[BTC-TC] LTC-ATF.B2 (Bond paying 0.05% per day interest)

[Deprived]

INTRODUCTION

LTC-ATF.B2 is the second bond issued by the fund I manage (LTC-ATF).  The first bond (you'd never guess it was LTC-ATF.B1) has been on offer since last year on LTC-Global and pays a higher rate of interest than this one.  Once this is launched it is intended that no further LTC-ATF.B1 will be sold (none have been placed for a while already).

This one is being issued for two reasons:

1.  To reduce the cost of capital.  Whilst LTC-ATF could comfortably continue paying the rate we do on LTC-ATF.B1 there is no reason for us to do so if we can raise capital at a lower rate.

2.  To make maintenance easier.  With this bond being transacted in BTC rather than LTC we are able to leave bids and asks up unattended without having to worry about exchange-rate movements making the prices wrong.

Capital raised from these bonds is used to enable LTC-ATF to trade BTC-denominated securities whilst maintaining minimal BTC exposure (by balancing the majority of BTC-denominated assets against BTC-denominated liabilities).


OVERVIEW OF TERMS

Each bond has a face value of 0.01 BTC.
Bonds will be sold at face value (or into such higher bids as exist).
A daily dividend will be paid of 0.05% of face value - so .35% per week, about 18.2% per year (assuming no compounding).
Bonds are backed by all assets of LTC-ATF (though LTC-ATF.B1 has a senior claim on them).
The bond has no fixed expiry date but a bid-wall will be maintained at 99% of face value to provide liquidity even if there are no bids from others.
The bond IS callable - at 105% of face value.  That option is only intended to be used if circumstances change such that the bonds can no longer be maintained - it will NOT, for example, be used to try to sell cheaper bonds in the future (hence LTC-ATF.B1 not being recalled now).
If LTC-ATF closes down then bonds will be paid out at 100% of face value - an exception to the general terms for calling the bond.


BACKING

LTC-ATF is contractually obliged to ensure the following :

That it holds more BTC-denominated assets than it has BTC-denominated liabilities.
That it holds total assets (excluding securities held on behalf of pass-throughs) with a value of at least 166.666% of all liabilities.  That is to say that liabilities may not exceed 150% of net assets.

In practice I aim to keep liabilities below100% of net assets (right now they're at 41.81%).

LTC-ATF predominantly trades/speculates rather than invests and so maintains very high liquidity compared to investment funds.  Typically 85-90% of all assets are cash (BTC or LTC) - at this instant 91.46% of assets are in cash.  Although we are heavy in cash that does mean the capital is inactive - most is backing Bids of securities or currency orders (to maintain our target currency ratios even when exchange-rate moves whilst I'm afk) with the remainder providing cover against short-term liquidity needs.

As of this instant LC-ATF's situation is (all numbers approximate):

Gross Assets : 849 BTC
Liabilities : 251.5 BTC (LTC-ATF.B1 - 250 capital plus 1.5 dividend due for payment shortly)
Net Assets : 598 BTC

Cash position (mixed BTC/LTC - just under half of it BTC) : 776 BTC

Our position is VERY sound financially.


RISK

This is addressed in more detail in the contract.  But briefly:

LTC-ATF bears all exchange-rate risk - this is mitigated to near zero (for bonds) by holding BTC-denominated assets exceeding BTC-denominated liabilities.

LTC-ATF bears all trading-related risk - this is mitigated as far as possible by spreading trading widely, avoiding multiple exposure to the same CP and not holding positions for long.  It would take massive - and rapid - losses for any trading loss to impact bonds.

Trading Platform Risk - this cannot be mitigated : we cannot avoid CP risk in respect of trading platforms (exchanges) that we use.  This risk IS shared with bond-holders (who accept such risk when they first deposit to exchanges) but if losses arise from this then they are then recouped from future LTC-ATF profits (but only after LTC-ATF.B1 has been fully repaired).


QUANTITY TO BE ISSUED

Initially 5000 bonds will be sold (50 BTC worth at face value) with there likely to be another similar quantity released later in the week.  There MAY be more released shortly after that - depending on certain other developments.  In general these will be issued whenever LTC-ATF needs (and can afford without risk of having to sell more units) more capital and/or when we manage to buy back LTC-ATF.B1 (reducing cost of existing debt).


RELEVANT LINKS

Listing for this bond : https://btct.co/security/LTC-ATF.B2

The below links provide further information on LTC-ATF.

The listing for the fund at https://www.litecoinglobal.com/security/LTC-ATF
The LitecoinTalk thread for the fund at http://forum.litecoin.net/index.php/topic,657.0.html
The Bitcoin forums thread for the fund at https://bitcointalk.org/index.php?topic=112876.0

If viewing LTC-ATF on the market please be aware that there was a 100:1 split on it executed today - it has NOT suffered some massive losses.

