# Lombard Credit Facility (Loopback)

> **Status: the facility is not yet operating.** This section describes a
> mandate whose contracts are built and rehearsed but not yet deployed. No
> deposits exist, no credit has been extended, and nothing on this page is
> live until the fund announces otherwise. Figures shown as "at the July
> 2026 snapshot" are illustrations from the design record, not quotes.

Lombard lending is the oldest business in private banking: credit extended
against a client's own portfolio securities. The fund's version is
**Loopback** — an isolated credit market where shareholders post **wsNET**
(the fund's wrapped, dividend-earning staked share) as collateral, borrow
**USDG** against it, and — if they choose — run an **automated leveraged
accumulation** ("Turbo"): the borrowed USDG buys NET on the fund's own
exchange pool, the NET is staked and wrapped, and the result lands back as
collateral, all in one transaction.

The facility runs on **Morpho**, the same immutable credit network that
powers Robinhood Earn — the fund wrote no lending engine of its own. The
fund's contributions are exactly three contracts: a collateral-pricing
oracle, the Turbo router, and nothing else. None has an owner, an admin key,
or a pause switch.

## Who is in the market

| Role | Fund language | What they do | What they earn |
|---|---|---|---|
| wsNET depositors | Borrowers | Post collateral, draw USDG, optionally Turbo | Levered NET exposure **plus the full dividend** on every wrapped share posted — collateral is never re-lent |
| USDG depositors | **Credit participants** | Fund the facility's loanable USDG | The floating borrow rate paid by borrowers |
| The Treasury | — | **Nothing.** | The 5% trading fee on every Turbo buy and every margin-call sale |

Two lines of that table deserve emphasis. First: looped collateral keeps
earning the shareholder dividend, because Morpho collateral sits unencumbered
— that is the feature no 2021-era predecessor offered safely. Second: **the
Treasury is not a credit participant.** Fund reserves are never lent, never
borrowed against, and cannot be reached by any loss in this facility.

## The advance rate, and why credit shrinks in euphoria

Collateral is not valued at its market price. The oracle values wsNET at

```
credited value = clamp( TWAP × 0.90,  NAV,  5 × NAV )  ×  dividend index
```

with a maximum **advance rate of 62.5%** against that credited value (the
Turbo router stops earlier, at 53.125%). The consequences, stated plainly:

* **Near NAV, the facility is a normal Lombard desk** — credit tracks a
  haircut market price, and leverage of roughly 2× is available.
* **Far above NAV, credit is capped at five times NAV** regardless of market
  price. At the July 2026 snapshot (shares near $99 against a $4.43 NAV)
  that meant roughly 1.15× — barely any leverage at all. This is
  deliberate. Speculative premium is the only thing that can fall 90%, so it
  is the one thing the facility refuses to lend against. Credit expands as
  price approaches NAV and mutes in melt-ups — the same lean-against-the-wind
  posture as the buyback program.
* **A stale-price guard fails the whole market closed** — new borrowing
  *and* margin calls both pause — whenever the pool's instantaneous price
  falls more than 15% below the time-weighted price, or the TWAP itself goes
  stale. The market resumes when prices reconverge. No one can borrow
  against yesterday's price during a crash.

## Margin calls

A position whose debt exceeds 62.5% of credited collateral value may be
margin-called by anyone: the executor repays debt and receives collateral
worth roughly 12.7% more (at the oracle's marks) than they repaid. Because
collateral is marked at the credited value — at or below market — **a
margin-called borrower surrenders collateral worth more at market than the
debt discharged.** Post accordingly; the application shows every position's
coverage ratio and margin-call price, computed on a fully-diluted basis
(assuming complete exercise of outstanding management options, which step
NAV down when exercised).

While credit is pinned at the 5×NAV cap, no market-price move can trigger a
margin call — the credited value only rises with NAV and the dividend index.
The exposures that remain are borrow interest outrunning the dividend, and
the management-option step just described. Both move slowly or are bounded;
the application displays "days to margin call at current rates."

## What credit participants are risking

Deposited USDG is **not a fund liability, not Treasury-backed, and not
NAV**. It is a loan to leveraged holders of a volatile security, priced by a
floating rate, and it can lose principal. The honest tail: if the share
price collapsed below the maximum debt level (about 3.1× NAV) and never
recovered, recovery on outstanding credit would be bounded by roughly the
NAV floor — on the order of **32 cents per dollar lent** in the worst
construction. The buyback program's standing bid supports the floor but is
deliberately rate-limited (1% of liquid reserves per 8-hour epoch); it is a
patient floor, not an instant one. The facility also carries smart-contract
risk in the underlying credit network. The borrow rate is the compensation
for all of the above.

The application displays a **facility-size guidance line — total borrows at
or below 10% of the exchange pool's USDG depth** — sized so a single
margin-call tranche can always clear the pool without loss. It is guidance,
not an enforced cap; when the facility exceeds it, expect margin calls in
smaller tranches and slower unwinds.

## The fee alignment

Every Turbo iteration buys NET through the fund's canonical pool and pays
the **5% trading fee**, which flows to the Treasury under the standard
schedule. So does every margin-call sale. Leveraged accumulation is
therefore not merely permitted by the fund — it structurally finances the
dividend program and the NAV floor that protect everyone else. Entry into a
Turbo position costs approximately 5% × (leverage − 1) of equity, disclosed
in the application before confirmation, with the payback period at current
dividend rates alongside.

## Terms

| Parameter | Value |
|---|---|
| Collateral | wsNET (wrapped staked NET, 18 decimals) |
| Loan asset | USDG |
| Maximum advance rate (liquidation) | 62.5% of credited value |
| Turbo target advance rate | 53.125% (85% of maximum) |
| Credited value | clamp(TWAP × 0.90, NAV, 5 × NAV) × dividend index |
| Divergence guard | Market pauses if pool price \< TWAP × 0.85 |
| Margin-call incentive | ≈ 12.7% at the oracle's marks |
| Interest model | Morpho Adaptive Curve (floating, utilization-driven) |
| Owner functions | None, anywhere |
| Parameter changes | Impossible in place; requires a successor market and voluntary migration |

The facility lives as the **Loopback** tab of Shareholder Services. The
presets are labeled in modem speeds; the fastest available connection
depends on market conditions, and presets beyond it read NO CARRIER. That
is not a bug. That is the euphoria governor doing its job.