Crypto lender Ledn Inc. sold $188 million in secured bonds backed by Bitcoin-linked loans, marking the first deal of its kind in the asset-backed debt market.
The transaction includes two bonds, according to Bloomberg, one of which received an investment-grade rating and has a spread of 335 basis points above the benchmark, according to people familiar with the matter. Jefferies Financial Group Inc. acted as sole editorial agent and publisher.
The bonds are secured by a total of more than 5,400 consumer loans issued by Ledn, where borrowers use their Bitcoin as collateral, according to a report by S&P Global Ratings.
The loans have an average interest rate of 11.8%.
Bitcoin price volatility remains moderate risk. Loans tied to cryptocurrency can go underwater if prices drop too much.
S&P’s Ledn bitcoin bond ratings
S&P said investors may be protected in part because Ledn uses algorithmic liquidation to sell Bitcoin securities when an automatic trigger is reached, using the proceeds to repay outstanding loans.
The report noted that the sharp drop in bitcoin at the beginning of February forced Ledn to cancel a “significant share” of the loan planned for this deal. S&P said all closings were made below the 81.4% LTV limit, shifting the portfolio mix to fewer loans and more cash in the financing account, while keeping total collateral at $200 million.
S&P’s analysis focuses on borrower default behavior, recovery rates at the time of liquidation, and concentration risk. The agency said that the default driven by the margin shows the most severe stress situation because closing the money occurs when the price of bitcoin falls, which may be small or volatile markets where the execution is most important.
Because Ledn underwrites loans primarily based on bitcoin collateral rather than borrower credit profiles, S&P said standard consumer loan performance metrics are limited.
For the ‘A’ stress level, the agency used a default assumption of 100%, with a modeled stress for the rated notes including a default rate of 79% and a 68% recovery for the A category of the BBB.
S&P highlighted structural reductions including foreclosures, early amortization competitors, revenue reserves funded at 5% of the note balance, and Ledn’s automated closing engine, which it says has successfully closed 7,493 loans in seven years without major losses.
Ledn plans to require cash interest payments to refinance from 2027, S&P said, easing liquidity pressure over time.
Bitcoin has since recovered modestly but remains about 46% below its October high, trading near $66,000 today.