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[Deprived]

At present the bond is awaiting moderator approval - which usually takes a few days.

[twentyseventy]

Glad to see this on BTC-TC. It will be nice to have another solid option for BTC-denominated investing besides Just-Dice and AM.

It will be interesting to see how the 'daily interest payment' nature of this security will affect the price of PMBs (this is obviously a true bond, not a Perpetual  Mining Bond).

[Rannasha]

Glad to see this on BTC-TC. It will be nice to have another solid option for BTC-denominated investing besides Just-Dice and AM.

It will be interesting to see how the 'daily interest payment' nature of this security will affect the price of PMBs (this is obviously a true bond, not a Perpetual  Mining Bond).

I don't think there'll be any effect. PMBs pay out a higher dividend-% at current difficulty and are rarely callable or have a garantueed buyback. With this bond, you're garantueed to get 99% of the face value back (minus exchange fees) due to the bid wall that Deprived will establish, which justifies the lower daily payments.

True bonds and PMBs are really different things and can't be compared easily.

[Deprived]

Glad to see this on BTC-TC. It will be nice to have another solid option for BTC-denominated investing besides Just-Dice and AM.

It will be interesting to see how the 'daily interest payment' nature of this security will affect the price of PMBs (this is obviously a true bond, not a Perpetual  Mining Bond).

Doubt it'll have much impact on PMBs as:

1.  There won't be much of it for sale - LTC-ATF doesn't increase BTC-denominated capital requirements that much (there's a few specific reasons why it's increasing right now).
2.  It'll pay less per day than a PMB - which is about as far as most purchasers of PMBs look (or they wouldn't be buying them at the prices most sell for in the first place).

[eltopo]

Are there any advantages over coinlenders (0.061% per day)?

[Deprived]

Are there any advantages over coinlenders (0.061% per day)?

Transparency of backing assets - LTC-ATF publshes a weekly report detailing what backs the bonds.  Details of specific securities held is NOT listed but the vast majority of assets (usually 85%+) are specifically detailed (cash holdings and shares which we also run pass-throughs to).  So I don't just say I have enough assets, I also explain exactly what the majority of them are (and it's nearly all cash).  Likely we also have a higher ratio of total assets to debt.

But if you're absolutely certain TF has enough assets to back Coinlenders in all likely circumstances then it DOES offer a better rate of return at present.  Which is the other point - Coinlenders' rate may change in the future : likely downwards if he gets enough users for input.io (where he can use deposited cash without having to pay interest).

Right now if you believe Coinlenders and LTC-ATF have equal risk and equal backing capital per borrowed BTC then Coinlenders IS the better option for you.

[Deprived]

I should add to the above that, at present, Just-Dice represents a statistically better investment than EITHER of Coinlenders/LTC-ATF.B2 - provided you have equal trust in dooglus to TF/myself and don't mind the risk of loss (you CAN lose capital with Just-Dice but the EV of it is still higher).

DMS (which I run) invests in both Coinlenders AND Just-Dice - so I personally consider both fine risk-wise and accept both will be better options for some (maybe many) people.

It's not my intention to claim this is the best investment around - that would be silly as LTC-ATF.B1 is definitely superior (if you can get it at face value) for one thing.  I'm trying to pay the lowest I can whilst still selling as much as I want to (which isn't a lot) - if I'm wrong then I'll raise the rate until it sells.  I make no bones about the fact I'm trying to get capital cheaply - I would be doing a disservice to investors in LTC-ATF were I to do otherwise.

[eltopo]

I should add to the above that, at present, Just-Dice represents a statistically better investment than EITHER of Coinlenders/LTC-ATF.B2 - provided you have equal trust in dooglus to TF/myself and don't mind the risk of loss (you CAN lose capital with Just-Dice but the EV of it is still higher).

DMS (which I run) invests in both Coinlenders AND Just-Dice - so I personally consider both fine risk-wise and accept both will be better options for some (maybe many) people.

It's not my intention to claim this is the best investment around - that would be silly as LTC-ATF.B1 is definitely superior (if you can get it at face value) for one thing.  I'm trying to pay the lowest I can whilst still selling as much as I want to (which isn't a lot) - if I'm wrong then I'll raise the rate until it sells.  I make no bones about the fact I'm trying to get capital cheaply - I would be doing a disservice to investors in LTC-ATF were I to do otherwise.

It's very great that you're discussing all the insides so openly - thanks. My coins are atm diversified between coinlenders, just-dice, AM shares and DMS (SELLING, but ssshhht, don't tell a soul! )

[ThickAsThieves]

"sexurities". Typo of the day! 

