Ledn Inc., a crypto lender, has issued $188 million worth of securitized debt backed by Bitcoin loans. This is a world-first in the asset-backed bond market.
This transaction consists of two tranches. according The following are some of the ways to get in touch with us: Bloomberg, One of the bonds received an investment grade rating, and was priced with a 335 basis point spread over the benchmark interest rate. Jefferies Financial Group Inc. was the only structuring agent, bookrunner and advisor.
Ledn issued more than 5400 consumer loans, in which borrowers put their Bitcoin holdings up as collateral. according to an S&P Global Ratings report.
These loans have an average weighted interest rate of 11,8%.
Bitcoin’s volatility is a major risk. Loans linked to Bitcoin can be wiped out if the price drops sharply.
S&P’s Ledn bitcoin bond ratings
S&P said investors may be partly protected because Ledn uses algorithmic liquidation to sell Bitcoin collateral when a default trigger is reached, applying the proceeds to repay outstanding loans.
Ledn had to liquidate their holdings due to bitcoin’s steep decline at the start of February. “significant share” The deal will include a number of loans. 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. S&P said that margin-driven failures were the most severe stress situation because defaults occur at a time when bitcoin is falling and liquidations are made in thin, volatile 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.
Ledn plans to require cash interest payments for renewals starting in 2027, which S&P said reduces liquidity stress over time.
Bitcoin is trading at around $66,000, a modest recovery from its October high. It remains 46% lower than the previous peak.
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Source: bitcoinmagazine.com
