DeFi Convertible Bond Offering ‘a Huge Step Forward for DAOs’

Porter Finance’s product launch enables DAOs, such as the one behind Ribbon Finance, to issue debt the DeFi way

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key takeaways

  • Ribbon DAO will issue $3 million of convertible bonds redeemable until December 4, 2022
  • The bonds carry a maximum yield to maturity of 7%

Two months after raising its seed round, DeFi upstart Porter Finance is bringing its first big idea to market. 

The platform began offering convertible bonds for a DAO, on Monday, with Ribbon Finance’s DAO (decentralized autonomous organization) as its launch partner.

The convertible bonds — effectively zero-coupon bonds sold to investors seeking a fixed income — are secured by 50,000,000 RBN (Ribbon Finance’s native token) or about 16.1 RBN per bond, according to a prospectus. That equates to about $15.2 million collateralized at 490%.

“This is a huge step forward for DAOs,” Jordan Meyer, Porter Finance founder, said in a statement, who called it “a completely new fundraising option for DAOs and a novel lending opportunity for investors.”

Ribbon DAO has around $170 million in assets under management via Ribbon Finance’s decentralized options vaults (DOV).

The Ribbon Finance protocol, operated via fully on-chain governance by Ribbon DAO, has generated about $4 million in revenues since October 2021, according to a statement.

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“Having consistent revenues, a large treasury, and strong execution history, Ribbon is the perfect example of a creditworthy DAO,” Meyer told Blockworks.

The prospectus notes Ribbon intends to use the net proceeds from sales of the bonds “for general purposes, including protocol-owned liquidity and bootstrapping the stablecoin supply in our covered call Fuse pool,” referring to a feature from Rari Capital that lets users borrow stablecoins against their Ribbon vault positions.

“This lets us collateralize our treasury RBN to raise cash today at a predictable rate,” a representative from Ribbon DAO told Blockworks.

“We are willing to give lenders some equity upside in exchange for better interest rates.”

Meyer expects this initial bond offering will catalyze a flood of similar deals.

“We are working to help more DAOs raise using the product and adding new features based on their feedback,” Meyer said. “We now have a large inbound of DAOs looking to follow in Ribbon’s footsteps.”

This story was updated on June 6, 2022, at 7:00 pm E.T. with comments from Ribbon DAO.


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