Ledn, which operates in the field of cryptocurrency lending, broke new ground in the asset-based debt market by issuing $188 million of securitized bonds based on Bitcoin-secured loans. This transaction stood out as an important example of how the use of crypto collateral can differ across financial instruments.
Bond Structure and Sector Effects
The bond issuance in question consists of two different tranches. It was stated that one of them received an investment grade credit rating and was priced 335 basis points above the benchmark interest rate. In financial intermediation, Jefferies Financial Group acted as the sole structor and distributor. The bonds are backed by over 5,400 personal loans issued by Ledn with Bitcoin as collateral.
The average interest rate for securitized loans was determined as 11.8 percent. Due to the nature of these loans, Bitcoin price volatility is seen as the main risk factor. It is stated that when the value of the collateral decreases, the repayment capacity of the loans may decrease rapidly.
S&P Evaluation and Collateral Management
Credit rating agency S&P Global Ratings states that investors are partially protected against possible defaults. When the threshold set for overdue or unrepaid loans is exceeded, Ledn algorithmically sells the Bitcoins as collateral and ensures the collection of the debt with the sales proceeds.
Following the sharp depreciation in Bitcoin in early February, Ledn liquidated a significant portion of the loans in the portfolio at an early stage, making the portfolio distribution cash-dominant. These sales made it possible to maintain the portfolio value at around $200 million.
Credit Portfolio and Structural Assurances
In S&P’s analysis, the probability of loan default, collection rates during liquidation and concentration in the portfolio were taken into account. These loans are generally given based on customers’ Bitcoin holdings rather than their credit history. Therefore, classical consumer credit performance data provides a limited reference.
It was stated in the study that in the most challenging scenario, the default rate was modeled as 79 percent and the recovery rate was modeled as 68 percent for the BBB-rated Class A tranche. S&P emphasized various measures that offset extreme default risks. These include overcollateralization, early amortization trigger mechanisms, a liquidity reserve of 5 percent of the note balance, and Ledn’s automatic liquidation system. The company stated that 7,493 loans were liquidated in the last seven years and no principal loss was experienced.
Future Plans and Bitcoin’s Status in the Market
Ledn plans to impose cash interest payments on loans to be renewed as of 2027. S&P believes that this practice will contribute to reducing the liquidity risk of the portfolio in the future. Bitcoin price, on the other hand, has shown a partial recovery after the last decline and is currently trading around $66,000; This level is 46 percent behind the October peak.
