Embattled bitcoin miner Core Scientific has been offered US$72mln lifeline from existing creditor B Riley in order to avoid bankruptcy.
The cash injection would give Core Scientific – which already has a US$42mln outstanding loan with B Riley – a two-year cash runway for the company to turn its fortunes around.
As part of the proposal, Core Scientific would need to suspend the majority of its US$300mln of outstanding equipment loans until the price of bitcoin (BTC) recovers above US$18,500, pursuant to which B Riley would distribute cascading amounts to creditors until they are made whole.
In an open letter, B Riley commented: “Bankruptcy is not the answer and would be a disservice to the company's investors. It will destroy value for the company's shareholders, reduce potential recoveries for the company's lenders, deplete its limited resources and create massive uncertainty for all its stakeholders.
“Moreover, bankruptcy is not necessary at all. In our opinion, the vast majority of Core Scientific's issues are self-imposed and can be corrected in conjunction with an open, transparent discussion and ongoing participation with its creditors and equity holders.”
Nasdaq-listed Core Scientific (CORZ) shares have absolutely tanked in 2022, as have all other crypto mining stocks.
Year to date, CORZ is down nearly 98%, even after today’s 70% rally following B Riley’s proposal.
These losses are primarily a result of BTC prices similarly tanking, although B Riley has taken umbrage at some of Core Scientific’s business decisions.
“These debts were incurred as part of an aggressive, ill-conceived strategy by the (Core Scientific) to continue to build out power facilities and expand miners while never selling bitcoin on hand and never hedging prices,” B Riley said.
B Riley continued: “This approach has led to the company having to sell all of its inventory, representing 9,618 Bitcoins in April 2022 valued at $362mln, at a massive loss.
“This decision combined with the fast maturity associated with mining has led the company to its current position.”
It is unclear if Cor Scientific intends to accept the proposal.
B Riley and Core Scientific have been approached for comment.