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

  • February 27, 2023
  • Judge also approves $6 million termination fee to initial lender group
  • Core 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 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.

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“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.

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