Core Scientific, one of the largest bitcoin miners in terms of processing power, declared bankruptcy on Wednesday and agreed to renegotiate its debt with some of its lenders.
As the crypto winter continues to take its toll on the industry, the company filed for Chapter 11 bankruptcy in the Southern District of Texas. According to the petition, the miner’s projected liabilities range from $1 billion to $10 billion. It has between 1,000 and 5,000 creditors, with investment bank B. Riley having the largest unsecured claim.
According to the filing, the miner’s assets are valued between $1 billion and $10 billion. According to its earnings report, Core Scientific’s assets were $1.4 billion at the end of the third quarter, while its liabilities were approximately $1.3 billion.
Core Scientific’s bankruptcy, which accounts for roughly 10% of computing capacity on the bitcoin network, managing 143,000 mining rigs and hosting another 100,000, is the largest yet and is poised to send shockwaves across an already frail industry.
In what looks to be a prepackaged bankruptcy, Core Scientific reached an agreement with some of its creditors. In a prepackaged bankruptcy, the debtor comes to an agreement with its debtee before filing for bankruptcy.
Core Scientific said in a news release that the miner expected support from some of its convertible noteholders in the form of two debtor-in-possession (DIP) facilities worth up to $75 million. This assistance will aid it through the bankruptcy process, which it hopes to complete “swiftly,” according to the company.
This assistance will enable it in completing the bankruptcy procedure, which it expects to accomplish “swiftly,” according to the press statement. At the end of the third quarter, the miner had $544 million in convertible notes outstanding.
Existing convertible note holders will “equitize their debt into a significant majority of the reconstituted company’s common shares,” according to the mining business. Other general unsecured claimants and existing common shareholders will also “get considerable recoveries in the form of reorganized common stock and warrants” as part of the restructuring agreement.
The company first warned of the possibility of bankruptcy in late October, when it stated that it would not be paying part of its loan installments, sending its shares down over 80% on the Nasdaq.
Instead, Core Scientific intends to execute a deal with a group representing “more than 50% of its convertible note holders” that will provide it $56 million in a DIP facility. The noteholders agreed to syndicate up to “$19 million in fresh money DIP Facility loans to all holders of convertible notes,” according to a news release issued on Wednesday.
