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Allegro Pay sp. z o.o. has signed Receivables Purchase Agreement with AION Bank S.A

October 11, 2021

Current report No. 12/2021

Legal basis: Article 17 of MAR - inside information

The Board of Directors (the “Board”) of (the “Company” and together with its subsidiaries, which includes among others Allegro Pay sp. z o.o. (“Allegro Pay”), the "Group"), hereby announces that on 11 October 2021, Allegro Pay, a wholly owned subsidiary of the Company, signed a Receivables Purchase Agreement (the “RPA”) with AION Bank SA / NV, a credit institution incorporated as a joint-stock company (société anonyme / naamloze vennootschap) under the laws of Belgium, with its registered office in Brussels, Belgium, acting through its Polish branch trading under the name "Aion Bank S.A. Spółka Akcyjna Oddział w Polsce" with its registered office in Warsaw (“AION”), concerning the purchase by AION of consumer loan receivables originated by Allegro Pay (the “Transaction”).

The entry into force of the RPA is subject to applicable policies and procedures, including credit and servicing policies and SLA for IT systems, being agreed by both Allegro Pay and AION (together the “Parties”), and provided no objection will be made by the Belgian banking authority exercising its supervision over AION before the first scheduled date of sale. As such, it will become binding once the above mentioned conditions are met. The RPA is concluded for a fixed term ending on 30 November 2023, which may be subject to extension or early termination based on termination events agreed in the RPA.

The RPA creates a framework for a series of possible disposals of receivables based on an offer and acceptance mechanism. The first offer day is scheduled for November 2021, and subsequent offers may be made each subsequent month until the termination date.

Receivables to be offered to AION in the course of the Transaction must be compliant with eligibility criteria defined in the RPA, which include among others a permissible range of the original number of installments of receivables to be disposed of (from three to thirty). Receivables under “buy now pay later” 30-day loans will not be subject to sale.

The Transaction will include receivables originated under consumer loan agreements entered into before signing the RPA as well as under new agreements to be entered into later on. The receivables will be sold on a non-recourse basis (subject to liability for breach of warranties (rękojmia) or breach of contract) and are expected to be derecognized from Allegro’s balance sheet upon their respective disposal dates.

The Parties agreed in the contract that Allegro Pay does not have to sell its receivables, but if it decides to do so, the receivables must be offered to AION (to the extent that they are compliant with eligibility criteria specified in the RPA) on the basis of exclusivity. However, the exclusivity doesn’t prevent Allegro Pay from entering into potential securitization transactions (private or public) that may be carried out in the future.

Allegro Pay will service any receivables sold to AION, in exchange for a servicing fee payable upfront at the time of each tranche of receivables is purchased. The fee will be set based on a rate agreed in the RPA, intended to cover actual costs of servicing and a reasonable margin.

Receivables will be sold for a price equal to the outstanding principal plus interest (accrued until the sale and forecasted until loan maturity) less a discount. The discount will be set based on a rate p.a. being the sum of a fixed base rate, an add-on rate (to be agreed by the Parties separately for each tranche, intended to reflect expected credit risk), the cost of capital (based on WIBOR 6M), and the servicing fee rate.

The Parties agreed a limit of PLN 500 million, to be renewed every day on a rolling basis, subject to AION's right to terminate with a 6-month notice period (at the time a termination notice is served, the limit will cease to be renewable and will remain available only until the end of the notice period). Within the limit, Allegro Pay will be able to sell receivables based on pre-agreed price parameters. The actual volume of sold portfolios may be higher than the limit. The Parties anticipate that if the cooperation is successful, the total balance of outstanding receivables purchased by AION may reach PLN 2 bn within the fixed term of the agreement. Furthermore, the Parties expect that the first disposals will cover the portfolio of existing receivables for an approximate amount of PLN 100-200 million to be completed by 2021 year-end. The Group expects that the sale of receivables under interest bearing installment loans to AION should generally result in a positive net margin being retained in Group EBITDA (operating profit before interest, tax, depreciation and amortization expenses), while the related receivables waill be de-recognized from the Group's balance sheet. The Transaction does not affect the shopping experience of Allegro users as the loans will still be granted, serviced and repaid via the Allegro platform.