One of Core Scientific’s major creditors, B. Riley Financial, a diversified financial services company, today sent an open letter to the company’s shareholders and lenders.
Bitcoin (BTC) miner Core Scientific is among several miners battling to stay afloat as growing energy costs push up expenses and persistently low bitcoin prices drive down profits.
For several equipment lenders and other financings, including its two bridge promissory notes, Core Scientific stated in October that it would postpone all principal and interest payments due in October and early November.
As for its financing structure, the company also said it looked into strategic alternatives and hinted that all options, “including bankruptcy, were on the table.” Since then, the market value of its common shares has decreased by 86%.
However, B. Riley has collaborated with the company to restructure its debt and provide liquidity in light of its strategy for exploring strategic capital structure options in order to prevent an unneeded and value-destructive bankruptcy case.
B. Riley has taken significant actions to find a solution since they think there is a way out, specifically by taking on debt on a lot of unencumbered assets. Additionally, they encourage the Company’s Board of Directors to quickly engage with creditors to find a workable solution that would benefit all parties involved with Core Scientific.
Creditor Offers $72 Million To Core Scientific
B. Riley stated in the letter that “bankruptcy is not necessary at all.” The bulk of Core Scientific’s problems, in their perspective, are self-inflicted, and they may be resolved in combination with ongoing dialogue and cooperation with its creditors and equity holders.
In order to achieve this goal, B. Riley has offered to provide the mining company with $72 million in new funds on very advantageous terms over an extended period of time – so that the mining company will have enough time to make money.
Additionally, the letter highlights that Core Scientific now has debts with relatively short maturities and equipment worth about $300 million. These debts were acquired due to the company’s rash, foolish strategy.
Due to this strategy, the company was forced to sell all of its inventory, which in April 2022 would have been worth $362 million or 9,618 Bitcoins, at a significant loss. “This decision, combined with the fast maturity associated with mining, has led the Company to its current position.”
Nevertheless, to avoid bankruptcy, B. Riley will offer enough liquid assets. No sums due to the company’s equipment lenders are intended to be reduced by its proposal. There are no conditions, and it is ready to fund the initial $40 million of financing right away.
All principal payments to equipment lenders would need to suspend at bitcoin values of $18,000 and lower until the price rise again. Once it has sufficiently recovered, they will distribute free cash flow in cascading amounts so that each lender may recoup their losses from the period when interest wasn’t paid.
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