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- Ledn’s $188M Bitcoin-backed bond sale revives institutional confidence in crypto credit.
- S&P assigns a BBB- rating as strong collateral offsets volatility-driven stress scenarios.
- Tight safeguards, Jefferies’ role, and structured reserves align Bitcoin debt with Wall Street.
Ledn has successfully completed a $188 million sale of Bitcoin-backed bonds. This is the first time that consumer crypto loans have been securitized in the form of asset-backed securities, which are more institutional in nature. This is a big leap forward for crypto credit, especially after years of uncertainty and inactivity in the space.
Ledn was able to raise investment-grade notes at 335 basis points above the benchmark rate. This brings the structure in line with traditional fixed-income products. This structure provides a more traditional approach to the market, which has faced difficulties in gaining investor trust since 2022.
Source: X
Ledn Sparks Renewed Interest in Crypto Lending
The collapse of crypto lenders such as BlockFi and Celsius led to the demise of the crypto lending space. These events led to the departure of large investors from the space, and the credit pipelines came to a standstill. However, the successful completion of the sale by Ledn indicates that there is renewed interest in the space.
Ledn has issued billions in loans since 2018 and can now boast of the fact that it has survived the collapse of the space and continued to operate under conservative regulations. The sale has now taken its model to the next level and securitized its loans.
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These bonds are secured by 4,078.87 BTC. S&P evaluated this portfolio, which had a value of approximately $356.9 million. The rating agency provided most of the structure with a BBB- rating. The score considers the strength of the underlying portfolio as well as the volatility of the price of Bitcoin.
Robust Safeguards Support Ledn’s Bitcoin-Backed Bonds
S&P performed a strict stress test on the structure. The agency used a 79% default rate as a basis for the test at the “A” level. The test ensured that the rating remained low despite the structure passing investment-grade thresholds for a portion of the debt.
Jefferies was the bookrunner on the deal. The involvement of the bank lends credibility to the deal from traditional finance. The structure features a 5% reserve to provide liquidity as well as automatic loan liquidations below an 81.4% LTV threshold. The rules provide additional security to the underlying portfolio in response to changing market conditions.
Volatility remains an issue with the underlying asset. The price of Bitcoin fell to 60,000 during the evaluation period. Ledn liquidated loans to ensure that coverage ratios were maintained. The move reduced the 2x overcollateralization but ensured that the structure remained in place.
The deal demonstrates that institutions will participate in Bitcoin-backed debt as long as risk controls are in place to mirror traditional finance models. The deal also represents a move toward incorporating crypto debt into traditional finance models.
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