Bitcoin Magazine
Bitcoin-Backed Bonds Facing Stress Test After Bitcoin Selloff, S&P Says
Wall Street’s first attempt at a public bond sale backed by bitcoin loans has hit some turbulence after bitcoin’s sharp decline triggered forced liquidations.
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.
Ledn’s bonds are expected to pay investors between 3 and 6 percentage points above benchmark rates.
Jefferies, which has been expanding its presence in structured finance, has increasingly offered more complex and less tested asset-backed products.
The bank has also pushed further into crypto dealmaking, including advising trading platform NinjaTrade on its $1.5 billion sale to exchange Kraken last year.
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.
S&P’s bitcoin bond ratings
Despite the disruption, the bond deal remains scheduled to close on Feb. 18, according to S&P Global Ratings, which assigned a rating to the notes. Ledn must now redeploy liquidation proceeds into new loans to generate the interest income needed to meet payments to bondholders.
The S&P ratings outlined the structure and key risks behind Ledn Issuer Trust 2026-1. S&P said the initial collateral pool consisted of 5,441 fixed-rate balloon loans to 2,914 borrowers, with an aggregate principal balance of about $199.1 million as of Dec. 31, 2025.
The loans are secured by roughly 4,079 bitcoin, valued at approximately $356.9 million at the cutoff date, with a weighted-average interest rate of 11.8% and a weighted-average loan-to-value ratio of 55.8%.
The report noted that bitcoin’s sharp decline in early February forced Ledn to liquidate a “significant share” of loans slated for the deal. S&P said all liquidations were
