The publicly traded miner is expecting support from some of its convertible note holders in a restructuring deal.
Core Scientific ( CORZ ), one of the largest Bitcoin ( BTC ) miners by computing power, filed for bankruptcy protection on Wednesday and reached a deal with some of its creditors to restructure its debt.
The company filed for Chapter 11 in the Southern District of Texas bankruptcy court as cryptocurrency continues to impact the industry. The miner's estimated liabilities are between $ 1 billion – $ 10 billion, according to the filing. It has about 1,000-5,000 creditors, with the largest unsecured claim coming from investment bank B. Riley.
According to the filing, the miner's estimated assets are between $ 1 billion – $ 10 billion. At the end of the third quarter, Core Scientific's assets stood at $ 1.4 billion, while its liabilities were about $ 1.3 billion, it said income statement.
The bankruptcy of Core Scientific, which accounts for about 10% of the computing power on the Bitcoin network, 143,000 mining rigs in operation and host another 100,000 is the biggest yet and is poised to send shockwaves through an already crumbling industry.
Core Scientific has reached an agreement with some of its creditors in what appears to be a prepackaged bankruptcy. In a prepackaged bankruptcy, the debtor reaches some sort of settlement with their debt before they officially file for bankruptcy.
The miner expects support from some of its convertible notes in the form of two debtor-in-possession ( DIP ) facilities, totaling up to $ 75 million, Core Scientific said in a press release. That support will help him move through the bankruptcy process, which he intends to do "quickly," the press release said. The miner had $ 544 million in convertible notes at the end of the third quarter.
Existing holders of convertible notes will "base their debt on a substantial majority of the total stock of the reorganized company," the mining firm said. Other holders of common unsecured claims and existing common shareholders will also "receive meaningful reimbursements in the form of reorganized common shares and warrants" under the restructuring deal.
The company first warned about the risk of bankruptcy in late October and said it would default on some of its loan payments, sending its shares down around 80% on the Nasdaq. In November, she reiterated that this money can leak by the end of this year.
Last week, investment bank B. Riley proposed funding plan $ 72 million, including $ 40 million funding 'immediately' and with 'zero contingencies.'" However, the rest of the funding will be provided after Bitcoin hits $ 18,500. Core Scientific has $ 42 million outstanding for the bank.
Instead, Core Scientific expects to strike a deal with a group representing "more than 50% of the holders of its convertible notes" that will provide it with $ 56 million in a DIP facility. Noteholders have agreed to syndicate up to "$ 19 million new cash DIP Facility loans to all convertible noteholders," it said in a statement on Wednesday.
"These funds, together with current cash generated from operations, are expected to provide the necessary financing to implement the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors," the miner said.
Core Scientific's operations "remain significantly cash flow positive on a debt basis," the press release said.
Crypto winter ravages miners
Core Scientific is one of several miners struggling to stay afloat as rising energy prices drive up costs while persistently low bitcoin prices cut into revenue. Count Sever, another big firm in the space, filed for Chapter 11 bankruptcy in late September.
Iris Energy ( IREN ) had to cut about 72% out of your computing power this was tied up with just over $ 100 million in defaulted loans. The loans were held by special purpose vehicles. In November, Argo Blockchain's ( ARBK ) a deal to sell $ 27 million shares to finance operations fell through and the company was subsequently downgraded by two analysts. Greenidge Generation ( GREE ) on Tuesday announced a debt restructuring deal with its lender NYDIG, but could still run out of cash within two months if it doesn't secure additional financing.
Basic science is also affected by bankruptcy of lender Celsius Network's mining arm, one of his biggest clients and creditor BlockFi, to whom $ owes 54 million. Celsius Mining filed for Chapter 11 bankruptcy in July and filed a lawsuit against Core Scientific in September, alleging it violated the terms of the automatic stay. Basic scientific claims about Celsius owed $ 5.2 million as of September 30. BlockFi filed for Chapter 11 bankruptcy protection in late November, one of the many cryptocurrency victims of FTX.
Core Scientific operates 243,000 machines in its facilities towards the end of October, split between 14.4 exahashes per second (EH/s) of Bitcoin self-mining hashrate and 10 EH/s hosted machines for other firms, according to the filing. It is about 10% of the world hashrat standing about 243 EH/s at the time of writing.
Shares of Core Scientific were down over 27% at $ 0.1519 in premarket trading.