By
Steve Muchoki
April 17th, 2024
Insolvent crypto lender Celsius entered an acquisition agreement with NovaWulf that sees the creation of a new company.
Celsius Network LLC has established an acquisition agreement with NovaWulf Digital Management to exit bankruptcy. Yesterday, Celsius announced it selected the digital asset firm as the sponsor for its proposed Chapter 11 restructuring scheme. Furthermore, the bankrupt crypto lender agreed to the buyout plan with NovaWulf after vetting several other bids.
Under the agreement between both platforms, NovaWulf will assume control of a newly created company that will cater to debts owed. According to the Celsius proposal, most creditors would receive a one-time crypto payment, with NovaWulf also making a sizable direct cash contribution. The proposed plan states that the digital asset firm would contribute between $45 million and $55 million to the new venture. Furthermore, Celsius also suggested that creditors with more significant claims should receive equity in the new company.
In all, most customers would receive up to 70% of their funds.
Celsius Acquisition Agreement Plan Proposed by Debtors with Full Support of Creditors Committee
Celsius submitted its acquisition agreement plan with NovaWulf to the United States Bankruptcy Court for the Southern District of New York yesterday. The proposed plan, which seeks to end the company’s high-profile bankruptcy proceedings, already has the support of the Celsius creditors committee. This body, fully known as the Celsius Official Committee of Unsecured Creditors (UCC), represents the interests of Celsius account holders.
In a statement, Celsius explained that the sale and reorganization plan is the brainchild of Celsius’ Debtors. In addition, the embattled crypto lender also said that the new company will have no “Celsius founder involvement or relationship.” Commenting on NovaWulf’s involvement in the proposed restructuring, Celsius explained:
“The Debtors believe that the NovaWulf plan provides the best method to distribute the Debtors’ liquid crypto assets and maximize the value of the Debtors’ illiquid assets through a new company run by experienced asset managers.”
Celsius’ Official Committee of Unsecured Creditors also summed up the development of the new company owned by Earn creditors. Earn accounts are accounts that pay customers interest on crypto lent out. As UCC put it:
“Last night Celsius (with UCC support) selected NovaWulf to sponsor a reorganization plan that will distribute liquid crypto to all account holders, as well as create a litigation trust and provide creditors with common equity in a NewCo holding illiquid assets like mining.”
In addition, the restructuring proposal also revealed that UCC would appoint a majority of NewCo’s board members. The Celsius acquisition agreement also states that the new company would take custody of Celsius’ mining business, existing loan portfolio, and illiquid assets, to develop crypto-oriented services. Furthermore, NewCo would also shield debtors from significant costs linked to liquidating client assets and the company.
Creditor Payment Breakdown Under New Company Plan
Under the new plan, creditors with claims less than $5,000 will be placed in a “Convenience Class,” where they will receive a one-time liquid crypto distribution. The payment format would be in the form of Bitcoin (BTC), Ether (ETH), and stablecoin USD Coin (USDC).
Creditors owed more than $5,000, and those with at least a $1000 claim who opt out of the Convenience Class shares will receive a portion of the residual crypto. The amount payable would be determined after the payments to smaller accounts.