Bitcoin miner Core Scientific borrows $70 million to replace bankrupt lender

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Judge also approves $6 million termination fee to original lender groupCore Scientific says new loan offers better terms, more flexibility

(Reuters) – Bitcoin miner Core Scientific Inc received bankruptcy court approval on Wednesday to replace its existing bankruptcy lenders with a new $70 million loan from its largest junior creditor.

U.S. Bankruptcy Judge David Jones told a hearing in Houston that Core Scientific may end its deal with a group of creditors that funded the start of its bankruptcy case and proceed with a new loan from the company. financial services B. Riley Financial Inc, which was owed $42 million when Core Scientific first filed for bankruptcy.

Jones also approved a termination fee of $6 million for the group of lenders being replaced, overriding objections from Core Scientific shareholders and junior lenders who argued the termination payment was too high.

Jones said the earlier bankruptcy loan was “incredibly expensive,” but he approved it because it was the best financing available at the start of Core Scientific’s bankruptcy. Invalidating the termination fee would invite debtors and creditors to question loan agreements made in the early stages of future bankruptcy cases, Jones said.

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“My orders must mean something,” Jones said. “The process is much bigger than $6 million.”

Austin, Texas-based Core Scientific filed for bankruptcy in December with a $75 million loan outstanding, but said it was open to better funding offers from other lenders.

The B. Riley loan was a better deal, even with the $6 million termination fee taken into account, because it offers better financial terms and does not commit Core Scientific to a restructuring path chosen by its primary lenders, Core Scientific attorney Ronit Berkovich told Jones. Wednesday.

Jones’ approval of the new loan allows Core Scientific to borrow $35 million immediately, and the remainder of the loan will be made available upon approval after a future court hearing. The company will use the first portion of the loan to pay operating expenses and fully repay the original bankruptcy loan, Berkovich said.

Core Scientific, one of the largest cryptocurrency mining companies in the United States, cited the sharp decline in bitcoin prices and rising energy costs for bitcoin mining as reasons for its bankruptcy.

Core Scientific manufactures bitcoin both for itself and for its customers, such as bankrupt crypto lender Celsius Network LLC, which owns computers at Core Scientific’s facilities.

The case is Core Scientific Inc, US Bankruptcy Court for the Southern District of Texas, No. 22-90341.

For Core Scientific: Ronit Berkovich, Ray Schrock and Alfredo Perez of Weil, Gotshal & Manges

For the ad hoc group of convertible bondholders: Kris Hansen of Paul Hastings

For the Creditors’ Committee: Brett Miller of Willkie, Farr & Gallagher

For Celsius: Chris Koenig of Kirkland & Ellis

Read more:

Bitcoin miner Core Scientific approved for $37.5 million bankruptcy loan

Core Scientific Files for Bankruptcy as Crypto Winter Bites

How crypto lender Celsius stumbled upon risky bank-like investments

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