Iris Energy says it would not financially support its affected SPVs under current terms and could default on its loan notice.
Bitcoin (BTC) mining facilitator Iris Energy Limited has announced that two of its miners received a default notice on an outstanding debt worth $103 million. However, Iris Energy maintains that it would not offer the miners financial support if the lender does not negotiate a new loan agreement. Essentially, this implies that the company could default on the $103 million equipment loans held by two of its special-purpose vehicles (SPV). In the likelihood of a loan default, Iris Energy could suffer a foreclosure of the affected assets.
Iris Energy Details Default Notice in SEC Filing
Iris Energy provided information about the default notice in a filing with the Securities and Exchange Commission (SEC). The filing states that the lender faults Iris for failing to enter into encouraging debt restructuring negotiations. However, Iris Energy disagrees with its lender’s allegations and refuses to cooperate unless the lender agrees to modified conditions.
Receipt of the default notice does not come as a surprise to Iris Energy. Last week, the Sydney-based green Bitcoin miner had warned of the likely default notice. This warning came from a prior standoff between the company and its lender over the current BTC mining capacity. According to Iris Energy last week, its miners’ capacity fell to $2 million worth of BTC a month, below the $7 million monthly payment obligation. The company now states in its SEC filing that the lender is opting to trigger an acceleration clause. This means that the creditor demands immediate payment of the entire principal as well as accrued interest.
Should Iris Energy lose mining equipment to its lender via seizures as a result of the default, it could also lose further ground on its operations. However, early last week, the Bitcoin miner’s co-founder and co-chief executive officer Daniel Roberts suggested that the worst might not happen. Roberts explained:
“The limited recourse equipment financing arrangements have been a recent focus for us. We remain committed to exploring a way in which we may be able to allow the lender to recover its capital investment…”
Alongside money from its subsidiaries, Iris Energy had $53 million safely tucked away as of last month.
Crypto Winter, Soaring Energy Costs Bite Down Hard on Miners
The Iris Energy looming loan default is part of a broader issue currently plaguing the crypto mining sector. Due to the prevalent bear market and rising energy costs, several Bitcoin mining firms struggle to repay or service their debt obligations. For instance, last month, leading player Compute North filed for Chapter 11 bankruptcy after owing a staggering $500 million. However, less than three days later, it was reported that the company received a reprieve to continue operations amid the bankruptcy filing.
Besides Compute North, other prominent crypto miners facing steep repayment obligations include Core Scientific and Argo Blockchain.
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