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- MicroStrategy is planning to raise funds and acquire more Bitcoin in its crypto portfolio
- The firm has plans to sell corporate bonds to raise approximately $400 million
- The junk bond is going to be used first time ever for Cryptocurrency purchases
- The firm has established two new subsidiaries for guaranteeing the bonds and holding previously acquired crypto assets
- According to spokespersons, the bond will yield approximately in the range of 6.35% and 6.5%
MicroStrategy is the first institution that added Bitcoin to its balance sheet last year. Since the first purchase, the firm continually acquired Bitcoins at several points. Recently in an official announcement, the firm revealed that it is making plans to increase its Bitcoin stash.
The firm has plans to sell corporate bonds to raise funds and invest in the flagship[ crypto asset. Moreover, the business intelligence firm will also write down the value of its existing holdings.
Read More: MicroStrategy CEO Says Bitcoin is ‘Sound Money’ For All
Read More: MicroStrategy CEO Michael Saylor On The Institutional Adoption Of Cryptocurrencies
MicroStrategy will provide sale corporate bonds for Bitcoin
MicroStrategy Inc, a business intelligence firm whose CEO Michael Saylor is the biggest proponent of Bitcoin. Michael Saylor has adopted Bitcoin and is also explaining to several about the utility of the currency. Although the firm has purchased several Bitcoins and has nearly 92k coins, it still desires to purchase more.
Read More: MicroStrategy Buys The Dip, Acquires $10M in Bitcoin
Read More: MicroStrategy Adds Another 229 Tokens to its Bitcoin Portfolio
In recent developments, the firm will offer a senior secured note to qualified institutional buyers. Notably, this is going to be the first-ever junk bond sale that will be used to finance the purchase of BTC.
Who will guarantee the latest bonds?
According to the announcement, MicroStrategy Services Corporation, which is a wholly-owned subsidiary of Saylor’s firm, will fully guarantee the latest notes. To back the bonds, they will be secured on a senior security basis with the firm’s existing assets, including any BTC acquired from the proceeds of the notes. However, the existing BTC already in the firm’s balance sheet is excluded from the backup assets list.
Who will hold and manage the existing BTC coins?
In the current scenario, Microstrategy has 92,079 Bitcoins that are worth more than $3.4 billion. The announcement also revealed that a newly established subsidiary would hold the existing coins. The name of the other latest subsidiary is MacroStrategy LLC.
Saylor’s firm is about to incur impairment loss
In a separate filing with the United States Security and Exchanges Commission (SEC), MicroStrategy mentioned that it is about to incur a loss of $284.5 million during its subsequent earnings report. Hence, the loss is the effect of the recent market crash caused due to regulatory scrutiny. Notably, the loss amount is entirely related to the Bitcoin holdings. And the figure is more than the firm’s cumulative earnings since 2011.
Before the latest loss announcement, it was also found that MicroStrategy had already seen a loss of $265 million. Which in total becomes a loss of more than $500 million, as per Bloomberg.
When will the junk bonds mature?
A spokesperson who has knowledge about the matter said to Bloomberg that the notes would mature after seven years. Moreover, after maturity, it can not be brought back for the next three years. The person also revealed that Jeffries Financial Group Inc is the only book-runner regarding the deal.
Yields on the debut junk bond sale
Another spokesperson who spoke with Bloomberg also highlighted that the business intelligence firm is in its early stage of pricing discussion with investors. The firm is planning for a yield of approximately in the range of 6.35% and 6.5% on the notes sale. It is also noteworthy that average bonds of that category yield 4.01%.
