The New Hampshire Business Finance Authority's $100 million of bitcoin-backed bonds received a provisional rating from Moody's Ratings.
Moody's rated Ba2 the two series of securities backed by a pool of bitcoin held by BitGo Bank & Trust. Both series will mature in 2029.
Investors in the second series of the bonds will receive a share of the appreciated value of the bitcoin upon maturity.
The structure also features a trigger, which will automatically liquidate the bitcoin and refund investors if bitcoin drops below a specific threshold.
The rating had to account for bitcoin's "historic volatility and liquidity," Moody's analysts wrote in the rating report.
"Our analysis includes various assumptions consistent with our methodology, including a 72.06% advance rate and a two-day exposure period, corresponding to a Ba2 rating for Bitcoin collateral."
The rating could change based on bitcoin's performance, according to the report.
"The performance of the rated bonds is subject to uncertainty and is sensitive to the performance of the underlying collateral, which in turn depends on economic and credit conditions that may change over time," analysts wrote. "The issuer's compliance with the transaction documents, collateral monitoring, liquidation mechanics, or replacement provisions will also affect the rating of the rated bonds."
The deal was
"Obviously being the first state to support a transaction like that there's a little bit of a risk involved," said New Hampshire Treasurer Monica Mezzapelle. "But at the same time, [the transaction] could only benefit the state, being a state that promotes innovation and this type of technology."
If "there are more entities that are interested in doing business with the state" after seeing the bitcoin deal, "we will always welcome that," Mezzapelle said.
