Wall Street’s initial attempt to sell public bonds backed by Bitcoin loans was met with some turmoil after the sharp drop in bitcoin led to forced liquidations.
Jefferies Bankers spent several months pitching investors institutional on an $188 million asset-backed bonds deal linked to Ledn’s thousands of crypto loans. Wall Street Journal reporting.
This structure is intended to package loans of one year to those who provide bitcoin as security, and the proceeds from the sale will be used to pay back these loans. Ledn Addition of capital for new credit.
After bitcoin, the transactions have been verified fell roughly The loan pool has been subject to margin calls after the 27% drop since January. Ledn has been forced to liquidate approximately one-quarter the loans that were intended to be used to fund the deal. WSJ.
The bitcoin-backed product was put to the test early when the volatility of bitcoin’s price triggered calls for margin across the entire loan book.
Ledn’s Bonds are expected Investors can expect to receive between 3 – 6 points of interest above the benchmark rate.
Jefferies is expanding its presence in the structured finance sector and offering more complex, less-tested asset-backed product.
In addition, the bank is now advising NinjaTrade’s $1.5 Billion deal. sale Last year, Kraken was exchanged.
Jefferies initially told investors that the Ledn Bonds would be backed by $199 in loans backed with bitcoin and $1 in cash. This mix of collateral has changed significantly since the liquidations. Now, approximately $150 million in loans and 50 million dollars of cash form the pool. WSJ reported.
What was once marketed as an interest-generating bond is now supported by cash in a much greater proportion, indicating the fragility of its structure when it comes to sharp withdrawals.
S&P’s bitcoin bond ratings
Despite the disruption, the bond deal remains scheduled to close on Feb. 18, according to S&P Global Ratings, which assigned a rating to the notes. Ledn will now have to redeploy the liquidation proceeds to new loans in order to generate interest income to pay bondholders.
The S&P ratings outlined the structure and key risks behind Ledn Issuer Trust 2026-1. S&P said the initial collateral pool consisted of 5,441 fixed-rate balloon loans to 2,914 borrowers, with an aggregate principal balance of about $199.1 million as of Dec. 31, 2025.
These loans were secured by approximately 4,079 Bitcoins, which valued $356.9 Million at the time of cut-off. The average interest rate was 11.8%, and there was a 55.8% weighted loan-to value ratio.
Ledn was forced to liquidate its assets due to the sharp drop in bitcoin prices that occurred at the beginning of February, according to a report. “significant share” Loans slated for this deal. S&P said all liquidations were executed below an 81.4% LTV threshold, shifting the portfolio mix toward fewer loans and more cash in the funding account, while keeping the total collateral package at $200 million.
S&P’s analysis focused on borrower default behavior, recovery rates during liquidation, and concentration risk.
According to the agency, margin-driven defaults present the most severe stress scenario as liquidations are made when bitcoin prices drop and can occur into volatile or thin markets.
Because Ledn underwrites loans primarily based on bitcoin collateral rather than borrower credit profiles, S&P said traditional consumer loan performance metrics are limited.
At the ‘A’ stress level, the agency applied a conservative 100% default assumption, with modeled stresses for the rated notes including a 79% default rate and 68% recovery for the BBB- class A tranche.
S&P highlighted structural mitigants including overcollateralization, early amortization triggers, a liquidity reserve funded at 5% of note balance, and Ledn’s automated liquidation engine, which it said has successfully liquidated 7,493 loans over seven years without principal losses.
Still, S&P flagged key weaknesses, including bitcoin’s historic volatility, regulatory uncertainty, and a conflict of interest tied to Ledn’s past practice of rolling loans by capitalizing unpaid interest.
Ledn plans to require cash interest payments for renewals starting in 2027, which S&P said reduces liquidity stress over time.
As per the WSJ, Borrowers must purchase more bitcoin if the price of bitcoin drops, and their loan is greater than 70%. Ledn liquidates the collateral automatically at 80%.
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Source: bitcoinmagazine.com
