Cryptocurrency lending company Ledn has raised $188 million for the cryptocurrency credit markets by closing the first asset-backed securities (ABS) transaction. The transaction is secured by bitcoin collateral.
Asset-backed securities are bonds backed by pools of underlying loans. Its investors get payments from the cash flows generated by the loans.
According to a report by Bloomberg, the bonds are backed by 5,400 consumer loans that the company has granted. All the loans are secured by the bitcoin holdings of the borrowers. The weighted average interest rate on the loans is 11.8%.
The offer available in two tranches has its investment-grade portion priced 335 basis points above the benchmark rate. According to the report, Jefferies was the only bookrunner and structuring agent.
The spotlight has been on Bitcoin’s volatility, as the biggest cryptocurrency by market capitalisation has dropped as much as 50% in the last four months, reaching as low as $60,000.
To safeguard investors during severe market falls, the structure uses automated collateral liquidation when criteria are exceeded.
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