(Kitco News) -
Core Scientific, the largest Bitcoin miner by computing power, submitted a filing to the U.S. Bankruptcy Court for the Southern District of Texas outlining a proposed deal to pay off $38.6 million of their outstanding debt by giving 27,403 cryptocurrency mining rigs to lender and creditor NYDIG.
The filing was dated Feb. 2, and the machines represent approximately 18% of their total array of 153,000 mining rigs.
Beginning in Oct. 2020, Core Scientific borrowed $77.5 million from NYDIG to purchase mining equipment, but a combination of rising energy and debt service costs and falling crypto prices resulted in the company being unable to continue payments on the loans since Q3 2022.
Core wrote in the filing that exchanging the mining rigs in return for “the full extinguishment of the NYDIG Debt will bring substantial benefits to the Debtors and their estates” because these particular machines are “no longer necessary for the Debtors’ current operations and future business plans” and because “the principal of the NYDIG Debt exceeds the value” of the machines. The deal must now be approved by the bankruptcy court.
Core Scientific filed for Chapter 11 bankruptcy on Dec. 21, becoming the first publicly traded crypto miner to do so.
“During this process and upon emergence, the Company will continue to operate its existing self-mining and hosting operations, which remain significantly cash flow positive on a debt-free basis,” they wrote at the time, adding that the company is “committed to operating normally during the implementation of its restructuring.”
According to a CNBC report, Core Scientific’s operations continued to generate positive cash flow, but it was insufficient to service the debt that the company took on to lease mining equipment. The company estimated their liabilities to be between $1 billion and $10 billion, and they have between 1000 and 5000 creditors.
On Oct. 26, Core Scientific submitted a filing with the Securities and Exchange Commission that showed they were in dire straits, writing that their operating performance and liquidity had been “severely impacted” by the collapse of the bitcoin price and increased electricity costs, among other factors. “As a result, management has been actively taking steps to decrease monthly costs, delay construction expenses, reduce and delay capital expenditures and increase hosting revenues,” they wrote.
The company’s board also decided to stop making payments on their debts in late October and early November. “As a result, the creditors under these debt facilities may exercise remedies following any applicable grace periods, including electing to accelerate the principal amount of such debt, suing the Company for nonpayment or taking action with respect to collateral, where applicable.”
As of October 26, 2022, Core Scientific said they held “24 bitcoins and approximately $26.6 million in cash as compared to 1,051 bitcoins and approximately $29.5 million in cash as of September 30, 2022.”
At the time of writing, Core Scientific’s share price was trading at $0.37, down 24% on the session. The all-time high of $14.32 was set in Nov. 2021 as the broader crypto market was peaking.
