By Michael Scott
Bitcoin mining company Core Scientific reports the US court approved its motion to access the $37.5M loan advanced by the existing creditors to address its liquidity crisis. Core Scientific admitted liquidity crisis in its December 21 Chapter 11 bankruptcy filing. The firm cited increased energy costs, a Bitcoin price downtrend, and reduced earnings in 2022, fueling the liquidity crisis.
Motion for Interim Approval Explained
The motion filed by Core Scientific indicated that accessing the loan will provide working capital to sustain mining operations. The miner noted in a subsequent statement its intentions to swiftly restructure its hosting activities and support mining operations.
The update issued on December 22 echoed the documents annexed to the motion that the loan was advanced by creditors holding over half of its convertible notes. The court filings highlighted that the creditors consented to offer the debtor-in-possession (DIP) commitment loans of $75M. The application indicated the DIP loan would attract a 10% annual interest rate.
The interim approval enables Core Scientific to access the loan in batches. The initial $37.5M batch attempts to keep the miner’s activities afloat. In support, the firm’s attorney clarified that Core Scientific intends to move to access the balance in January. This contradicted the DIP budget, which forecasted the miner’s second application by January 21 to be approximately $12.5 million.
Financial Woes Amidst Bearish Crypto Market
The creditors’ representative Kris Hansen decried the bearish market impact on the crypto mining segment. Hansen confessed that Core Scientific creditors comprehend the prevailing market slowdown to restate their long-term focus with the BTC miner.
Hansen expressed confidence in the crypto industry recovery in his address on behalf of convertible note holders. He admitted that Core Scientific runs a tight balance sheet since its liabilities were estimated at $1.33B by September 30, with its assets valued at $1.4 B.
Core Scientific admitted the exposure to the market slowdown weighed heavily, being one of the largest crypto mining companies. In particular, it alluded to the declining BTC prices as behind the $434.8 M loss incurred in the third quarter.
DIP Loan Inevitable
The firm’s mining operations yielded 12,000 BTC in 2022. The statement portrayed an improvement from the 5769 BTC realized in 2021. However, the plummeting Bitcoin price made the higher mining activity inadequate to turn around its financial position
The statement added that the crypto miner was set for a $ 1.71 billion loss in 2022. This realization informed the November admission that it would likely plunge into bankruptcy unless it secured fresh cash injection. It is observable that Core Scientific’s business continuity is pegged to the $75M loan, restructuring, and uptrend in the crypto market.