In order to restructure its debt, Core Scientific (CORZ), one of the largest Bitcoin miners by computing power, filed for bankruptcy on December 21st, 2022.

The downturn in markets has had significant impacts on the business, forcing Core Scientific to file for Chapter 11 bankruptcy at the Southern District of Texas bankruptcy court. 

According to the filing, the miner’s projected liabilities range from $1 billion to $10 billion and has between 1,000 and 5,000 creditors, with investment bank B. Riley holding the largest unsecured claim.

Based on the filing, the miner’s assets are worth between $1 billion and $10 billion. Core Scientific’s earnings report claimed it had assets worth $1.4 billion at the end of Q3 and liabilities of roughly $1.3 billion.

Through a prepackaged bankruptcy, Core Scientific reached a deal with some of its creditors. In a prepackaged bankruptcy, the debtor and its debtor come to some form of agreement before filing for bankruptcy.

The company anticipates assistance from a few of the holders of its convertible notes in the form of two debtor-in-possession (DIP) arrangements totaling up to $75 million. Core Scientific stated that it will benefit from this assistance as it navigates the bankruptcy process and plans to accomplish these plans “swiftly.” At the end of the third quarter, the miner had $544 million in convertible notes outstanding.

The firm also mentioned that their existing convertible note holders will “equitize their debt into a significant majority of the common stock of the reorganized company.” Existing common shareholders and other holders of general unsecured claims are expected to “receive meaningful recoveries in the form of reorganized common stock and warrants.”

In late October, the company issued a warning of its bankruptcy and announced it would stop paying various loan installments. This news caused the company’s share price to drop by roughly 80%. Core Scientific later stated in November that it might not have enough cash by the end of the year.

Investment bank B. Riley put out a financing plan for $72 million last week, including $40 million in funding that would be provided with “zero contingencies.” The remaining funds would be made accessible after the price of Bitcoin reached $18,500. $42 million is currently owed by Core Scientific to the bank.

With a group that includes more than half of the holders of its convertible notes, Core Scientific expects to reach an agreement that will grant the company $56 million in a DIP facility. Wednesday’s statement included that the holders of convertible notes had agreed to syndicate up to “$19 million in new money DIP Facility loans to all holders of convertible notes.”

Core Scientific explained:

These funds, along with ongoing cash generated from operations, are anticipated to provide the necessary financing to effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors.

Core Scientific currently claims that their operations “remain significantly cash flow positive on a debt-free basis.”

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