By
Temitope Olatunji
April 26th, 2024
The restructuring plan will allow Core Scientific to cut $400 million in debt by equitizing the said amount in secured and unsecured claims.
A US bankruptcy court has approved the restructuring plans of blockchain infrastructure and hosting provider Core Scientific. The Bankruptcy Court for the Southern District of Texas issued the relevant decision on Tuesday as a way to offer “a tremendous recovery for both unsecured creditors and equity holders”.
Core Scientific filed for Chapter 11 bankruptcy in 2022, following its inability to generate enough revenue to repay debts. Those were debts it accrued after taking up high-interest loans to keep up with the 2021 bull market.
The firm went down with several other crypto companies including notable ones such as crypto exchange FTX and crypto lenders Celsius Network and Voyager Digital.
However, its fortunes appear to have changed for the better, meaning that there’s been a more-than-expected turnaround. Core Scientific notes the “favorable changes in the cryptocurrency and power markets” as the drivers of this remarkable turnaround.
For clarity, Bitcoin (BTC) price has surged 154% from the time the company became insolvent in December 2022. That is from $16,900 to the current price of around $43,000.
Core Scientific’s Restructuring Plans
According to court documents, Core Scientific is eyeing January 23 to fully emerge from bankruptcy. It also hopes to re-list its shares on the Nasdaq by the following day.
As for its restructuring plan, the firm seeks to offer all its creditors a 100% recovery, while also ensuring that existing equity holders get a considerable amount of recovery as well.
The plan will allow Core Scientific to cut $400 million in debt by equitizing the said amount in secured and unsecured claims. The firm also believes that its successful restructuring will let it protect the jobs of at least 240 employees. That is even as its reduced debt will help it to save $60 million on annual interest costs, per court documents.
Meanwhile, Core Scientific CEO Adam Sullivan has also shared some growth plans for the company. According to him, creating value for shareholders is what the company will be focused on going forward. Part of his statement read:
“With demand for bitcoin and high-value compute continuing to rise, we look forward to creating value for our shareholders as we execute our growth plan, de-lever our balance sheet and deliver superior efficiency at scale.”
It might be worth mentioning that Core Scientific did not stop forging partnerships and making relevant deals even while its bankruptcy proceedings went on. Last September, it entered into a double agreement with Bitmain that saw the latter invest $53 million into the company.