Bitcoin Miner Core Scientific’s Lender Wants to Give Miner $72M to Avoid Bankruptcy
B Riley, an investment bank and one of Core Scientific’s top lenders (CORZ), has offered a $72 million financing plan to help the company avoid bankruptcy.
B Riley stated in a statement that ‘In our view, the vast majority Core Scientific’s problems are self-imposed’ and could be corrected with an open, transparent, and ongoing participation with its creditors, equity holders and creditors. Core has an outstanding loan amount of $42 million from Core. The bank said its new financing proposal will be on favorable terms and provide more than two years of runway to the company to become profitable.
B Riley stated that it was ready to fund the first $40,000,000 of the new financing right away, with “zero contingencies.” All principal payments to equipment lenders must be suspended at bitcoin prices below $18,500 in order to finance the remainder. Equipment lenders will receive cash flow from operations if they exceed that threshold.
Core, the largest bitcoin miner in terms of computing power, warned of bankruptcy late October. This sent its shares plummeting around 80% on Nasdaq. It stated that it could run out of money before the end of the year. Core Scientific is one of many miners that are struggling to stay afloat due to rising energy costs and stubbornly low bitcoin prices. After merging and Power & Digital Infrastructure Acquisition, the company became public on Jan. 20, in a special-purpose acquisition company transaction.
B Riley stated that Core holds about $300 million worth of total loans. These loans have a short maturity and were taken over by the miner at the height of the crypto market. The statement stated that the debts were part of an aggressive and ill-conceived strategy used by Core to expand power facilities and miner expansion, but never sell bitcoin and never hedge prices.
These strategies culminated in the company selling all bitcoins in its stock at a loss. This led to the current situation, according to the bank statement.
Shares of miners rose 22% Wednesday, but have fallen 98% since then. Meanwhile, shares of peers like Marathon Digital (MARA), Riot Blockchain (RIOT), and both have plunged more than 80% in the same period.