[Deprived]

"sexurities". Typo of the day! 

Nice catch

[🏰 TradeFortress 🏰]

I should also mention is much harder for Deprived or me to run with the coins:

1) Your btc doesn't sit there on coinlenders, if I run borrowers will default or repay to people with claims. I'm also not going to have much luck selling my assets tied to me. You will have to take my word for that, because it is not beneficial for me to disclose CL's exact holdings.

Also Inputs will be full reserve (by default).

2) Deprived isn't going to be able to cash out his btct.co assets because if Burnside sees he sold everything and made a manual withdrawal request, he's going to think he was hacked if nothing else.


Whereas with Just Dice dooglus has 20+K coins in cold storage and COULD (not saying he would) disappear in the woods one day. Nobody has tested large withdrawals. (Eg for CL it has got to half of peak amount before, I've got plenty of hundred BTC withdrawals due to investors wanting out to convert to fiat)

He has proven himself trustworthy to me before with how he handled WBX and such, but of course you should research and judge all investments yourself.

[twentyseventy]

2) Deprived isn't going to be able to cash out his btct.co assets because if Burnside sees he sold everything and made a manual withdrawal request, he's going to think he was hacked if nothing else.

Good point; it would have to be a much more concerted effort to run with everything from BTCT than just one large overnight withdrawal.

[vandinn]

Will there be a notice here on the forum prior to the initial offering of the security? How much time in advance?

[Deprived]

Will there be a notice here on the forum prior to the initial offering of the security? How much time in advance?

I honestly wasn't going to bother as initially there'll only be 50 BTC worth sold.  But as you asked, and as we don't need the cash urgently, I'll give 24 hours notice for the first batch.  Thereafter I'll try to give notice where it can be scheduled - but when bonds are sold for a short-term need (typically some new opportunity where I don't want to pull cash away from existing ones) then they'll just be sold/placed without announcement.

It just seems unlikely to me that with such a low rate of return people are going to outbid one another on it.

[Deprived]

This has now been approved on BTC-TC.

I'll be aiming to release the initial batch of 5,000 at 14:00 tomorrow (just over 24 hours from now).  That MAY be delayed as I made a minor error and only created the bond with 1k shares (I must have not saved the change after I increased it).  Will need to get burnside to change that (issuers can't increase shares) - but hopefully that'll be done by tomorrow.

Face value is 0.01.  I strongly recommend NOT bidding any significant amount over that.

[🏰 TradeFortress 🏰]

50,000 is 500 BTC worth.

[Deprived]

50,000 is 500 BTC worth.

Yeah fixed that before you posted.

The bid for 2000 at 0.0099 is the fund's own - that's the guaranteed buy-back offered, so it'll be available as soon as any are sold.

[Deprived]

The initial 5000 are up for sale now - as expected there weren't many orders waiting (which is why I wasn't going to bother scheduling release until someone asked).

First dividend will be later today.

There won't be any news relating to these - so I won't be bumping the thread at all other than if A new batch is placed or if the interest rate is increased (unlikely at present as the cash isn't needed badly).

LTC-ATF's results (and the ratios relevant to bonds) can of course be checked in its thread - though those will be moving to my own website before long where I'll be able to give more detailed and up to date reporting (I'm hoping to use an embedded spreadsheet so anyone can see the valuation and breakdown at any time not just when I produce weekly reports).

[Deprived]

Well they sold out in less than an hour.

And already someone bought a few at 40% over face value from a reseller - it would take years to make back that 40% from the interest.

I'd put up an order myself to stop massive over-charging but:

1.  I only sell at face value unless there's bids up.
2.  I'd be accused of profiteering - even if the intention was just to stop people losing more by buying higher from resellers.
3.  They'd just get bought out and resold higher anyway.

If bids rise high I WILL sell into them - but the fund won't place Asks other than at .01 itself (and will NEVER try to drive the price up by bidding itself above face value without advance disclosure).  Reason I'll sell into bids is simple : I already know I'll be selling another batch in a week or two (once our next security is launched - but before that I have some other things that need to be done).  So if bids rise to a level where they cover more than a few weeks interest then the fund is better off selling now and returning some of the extra as dividends than waiting until the cash is actually needed.

DO NOT BUY THESE AT A LARGE MARKUP TO FACE VALE - YOU'RE GIVING AWAY MONEY YOU WON'T GET BACK.

I'd recommend against paying more than a few percent over face value and never pay more than 5% over face - you should never buy ANY security at above the price the issuer is entitled to do a call at unless there's a guarantee of some kind that there won't be a call for a significant period of time (or it's as part of a short-term trade).