Coinbase Redeems Discounted Convertible Senior Notes

According to an announcement dated June 15, cryptocurrency exchange Coinbase has agreed to redeem $64.5 million in 0.50% Convertible Senior Notes due 2026.

Due to the 29% discount on the par value of the notes, the company estimates that it will only require $45.5 million in cash to close the deal. Coinbase composed:

“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.”

Coinbase’s chief financial officer, Alesia Haas, referred to the transaction as an “opportunistic repurchase” and stated that the company would continue seeking similar opportunities.

Since the start of the cryptocurrency bear market, several of Coinbase’s debt instruments have been trading at discounts.

Investor apprehensions were exacerbated by a May 2022 disclosure stating that if the company went bankrupt, users’ digital assets on the platform could “be subject to bankruptcy proceedings” and be regarded as “unsecured creditors.”

In one instance, in September 2021, Coinbase Global Inc. DL-Notes 2021 (21/31) traded at 54 cents per dollar.

This debt was issued with a coupon rate of 3.625% and a maturity date of October 2023 for over $1 billion. The current yield on the bond is 15.2%.

However, it appears that the discounts have not attracted investors.

The U.S. Securities and Exchange Commission charged Coinbase on June 6 with operating an unregistered securities exchange and selling unregistered securities through its staking-as-a-service program.

The lawsuit is ongoing.