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Embattled crypto miner Core Scientific looks to borrow $70 million from creditor B. Riley to offset a previous loan.
Core Scientific recently secured permission from a bankruptcy court to take out a sizable loan from one of its biggest creditors. The Southern District of Texas bankruptcy court ruled that the blockchain company could take out a maximum loan of $70 million from investment bank B. Riley. This loan would offset Core Scientific’s existing debtor-in-possession (DIP) financing loan, to which B. Riley is already a creditor. The Los Angeles-based capital market company previously tried to provide funds before the Bitcoin miner’s insolvency.
Core Scientific Loan Structure
Essentially, Core Scientific is taking out a loan from a creditor to service a previously existing loan from that same creditor. At the beginning of its Chapter 11 bankruptcy process, the Bitcoin mining platform intended to replace its original DIP loan in advance. The move was because Core Scientific believed it would find better terms with added flexibility. The proof-of-work crypto miner seeks to use $35 million to replace the original loan. In addition, the blockchain company also plans to deploy the outstanding loan balance from one or more additional borrowings.
Core Scientific explained that its replacement loan comes after “extensive marketing and hard-fought negotiations with numerous potential lenders.” In addition, the company stated that an ad hoc shareholders’ committee and the creditors’ committee approved the move. Furthermore, Core Scientific said the loan will ensure “sufficient liquidity to operate their businesses and administer their estates.” Such operations come to bear “in the ordinary course for the duration of these Chapter 11 cases.”
B.Riley $72M Loan Offer
Last December, B. Riley offered Core Scientific $72 million in financing to prop up the flailing company. At the time, B. Riley chalked Core Scientific’s financial struggles to “an aggressive, ill-conceived strategy.” Furthermore, the financial powerhouse ascertained the loan would allow Core Scientific to keep its mining and hosting operations afloat amid its restructuring. In a letter issued to Core Scientific, B.Riley said:
“B. Riley has proposed to Core Scientific’s Board of Directors that it would provide $72 million in new, non-cash pay financing on favorable terms, providing more than two years of runway for the company to achieve profitability. This is a far superior approach for all constituents, one that would avoid bankruptcy while preserving meaningful value for all of Core Scientific’s stakeholders.”
In mid-December last year, Core Scientific secured the court’s permission to take out a $37.5 million DIP loan from creditors. The approved loan attracted a 10% annual interest, and the blockchain company could also access an additional $37.5 million in funding in January 2023. At the time, a creditors’ representative said in a media session that stakeholders have faith in Core Scientific. Furthermore, creditors understand the bear market’s challenges and view a long-term play for the Bitcoin mining company.
Core Scientific’s financial woes became apparent last October, and the company subsequently filed for bankruptcy in December. In addition to rising electricity costs and plunging Bitcoin (BTC) value, the miner’s financial bottom line took a hit from Celsius’ bankruptcy.