Core Scientific, a Bitcoin miner that filed for bankruptcy last month, could get some major help. According to a statement, a man known as B. Riley offered a $72 million loan to the miner. Riley is one of Core Scientific’s biggest debt holders, meaning the mining company owes him a large sum. But the creditor chose to try to save the company rather than allow a potentially unnecessary and destructive bankruptcy. The mining company’s debt to Riley reaches US$ 42 million, not counting the new offer. Riley has already indicated that he plans to demand favorable terms and offer a minimum period of 24 months for the company to repay the debt.
Proposal
Although the proposal sounds altruistic, B. Riley has no intention of reducing amounts owed to Core Scientific’s equipment creditors. In fact, an investment bank is prepared to fund the first $42 million immediately, with no contingencies. Among the conditions offered is the suspension of payments during the low phase in the price of Bitcoin (BTC). That way, Core Scientific would pay back the loan only when the price of BTC surpasses $18,500. Upon price recovery, the proposal will provide free cash flow to Core, which will distribute returns to lenders in the form of interest and partial principal payments. This model should continue until the company manages to pay off all the debt. As Riley explained, the measure is not intended to do charity, but to give Core conditions to recover its activities. In the creditor’s view, the company’s difficult time is a result of the drop in the price of BTC, not the company’s loss of quality. “Bankruptcy is not the answer and would be a disservice to the company’s investors. This will destroy value for the company’s shareholders, reduce possible recoveries for the company’s creditors, deplete its limited resources and create huge uncertainty for all interested parties,” he said.
Problems for Core Scientific
Core Scientific is the biggest BTC miner, but it has been reeling from a more than 70% drop in the cryptocurrency’s price in 2022. Falling BTC prices, as well as higher energy costs, have hurt the company’s profitability. Cash-strapped, the company suspended all principal and interest payments earlier this year. As a result, its common stock has dropped 86% and is now worth just $0.15 – the company is worth $50 million in market value. The miner lost $435 million in the third quarter and $862 million in the second quarter, taking its net loss to a staggering $1.7 billion. Last month, another Bitcoin miner, Argo Blockchain, failed to raise $27 million from a strategic investor, sending its stock plummeting. Mining data center operator Compute North has filed for bankruptcy, owing $500 million to at least 200 creditors. In short, the pressure on BTC prices continues to affect the profitability of investors and miners, causing severe losses in share prices.
