Bitcoin miner Core Scientific borrows $70 mln to replace bankruptcy lender

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

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

Jones also approved a $6 million termination fee to the lender group that is being replaced, overruling objections from Core Scientific’s equity holders and junior lenders who argued that the termination payment was too high.

Jones said the earlier bankruptcy loan was “incredibly expensive,” but that he had 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 second-guess loan agreements reached in the initial stages of future bankruptcy cases, Jones said.

“My orders have to mean something,” Jones said. “The process is far more important than $6 million.”

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

The B. Riley loan was a better deal, even with the $6 million termination fee factored in, because it offers better financial terms and does not commit Core Scientific to a restructuring path chosen by its senior lenders, Core Scientific attorney Ronit Berkovich told Jones on 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 its operating expenses and fully repay the initial 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 mints bitcoins both for itself and for customers, such as the bankrupt crypto lender Celsius Network LLC, which owns computers at Core Scientific’s facilities.

The case is Core Scientific Inc, U.S. 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 noteholders: Kris Hansen of Paul Hastings

For 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 mln bankruptcy loan

Core Scientific files for bankruptcy as crypto winter bites

How crypto lender Celsius stumbled on risky bank-like investments

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