Goldman Leads $270 Million Credit Line for Brazilian Fintech

Open Co, a Brazilian fintech that specializes in unsecured loans to individuals, is raising 1.5 billion reais ($270 million) through a credit line led by Goldman Sachs Group Inc.

The Wall Street bank is providing 1 billion reais and the rest will come from local investors, according to Raphael Zagury, Open Co’s chief financial officer. The funds will help the firm start to expand again after fallout from the Covid-19 pandemic forced it to pull back on lending, he said.

Founded earlier this year, Open Co resulted from a merger between Geru, which offers credit to “more established individuals,” and Rebel, which provides loans to young Brazilians, Zagury said in an interview. Both companies had to reduce lending offers by about 50% in March and April of 2020 as delinquency rates on first installments on loans doubled to 10%.

“We were able to control the bleeding,” the 44-year-old CFO said, adding that the firm’s credit models proved accurate, and nonpayment rates are back to 4%.

Many borrowers have struggled to pay debt amid the Covid-19 pandemic, with a record 14.3 million people unemployed and an additional 5.9 million who have stopped looking for work. Many of Brazil’s biggest financial technology companies are consolidating in response.

“Our main challenge now is to grow again,” Zagury said.

Geru and Rebel have loaned a total of about 1.5 billion reais to roughly 100,000 clients, and the goal is to provide 1 billion reais in credit this year, the CFO said. Open Co has 170 employees, and plans to hire 80 more this year.