Last week, Apple officially announced that Chase is set to take over Apple Card, ending its deal with Goldman Sachs.
A new report from The Wall Street Journal, based on conversations with “20 people familiar with the matter,” goes in-depth on what Apple told people was an “unhappy marriage.”
An unhappy marriage for Apple and Goldman Sachs
According to the report, Apple wanted Goldman Sachs to “approve nearly all applicants” for Apple Card. This led to Goldman Sachs approving a higher-than-normal number of subprime borrowers. In fact, more than 30% of Apple Card balances are to people “with credit scores below what most lenders define as prime.” That’s a higher percentage than many banks who specialize in subprime lending.
Once Apple officially sent a proposal to Goldman Sachs to end their relationship, the company began conversations with other issuers.
In its pitch to one firm, Apple said that its relationship with Goldman Sachs was akin to “an unhappy marriage.”
“It said the two companies were willing to stay together, but no one likes being married to someone who doesn’t want to be married to them,” the report says.
Apple, Goldman Sachs, and other issuers also considered “using a private-credit fund to take on the balances.”
One potential solution Apple, Goldman and interested card issuers explored was using a private-credit fund to take on the balances. Those lenders have increasingly been turned to for complex bespoke financing deals across Wall Street and have backed consumer lenders, but a deal this big and complex would have been new ground. Apple approached a boutique investment bank to help find a fund and approached a small fintech company about a deal with a private-credit partner. Goldman bankers reached out to private-credit firms to gauge their interest and Barclays, considering its own bid, approached KKR about arranging a deal to help.
Goldman hoped that Apple would make a decision on who would take over Apple Card by early March 2025. Then, conversations between that company and Goldman would begin. That timeline never came to fruition, and Goldman executives reportedly felt that it was become “Apple wasn’t following through on what it needed to do.”
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