Second comment, on a different front:
2. Comparison to other borrowing options
The following points are not to endorse these options for Lido. They’re more to evaluate whether the proposed loan terms are fair, by comparing them to similar competing alternatives.
An immediate point of comparison to Solv’s overcollateralized loan proposal would be taking out the equivalent loan on a decentralized lending platform.
2.1. First example - Aave
The counterfactual of taking an overcollateralized loan of stablecoins against stETH on Aave can give some insights on fair cost of capital for a potential bond.
For both DAI and USDC, interest rates on Aave have been consistently under 4% (which is considerably below the 5-10% proposed):
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2.2. Second example - Maker
The situation is similar in Maker. Borrowing DAI against stETH with the same collateral ratio as requested in Solv’s proposal would also cost Lido much less than the 5-10%.
2.3. Considerations
a) Rates on stablecoin borrowing against cryptoassets is highly correlated with demand for leverage and for yield farming (main use cases). These are in turn both correlated with bull markets in crypto.
As such, its fair to point out that this current variable rate could increase into or past the interest range proposed in Solv’s proposal.
However, because of the aforementioned correlation, if that happened, Lido would probably be in a position to get working capital in other ways (treasury diversification by selling LDO holdings ou stETH revenues – which would themselves be worth more), so the loan wouldn’t be as needed/would be closable.
b) On a bond, Lido would get the $10m up front but would only need it/deploy it over several months, all while paying the full interest on all of it.
On the other hand, in a counterfactual scenario such as the two mentioned here, borrowing of the stablecoins would only happen ~linearly as needed, so the effective interest paid at the end of the period would be half (think: in a first month paying 4% of, say, $1m and at the end 4% of $10m, averaging 4% on $5m).
Again, only presenting these comparisons to gauge whether the proposed deal terms are the best we could get.