$100M Bitcoin-Backed Bond Gets Ba2 Rating As Crypto Moves Into Public Finance

• Moody's assigned a Ba2 provisional rating to a $100 million Bitcoin-backed bond issued by a New Hampshire state agency.
• The structure has strict protections, such as a 1.60 times collateral buffer and a 1.40 times liquidation trigger. 
• This comes on the heels of Coinbase, Better, and Fannie Mae expanding their Bitcoin-backed lending products.

Bitcoin is making deeper inroads into traditional U.S. finance, and now, even state-linked borrowing. Moody's Ratings assigned a Ba2 provisional rating to a $100 million Bitcoin-backed (BTC) bond issuance linked to a New Hampshire state agency. 

The Business Finance Authority of the State of New Hampshire issued the bonds as part of the Waverose Finance Project. They are fully backed by Bitcoin. Unlike regular municipal bonds, investors will only get their money back from the sale of Bitcoin linked to the deal, not from taxes or government money. 

How The Structure Works

The deal is split into two tranches, Series A-1 and Series A-2. Both have a Ba2 rating and will mature in 2029. The total amount will be $100 million, but the exact amount for each tranche is still being decided.

The deal is notable because it is one of the first structured finance products linked to the state and backed by Bitcoin. The proceeds from the bonds will be used to buy Bitcoin, which will then serve as collateral for the loan. 

Built-in Safeguards Against Volatility

The issuance includes built-in protections to address Bitcoin's well-known price swings. The deal requires the value of the Bitcoin collateral to remain well above the amount borrowed, with a 1.60x collateral buffer. If that level drops to 1.40 times, the structure automatically sells Bitcoin to pay back investors. Interest payments will also be funded through periodic liquidation of Bitcoin, with no scheduled amortization of principal until maturity. 

Investors Get Bitcoin Upside, But Only After Repayment

Moreover, the Series A-2 bonds have a special feature: investors can receive 15% of any increase in Bitcoin's price, but only after all principal, interest, and costs have been paid.

This is especially relevant as Bitcoin’s year-to-date performance has been negative, down over 21%. 

Bitcoin’s price was at $68,520, up over 3% in the last 24 hours. On Stocktwits, retail sentiment around BTC improved to ‘bearish’ from ‘extremely bearish’ territory, while chatter levels remained ‘low’ over the past day. 

Meanwhile, Moody’s stock was marginally higher in pre-market trading on Wednesday. On Stocktwits, retail sentiment around MCO shifted from ‘bearish’ to ‘neutral’ over the past day. Chatter around it remained at ‘high’ levels.  

The issuance comes at a time when crypto is becoming more popular in mainstream finance. Last week, Fannie Mae, the government-backed foundation of the U.S. mortgage market, partnered with Better Home & Finance (BETR) and Coinbase (COIN) to launch a program that allows people to use crypto as collateral. With it, homeowners can use either Bitcoin or stablecoin USDC (USDC) as collateral for a mortgage.

Read also: IREN, BMNR, HUT, CIFR, BTDR Rise With Bitcoin Back Near $70K – Analysts Flag Key Support Levels

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