Coinbase begins $150M debt buyback at 36% discount

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Cryptocurrency exchange Coinbase will begin buying back up to $150 million of its 2031 senior notes for 64.5 cents on the dollar, a discount of 35.5%.

According to the Aug. 7 announcement, the tender offer will last until Sept. 1, with an early premium of three cents on the dollar on top of the regular purchase price. The 2031 senior notes have a coupon rate of 3.625% per annum and a total principal balance of $1 billion.

Last month, the exchange redeemed $65 million in convertible notes at a discount of 29%. Since the onset of the cryptocurrency bear market, Coinbase’s debt securities have been trading at a discount to par value amid investor concerns about its ability to repay. 

In its May 2022 filing with the United States Securities and Exchange Commission, Coinbase indicated that users’ digital assets held on the platform may “be subject to bankruptcy proceedings” and could see them treated as “unsecured creditors.” Such risk factors are disclosed as part of SEC filings for publicly listed companies. As seen in other proceedings, such as FTX and Celsius, unsecured creditors typically only recover a fraction of their original assets as companies’ funds are first liquidated to repay senior creditors.

The exchange also faces an ongoing SEC lawsuit over allegations it is operating an unregistered securities exchange. The firm has since filed for a dismissal of the lawsuit. 

In its Q2 2023 report, Coinbase disclosed that it held $3.3 billion in long-term debt compared with $5.2 billion in cash and equivalents. It recorded $614 million in operating cash flow during the first six months of 2023. Compared to Q2 2022, customer crypto deposits on the exchange grew by 40% to $124.2 billion.

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