synchrony pursuant to which each Seller agreed to sell to Synchrony the receivables (other than
charged-off
receivables) in the Portfolio. In addition, the Company has agreed to guaranty the payment
obligations of each Seller under the respective Purchase Agreement.
Each of the Sellers and Synchrony has made customary representations,
warranties and covenants in the applicable Purchase Agreement and has agreed to provide customary indemnification to the counterparty thereto. In connection therewith, BMLI is obligated to service the Portfolio in the ordinary course of business and
consistent with certain policies and procedures, and each of the Sellers has agreed to refrain from taking certain actions between signing and closing, including selling or encumbering the assets to be sold to Synchrony under the Purchase
Agreements.
The consummation of the transactions contemplated by the Purchase Agreements is subject to certain conditions, including,
without limitation: (i) receipt of a
non-objection
letter from the Commission de Surveilance du Secteur Financier in respect of the sale by LuxCo, (ii) the absence of any action or investigation by a
governmental authority seeking to restrain or prohibit the Transaction and (iii) the consummation of certain purchase and sale transactions between Synchrony, on the one hand, and each of Chestnut Receivables LLC and Comenity Capital Bank, on
the other hand, with respect to the purchase and sale of certain Portfolio-related assets. Moreover, the obligation of each Seller, on the one hand, and Synchrony, on the other hand, to consummate the Transaction is subject to certain other
conditions, including, without limitation: (a) the accuracy of the representations and warranties made by Synchrony and each Seller, respectively, subject to customary materiality qualifiers; and (b) the compliance in all material respects
by Synchrony and each Seller, respectively, with its
pre-closing
covenants and obligations. Pursuant to the terms of each Purchase Agreement, either Seller or Synchrony may terminate such Purchase Agreement if
the closing has not occurred by October 1, 2018.
The representations, warranties and covenants contained in the Purchase Agreements
have been made solely for the benefit of the applicable parties specified therein. In addition, such representations, warranties and covenants: (i) have been made only for purposes of the applicable Purchase Agreement; (ii) have been
qualified by confidential disclosures made to the other parties in the disclosure schedules delivered in connection with the Purchase Agreements; (iii) are subject to materiality qualifications contained in the applicable Purchase Agreement,
which may differ from what may be viewed as material by investors; (iv) were made only as of the date of the applicable Purchase Agreement or such other date as is specified therein; and (v) have been included in the applicable Purchase
Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as fact.
The foregoing
description of the Purchase Agreements and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of each Purchase Agreement, which are attached hereto as Exhibits 2.1
and 2.2, respectively, and are incorporated by reference into this Current Report on Form
8-K.