"Bankers at Jefferies have spent months pitching institutional investors on a $188 million asset-backed bond deal tied to thousands of loans issued by crypto lender Ledn, according to Wall Street Journal reporting. The structure is designed to package one-year loans made to individuals who post bitcoin as collateral, with proceeds from the bond sale providing Ledn additional capital to extend new credit."
"But the transaction has been tested after bitcoin fell roughly 27% since mid-January, prompting margin calls across the loan pool. Ledn was forced to liquidate about one-quarter of the loans intended to back the deal, according to WSJ. In other words, the bitcoin-backed credit product faced a stress test pretty early on when bitcoin price volatility triggered margin calls across the loan book."
"Originally, Jefferies told investors the Ledn bonds would be supported by $199 million in bitcoin-backed loans and $1 million in cash. That mix has shifted significantly following the liquidations, with roughly $150 million of loans and $50 million of cash now forming the collateral pool, the WSJ reported. In other words, what was marketed as a bond supported primarily by interest-generating loans is now backed far more heavily by cash, showing fragility of the structure during sharp drawdowns."
Jefferies arranged a $188 million asset-backed bond tied to thousands of one-year loans issued by crypto lender Ledn, using bitcoin posted as collateral. The bond proceeds were intended to provide Ledn additional capital to extend new credit. Bitcoin fell roughly 27% since mid-January, prompting margin calls across the loan pool and forcing Ledn to liquidate about one-quarter of the loans backing the deal. The collateral pool shifted from roughly $199 million of loans and $1 million cash to about $150 million of loans and $50 million cash. The bonds are slated to pay roughly 3–6 percentage points above benchmarks and remain scheduled to close.
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