DBRS Morningstar has for the first time rated securities issued on a blockchain, specifically Etherum, as part of a $39.7 million investment in FAT Brands, the owner of “fast casual” eatery chain Fatburger.
The Toronto-based rating company, which says it rates investment assets from more than 2,600 issuers worldwide, has in fact rated a traditional debt security backed by franchise royalties and upfront fees coming in via Fat Brands companies, which also include Buffalo’s and Ponderosa Steakhouse.
The Security Structured to Incorporate Several Ethereum Tokens into Investment Process
The security was, however, structured to incorporate several Ethereum tokens into the investment process. With the help of New York-based structuring consultant Cadence, ERC-20 tokens digitally representing the debt security were issued Friday to the wallets of all investors, with transactions logged on the blockchain of Ethereum. The same goes for quarterly payments.
In its rating, Morningstar said that using Ethereum would speed up access to securities data, as well as boost transparency.
For the blockchain side of the investment process, the trustee, UMB Bank, held $40 million in $CDG, a stablecoin linked to the US dollar, while other tokens representing two tranches of debt security were held by FAT Brands.
A smart contract concluded trade settlement, passing security tokens to investors and $CDGs to FAT in visible transactions on blockchain explorers.
“It’s definitely the first rated securitization with a digital asset element, and we’re using it the way it was intended: to provide that level of transparency,” Nelson Chu, founder and CEO of Cadence said.
Cadence has previously issued more than 60 blockchain securities on Ethereum, although no such securities were rated.
Last month, the flagship cryptocurrency Bitcoin (BTC) has been upgraded to “A-” by Weiss Ratings on bullish performance.
Weiss said on its twitter account:
“The Weiss Crypto Rating for #BTC is now A- (excellent), thanks to improving fundamentals and positive price action ahead of Bitcoin’s next halving.”