Coinbase increases junk bond supply to $ 2 billion after investor swarm


Leading US-based cryptocurrency exchange Coinbase has seen huge demand for its junk bond offering, with the company increasing the size of the sale by a third from $ 1.5 billion to $ 2 billion.

According to the Economic Times, at least $ 7 billion in orders were placed competing for equal amounts of seven- and 10-year bonds, offering interest rates of 3.375% and 3.625% respectively.

The publication cites an anonymous source as saying that the interest rates were cheaper than the initial quotes offered by Coinbase, with the surge of demand suggesting that buyers have a higher opinion of the company’s creditworthiness than initially suspected by the stock market.

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“Strong demand is clearly a big endorsement by debt investors,” commented Julie Chariell, analyst at Bloomberg Intelligence.

However, exchange bonds were rated one rank below the investment grade, with Bloomberg bond indices showing that similar debt offerings are earning a return of 2.86% on average.

Junk bonds refer to corporate debt issued by a company that does not have a prime credit rating. Due to the reduced credit rating, junk bonds command higher interest rates than higher quality corporate bonds.

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Coinbase announced its debt offer on September 13, saying the funds could be used for “continued investments in product development” and “potential investments or acquisitions of other companies, products or technologies” that the company could identify in the future.

Related: Coinbase Plans To Raise $ 1.5 Billion Via Debt Offer

Coinbase is just the second major crypto firm to complete a junk bond offering, with MicroStrategy Inc. issuing $ 500 million worth of notes to fund a further build-up of Bitcoin as markets collapsed in June .

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Since trading at $ 342 on the day it opened, Coinbase’s COIN stock last traded at $ 243. However, COIN has increased by around 20% since the end of June.

The recent bullish investor sentiment surrounding Coinbase comes despite threats from the United States Securities and Exchange Commission (SEC) to take legal action against the exchange if it launches a USDC loan product.

Prior to the SEC warning, the exchange intended to launch its crypto loan product ‘Lend’ in just “a few weeks.”