January 28, 2023

Core Scientific Noteholders Seek 97% Company Acquisition in Bankruptcy Restructuring

Bitcoin Miner Core Scientific Receives $72M Offer From Creditor to Avoid Bankruptcy

Bankrupt Bitcoin miner Core Scientific may be about to forfeit nearly all corporate equity in order to pay off its debt. 

Owners of the company’s convertible notes are seeking a 97% acquisition of the firm in return for up to $75 million of debtor-in-possession financing. 

Core Scientific’s Restructuring Plan

As announced by the mining firm on Wednesday, the Ad Hoc Noteholder Group intends to provide $56 million to Core Scientific, with the remaining $19 million coming from other noteholders. Ad Hoc holds over 50% of these notes. 

During the restructuring process, Core Scientific will continue to self-mine and operate its hosting services, as they remain cash flow positive on a debt-free basis. The loans from Ad Hoc combined with profits from its regular business operations are expected to allow Core Scientific to restructure, cover its legal fees, and emerge from Chapter 11. 

“As contemplated, the restructuring will reduce the Company’s funded indebtedness by hundreds of millions of dollars and reduce annual interest expense by tens of millions of dollars,” explained the firm. 

Core Scientific filed for Chapter 11 bankruptcy early Wednesday morning, becoming the first publicly traded crypto company to officially declare insolvency. The firm’s fate was arguably written in October after confirming that it didn’t possess the funds to make its November interest payments. At the time, it held just 24 BTC and $26.6 million in cash. 

The company later reported in an SEC filing that it lost $1.7 billion in 2022. Despite receiving a $72 million loan from B. Riley this month, the emergency funds were still not enough to avert bankruptcy.  

“The Board of Directors of the Company determined that the restructuring contemplated by the Restructuring Support Agreement represents the optimal path forward and best positions the Company for long-term success,” concluded the company. 

Bear Market Woes

As with many other crypto firms this year, Core Scientific’s financial troubles primarily stemmed from Bitcoin’s plummeting price – which translates to less dollar-denominated profits for the company. Meanwhile, rising energy costs and network difficulty drove operating costs to unsustainable levels, while certain hosting customers “failed to honor their payment obligations.”

North Compute was the first major miner to file for bankruptcy this year. Iris Energy and Argo Blockchain are also facing difficulties with making their loan payments for rented mining equipment.


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