- Core Scientific mining company was brought down by debt due to a drop in Bitcoin price.
- The court filing shows an Ad Hoc Group of creditors, including BlackRock and Apollo, acquired secured convertible notes issued by the crypto miner.
- Early this month, Core Scientific freed up its hosting space by letting go of the bankrupt crypto lender Celsius Network.
Core Scientific Inc. was lent millions by top traditional finance companies, enabling the Bitcoin miner to build and thrive in its operations. A court filing published on January 18 indicated that BlackRock and Apollo Global Management are among the creditors that lent the cryptocurrency miner $500 million by purchasing its convertible notes.
In August 2021, a report by Bloomberg stipulated that the miner managed to raise capital as BlackRock snapped up $38 million of convertible notes through subsidiary-managed accounts. Apollo acquired $33.3 million between April and August of the same year.
BlackRock and Apollo contributed $17 million and $6.1 million, respectively, towards debtor-in-possession (DIP) financing in 2022, enabling Core Scientific to keep operating during bankruptcy.
In the filing, the creditors referred to as ad hoc groups of DIP finance lending included multi-strategy investment firm Ibex investors, Gullane Capital, and ICG advisors. The filing stated:
“Members of the Ad Hoc Group are the valuable holders of or investment advisors or managers to funds or accounts that hold disclosable economic interests concerning [Core Scientific].”
Other members holding Core scientific notes include Corbin Capital Partners, Kensico Capital Management, Jordan Park, Toroso investments, MassMutual, Sabby Volatility Warrant Master Fund, and Marsico.
However, the largest creditor was Ibex which lent the company $97.9 million in April and another $10.1 million towards the DIP loan.
Core Scientific’s prepackaged bankruptcy
In December, Core Scientific filed for Chapter 11 Bankruptcy protection after the company warned its cash resources would be exhausted by the end of 2022. The Texas-based Core Scientific filed for bankruptcy at the Southern District of Texas bankruptcy court. The company attributed its bankruptcy to slumping Bitcoin prices, rising energy costs for bitcoin mining, and an unpaid $7 million debt from Celsius Network.
At the time of bankruptcy filing, Core Scientific noted that it had suffered a loss of $438.4 million for the three months ending September 2022 and had only $4 million in liquidity. It has about 1,000- 5,000 creditors, with the most significant unsecured claim coming from B. Riley investment bank. According to Core Scientific’s earnings report, at the end of the third quarter, its assets stood at $1.4 billion. In contrast, its liabilities were about $1.3 billion.
The company warned of the risk of bankruptcy in late October, as it noted that it wouldn’t be paying some of its loan installments. The firm reached an agreement with some of its creditors in what appeared to be a prepackaged bankruptcy. In a prepackaged bankruptcy, the debtor gets some deal with the debtee before officially filing for bankruptcy.
Last year, various crypto miners struggled amidst rising energy prices and the broader macro trends affecting crypto asset prices. In late September, Compute North, another major company in the crypto space, filed for Chapter 11 bankruptcy protection. Iris Energy (IREN) had to unplug about 72% of its computing power, which was tied to just over $100 million of loans it defaulted on.
However, earlier this month, Core Scientific decided to free up hosting space by letting go of its largest client, the bankrupt crypto lender Celsius Network.
