One of Core Scientific’s largest lenders – B Riley – has offered to loan out $72 million to the embattled Bitcoin miner in a bid to avoid a potentially unnecessary and value-destructive bankruptcy proceeding.
According to the released statement, B Riley plans on providing non-cash pay 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.
Proposal
With the latest proposal, B. Riley has no intention to haircut amounts owed to Core Scientific’s equipment lenders. In fact, the investment bank is prepared to fund the first $40 million of financing immediately, with zero contingencies. All principal payments to equipment lenders would need to be suspended until the price of Bitcoin recovers to $18,500 for the rest of the proposed financing.
Following the price recovery, the proposal will provide free cash flow that will be distributed in cascading amounts to equipment lenders in the form of interest and partial principal payments 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 recoveries for the Company’s lenders, deplete its limited resources and create massive uncertainty for all its stakeholders.”
Troubles for Core Scientific
Core Scientific has been facing the squeeze of a bitcoin bear market and higher energy costs. Its financial woes reflected the depressed state of the mining industry. The firm suspended all principal and interest payments earlier this year, with its common shares declining to 86% and currently trading at $0.15 per share, representing a market capitalization of approximately $50 million. With bankruptcy on the table, it revealed exploring strategic alternatives with respect to its capital structure and suggested all options.
The public-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, as per the quarterly report filed with the United States Securities and Exchange Commission (SEC) on November 22nd.
Last month, another Bitcoin miner Argo Blockchain failed to raise $27 million from a strategic investor sending its shares tumbling. Several mining companies have been reeling 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 to acquire the company.
Additionally, Canadian Bitcoin miner Bitfarms sold $62 million of its BTC to curtail its debts and maintain liquidity.
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