One of Core Scientific’s biggest lenders – B Riley – has offered to lend $72 million to the struggling Bitcoin miner in a bid to avoid potentially unnecessary and value-destroying bankruptcy proceedings.
According to the released statement, B Riley plans to offer non-cash financing on favorable terms with more than two years of runway for the firm to achieve profitability. Core Scientific already has an existing loan with B Riley totaling $42 million.
With the latest proposal, B. Riley has no intention of reducing amounts owed to Core Scientific’s equipment borrowers. In fact, the investment bank is prepared to fund the first $40 million in funding immediately, with zero contingencies. All principal payments to equipment lenders must be suspended until the price of Bitcoin returns to $18,500 for the remainder of the proposed financing.
After the price recovery, the proposal will provide free cash flow which is distributed in decreasing amounts to equipment lenders in the form of interest and partial installments until they are made whole.
“Bankruptcy is not the answer and would be a disservice to the company’s investors. It will destroy value for the company’s shareholders, reduce potential repayments for the company’s lenders, drain its limited resources and create massive uncertainty for all its stakeholders.”
Problems for Core Scientific
Core Scientific has faced pressure from a bitcoin bear market and higher energy costs. Its financial problems reflected the depressed state of the mining industry. The firm suspended all principal and interest payments earlier this year, with common shares falling 86% and currently trading at $0.15 per share, representing a market capitalization of approximately $50 million. With bankruptcy on the table, it revealed it was exploring strategic options with respect to its capital structure and proposed all options.
The publicly traded Bitcoin mining company lost $435 million in Q3 and $862 million in Q2, bringing its net loss to a staggering $1.7 billion since the beginning of the year, according to its quarterly report filed with the United States Securities and Exchange Commission (SEC) ) November 22.
Last month, another Bitcoin miner Argo Blockchain failed to raise $27 million from a strategic investor, sending its shares tumbling. Several mining companies have floundered amid the intense crypto winter.
Mining data center operator Compute North filed for bankruptcy, owing around $500 million to at least 200 creditors. Another established player in the space, Marathon Digital, is reportedly considering buying the company.
In addition, Canadian Bitcoin miner Bitfarms sold $62 million of its BTC to reduce debt and maintain liquidity.
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