Crypto lender Ledn Inc. Has completed the first asset-backed securities (ABS) deal backed by bitcoin collateral, raising $188 million for crypto credit markets, Bloomberg reported Wednesday.
The transaction involves more than 5,400 consumer loans issued by Ledn, with borrowers using their Bitcoin holdings as collateral. Jefferies Financial Group Inc. Served as the sole structuring agent and bookrunner for the deal, according to the report.
The bonds are structured into two tranches, including an investment-grade portion priced at a spread of 335 basis points over the benchmark rate. The loans underlying the bonds carry a weighted average interest rate of 11.8%, Bloomberg reported.
The structure of the deal incorporates algorithmic liquidation of Bitcoin collateral when pre-defined thresholds are breached, a mechanism intended to protect investors against significant market downturns. S&P Global Ratings noted that a sharp decline in Bitcoin’s price earlier in February forced Ledn to liquidate a “significant share” of loans originally slated for inclusion in the deal, with all liquidations occurring below an 81% threshold.
Bitcoin’s price volatility remains a key risk factor for these types of loans, as falling prices could render loans underwater. The deal marks a first-of-its-kind transaction in the asset-backed debt market, potentially opening new avenues for financing within the cryptocurrency industry.
According to CoinDesk, Ledn packaged the 5,400 bitcoin-collateralized consumer loans into the asset-backed securities transaction.