Percent, a private credit financial technology platform, and Anzen, a protocol for private credit protection, launched a new risk mitigation tool that offers accredited investors on Percent’s platform access to credit default swaps (CDS). This new product provides an added level of protection in the case of a default or related event, potentially safeguarding investors from losses.
Beginning this month, some of Percent’s offerings now include mitigation for potential downside risk driven by default or non-performance of underlying assets, starting with the June 15 issuance of percent blended notes, which provide investors with a single investment basket that offers exposure to multiple products.
“Until now, there has been no way to provide default protection for these types of private credit investing opportunities,” Nelson Chu, founder and CEO of Percent, said. “In a new first for private markets, we have partnered with Anzen, combining the best of traditional finance and the innovations of decentralized finance (DeFi) to make credit default swaps a reality in private credit markets.”
A portion of interest paid or principal amortization on underlying securities of each blended note will be pooled to create a reserve fund, while the remainder will be generated through DeFi yield farming. This fund will provide protection for a specific tranche or slice of note exposure, with CDS premium, triggers and other relevant details provided in the transaction documents of each blended note. Investors can see the amount held in the treasury in real time, along with what the coverage ratio would be in the event of a default at any given point in time during the maturity of the note.
