According to Bloomberg, cryptocurrency lending firm Ledn Inc. has issued asset-backed securities (ABS) collateralized by Bitcoin, totaling $188 million (approximately 2.6 trillion Korean won). Bloomberg states that this is the first transaction involving Bitcoin-backed bonds in the ABS market.
Structure and Issuance Conditions
Citing multiple sources familiar with the matter, Bloomberg reports that the transaction consists of two bond tiers, with the investment-grade tier priced at a spread of 335 basis points over the benchmark rate. Jefferies Financial Group Inc. served as the exclusive structuring agent and bookrunner.
Collateral Asset Composition
According to a S&P Global Ratings report cited by Bloomberg, the bonds are backed by a pool of over 5,400 loans where consumers borrowed from Ledn using their Bitcoin as collateral. The weighted average interest rate on these loans is 11.8% annually.
Volatility Risk and Safety Measures
The sharp volatility of Bitcoin prices is a key risk factor for this transaction. Bloomberg reports that S&P states Ledn has a structure that allows for the immediate sale of collateralized Bitcoin through an algorithm-driven automatic liquidation system in the event of loan default, using the proceeds to repay the loan. This mechanism helps ABS investors to some extent mitigate the risk of price crashes.
Bloomberg reports that earlier this month, when Bitcoin plummeted about 50% from its October high, Ledn reportedly liquidated a significant portion of loans in its securitized portfolio. Bloomberg adds that although Bitcoin has rebounded slightly, it is still down about 46% from the October high, with the current price around $66,484.
Bloomberg states that this transaction marks the official expansion of securitization technology from traditional financial markets into the cryptocurrency lending sector. It remains to be seen whether similar structured cryptocurrency-backed ABS issuances will continue in the future.
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