In a landmark transaction, the cryptocurrency lender Ledn Inc. has successfully issued $188 million in securitized bonds backed by Bitcoin-linked loans, establishing a precedent in the asset-backed debt market.
This transaction comprises two tranches of bonds, one of which has garnered an investment-grade rating and is priced with a spread of 335 basis points over the benchmark rate, as reported by Bloomberg. Jefferies Financial Group Inc. acted as the exclusive structuring agent and bookrunner for this innovative financial instrument.
The bonds are secured by a pool of over 5,400 consumer loans issued by Ledn, where borrowers utilized their Bitcoin holdings as collateral. According to an S&P Global Ratings report, these loans exhibit a weighted average interest rate of 11.8%.
The report emphasized that a sharp decline in Bitcoin’s price in early February compelled Ledn to liquidate a “significant share” of loans designated for this transaction. S&P reported that all liquidations were executed below an 81.4% loan-to-value (LTV) threshold, resulting in a portfolio mix that shifted toward a higher concentration of cash in the funding account while maintaining a total collateral package valued at $200 million.
S&P’s analysis focused on borrower default behavior, recovery rates during liquidation, and concentration risk. The agency noted that margin-driven defaults pose the most severe stress scenario, as liquidations tend to occur while Bitcoin prices are declining, potentially leading to execution slippage in thin or volatile markets.
Because Ledn primarily underwrites loans based on Bitcoin collateral rather than borrower creditworthiness, S&P has stated that traditional consumer loan performance metrics are of limited applicability.
At the ‘A’ stress level, the agency applied a conservative 100% default assumption, estimating stresses for the rated notes to include a 79% default rate and a 68% recovery rate for the BBB- class A tranche.
S&P further highlighted structural mitigants, including overcollateralization, early amortization triggers, a liquidity reserve funded at 5% of the note balance, and Ledn’s automated liquidation engine, which has successfully liquidated 7,493 loans over seven years without incurring principal losses.
In a forward-looking perspective, Ledn plans to implement cash interest payment requirements for renewals starting in 2027, which S&P believes will alleviate liquidity stress over the long term.
Bitcoin’s price has shown modest recovery but remains approximately 46% below its October peak, currently trading near $66,000.
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