USBC Increases Bitcoin-Backed Loan to $18 Million, Faces Price-Dependent Risk

USBC increased a Bitcoin-backed loan to $18 million in late July. That created a price-dependent risk: the company could have to add collateral or repay debt within 24 hours. Using the filing’s July 31 inputs, the disclosed 130% call ratio equates to an illustrative Bitcoin price near $48,852.

The company is developing a tokenized-deposit offering. In its Aug. 7 Form 10-Q, it said a fourth draw of $3 million on July 28 raised the balance under its Payward Interactive facility from $15 million. USBC had pledged 479 Bitcoin worth about $30.1 million as of July 31. The filing reported a 59.8% loan-to-value ratio.

Payward Interactive, a Kraken-affiliated entity, is the lender. Affiliate Payward Financial, branded Kraken Financial, holds the Bitcoin as custodian for the lender.

The exposure has grown since June, when USBC disclosed a $15 million balance secured by 336 Bitcoin. The August filing therefore updates both sides of the risk: more debt and more encumbered Bitcoin.

The call and liquidation lines

USBC’s facility requires an initial margin ratio of 150%. At or below the disclosed 130% call ratio, Payward Interactive may issue a collateral-call notice. The notice can require additional collateral or partial repayment within 24 hours. The ratio must then return to 150%.

Using $18 million of principal and 479 Bitcoin, with no change in accrued fees, debt or collateral, 130% coverage equals $23.4 million. That total is about 22.3% below USBC’s approximate $30.1 million July 31 collateral value. It equates to an illustrative $48,851.77 per Bitcoin.

The price is not a permanent contractual trigger. The master loan agreement uses an applicable spot reference. The loan balance can include accrued and unpaid fees. Repayments or additional collateral would also move the level.

The 120% liquidation threshold

At the disclosed 120% ratio, the same principal-only calculation gives $21.6 million of collateral. That equals an illustrative $45,093.95 per Bitcoin. At that ratio, the agreement gives Payward sole discretion to liquidate immediately without notice. It can do so even if it has not issued a call or the 24-hour response period remains open.

The direct remedy carries a fee equal to 1% of collateral-sale proceeds. USBC would owe any shortfall after proceeds are applied, while excess proceeds would be returned.

USBC reported that no collateral call, mandatory repayment or liquidation had occurred as of July 31.

CryptoSlate data showed Bitcoin at $65,035, as of press time. Under the same illustrative inputs, Bitcoin would have needed to fall about 24.9% from that observation to reach $48,851.77. The live distance changes with Bitcoin’s price and the facility inputs.

The debt carried 8.5% annual interest. Based on the $18 million aggregate balance then outstanding, USBC said the loan would mature on July 28, 2027, unless ended earlier.

USBC held $2.982 million of cash and cash equivalents at June 30. It reported a $46.3 million first-half net loss. That loss included $29.7 million of unrealized digital-asset losses, $11.2 million of stock-based compensation and a $2.5 million credit-loss provision. A $12 million non-cash deferred income-tax benefit partly offset those items. The net loss is therefore not equivalent to cash burn.

The company said loan proceeds were being used primarily to develop its tokenized-deposit offering, including costs paid to affiliate Vast Holdings. In practice, the 130% ratio can start a 24-hour cure period. The 120% ratio gives the lender immediate liquidation rights. Neither level is static.