Coinbase buys back $65M in convertible notes at 29% off.

On June 15, Coinbase, a cryptocurrency exchange, announced that it had agreed to redeem $64.5 million worth of 0.50% Convertible Senior Notes due in 2026. However, due to the notes’ 29% discount to par value, the company estimates that it will only need $45.5 million in cash to complete the agreement. Coinbase stated:

“The Repurchases are expected to close on or about June 20, 2023, subject to the satisfaction of customary closing conditions. Following such closings, approximately $1.373 billion principal amount of the Notes will remain outstanding.”

Alesia Haas, Coinbase’s chief financial officer, described the transaction as an “opportunistic repurchase” and said the firm would continue to seek similar opportunities in the future. Since the cryptocurrency bear market began, many of Coinbase’s debt instruments have been trading at discounts.

Investor concerns were heightened by a disclosure in May 2022 that if the company were to go bankrupt, users’ digital assets held on the platform might “be subject to bankruptcy proceedings” and could be treated as “unsecured creditors.”

For example, the Coinbase Global Inc. DL-Notes 2021(21/31) issued in September 2021 is currently trading at 54 cents on the dollar. Over $1 billion of this debt was issued with a coupon rate of 3.625% and a maturity date of October 2023. The bond’s current yield is 15.2%.

However, it appears that investors have not been enticed by the discounts. On June 6, the U.S. Securities and Exchange Commission charged Coinbase with operating an unregistered securities exchange and the sale of unregistered securities from its staking-as-a-service program. The litigation is ongoing.

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