The New Hampshire Business Finance Authority is set to issue bitcoin-backed bonds totaling $100 million, in a deal that has received a "Ba2" rating from Moody's Investors Service.
The bonds, issued through the quasi-public state agency, will be structured into two classes with an initial total balance of $100 million, though the respective balances for each class has yet to be determined, Moody's said in a Tuesday statement.
The Ba2 provisional rating falls in the ratings agency's speculative-grade category, two notches below the lowest investment-grade level. According to the agency's guidance, such a rating indicates the obligations could be speculative and subject to substantial risk.
Moody's said it considers all relevant risks, "particularly those associated with the transaction's collateral, structure and operation risks of various service providers."
The bonds will be collateralized by a loan backed by bitcoin, per the statement. While the bonds are issued through a public authority, they are structured as "limited recourse obligations," meaning they are payable solely from proceeds from the bitcoin collateral, with no public funds eligible for repayment.
BitGo will serve as custodian and hold the bitcoin collateral in segregated wallets. It will also act as liquidation agent responsible for liquidating bitcoin to make interest and principal payments.
The bonds are also set to adopt a standard safeguard mechanism, with collateral market values regularly tested. If the loan-to-value ratio worsens, a mandatory redemption of the bonds would be triggered. Moody's noted that initial collateral coverage is set at 1.60x, with an LTV trigger at 1.40x, levels consistent with the target rating.
It's not immediately clear when the bonds will be officially launched. The Block has reached out to the New Hampshire Business Finance Authority for further information.
The forthcoming bond issuance comes as U.S. public entities continue to explore ways to adopt crypto. On Monday, the Labor Department proposed a rule that would allow cryptocurrencies to be included in 401(k) retirement plans in response to President Donald Trump's executive order.
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