What Are the Details of Core Scientific’s Pre-Planned Bankruptcy?
• Core Scientific, a bitcoin mining company, has filed for Chapter 11 bankruptcy protection.
• Core Scientific’s Chief Mining Officer, Russell Cann, says the company is expecting to emerge stronger after the reorganization process.
• The company’s largest unsecured creditor is investment bank B. Riley, which had proposed a debt restructuring deal for Core Scientific.
Core Scientific, one of the largest bitcoin mining companies in the world, has filed for Chapter 11 bankruptcy protection. The company accounts for about 10% of the entire hashrate of the Bitcoin network, with computing power of nearly 25 exahash/second (EH/s). The filing came after months of turmoil for the crypto mining industry, which has been squeezed between low prices hurting revenue and higher energy costs lifting expenses.
Core Scientific Chief Mining Officer Russell Cann explained that the company expects to emerge stronger from the reorganization process, and that operations will remain largely unchanged. He stated that the bankruptcy filing will now allow for “the restructure of the balance sheet.” Cann clarified that customers who already have machines or contracts with Core Scientific’s hosting business won’t be affected by the bankruptcy, except for two potential sites that are still under development and will be considered for sale. Other than that, the company has no plans to sell mining machines, unless in the normal course of business.
The company’s largest unsecured creditor is investment bank B. Riley (RILY), which earlier this week published a letter proposing a debt restructuring deal for Core Scientific. According to the restructuring plan, the secured debt convertible noteholders will get equity, while the current equity and unsecured holders will get warrants such that as the company grows they will get more shares. The plan also involves about $75 million in debtor-in-possession credit facilities.
Industry reaction to the bankruptcy filing has been mixed. Foundry CEO Mike Colyer said he has no doubt that Core’s team will manage to navigate this difficult time and come out of it stronger. On the other hand, Wolfie Zhao, head of research at TheMinerMag, warned that taking leverage to hodl isn’t a great idea in bitcoin mining and that the bankruptcy filing might also send the share price of miners on a renewed downward trend.
In conclusion, the bankruptcy filing of Core Scientific serves as a reminder of the volatility of the crypto mining industry, and will likely have a ripple effect on the market. Despite the uncertain times, Core Scientific is expecting to emerge stronger from the reorganization process, and its customers should not be affected.