Bitcoin Miner Core Scientific Files for Bankruptcy, Continues Mining while Repaying Debt Holders

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• Core Scientific, one of the world’s largest publicly traded Bitcoin mining companies, has filed for Chapter 11 bankruptcy protection.
• The company has from $1 to $10 billion in assets and liabilities and 1,000 to 5,000 creditors.
• The firm still has a positive cash flow, but it’s smaller than its debt for leasing mining hardware.
• Core Scientific will continue its mining operations while planning a restructuring deal.
• CORZ plummeted by more than 30% on the news. It’s currently trading at around $0.15, down 99% from its all-time high of $14.32.

Core Scientific, one of the world’s largest public Bitcoin mining companies, has filed for Chapter 11 bankruptcy in the U.S.

Core Scientific still has a positive cash flow but cannot repay its debt for leasing the hardware used for mining. According to the filing, the company’s estimated liabilities and assets are between $1 billion and $10 billion. It has around 1,000 to 5,000 creditors.

The Texas-based company will avoid liquidating its assets and is reported to continue its mining operations throughout the bankruptcy process while coming up with a restructuring deal with its lenders and creditors.

Core Scientific has received support from a group of convertible noteholders in the form of debtor-in-possession facilities (DIP) of up to $75 million. These funds, the company said, will allow it to provide the necessary funding effectively follow through with its planned restructuring, among other things.

CORZ, Core Scientific’s stock, plummeted by around 30% on the news and is currently trading at around $0.15, according to data from Yahoo! Finance. The stock has been on a downturn since it reached an all-time high of $14.32 in November 2021, the peak of the latest crypto bull run that saw Bitcoin hit $69,000.

Early Warnings Come True

Core Scientific, which has mining operations in North Dakota, Georgia, North Carolina, and Kentucky, said in an October filing that its operating performance has been “severely impacted” by “the prolonged decrease in the price of Bitcoin, the increase in electricity costs, and the increase in the global bitcoin network hash rate.”

The company also warned that its stockholders might be exposed to “a total loss of their investment” if the cryptocurrency market fails to recover anytime soon.

Not only did the market not recover, it also dumped even harder. The price of Bitcoin at the time was around $20,000, and the FTX debacle had not happened yet. Bitcoin went to as low as $15,500 following the implosion of Sam Bankman-Fried’s crypto empire.

Miner Capitulation Continues

The current crypto bear market has been brutal to Bitcoin mining companies. Compute North, another major mining firm in the industry, went under in late September. Another miner, Marathon Digital Holdings, announced an exposure to Compute Nother worth around $80 million.

Greenidge Generation reported a loss of more than $100 million in the second quarter of 2022 and paused its plans to expand in Texas. The firm has reached a debt restructuring deal with its lender NYDIG to avoid bankruptcy.

While other mining companies have survived, many have all but paused their operations or are looking for additional funding to keep afloat. It’s unclear whether Bitcoin will recover in the coming months, as analysts agree that the world is facing a global recession sometime in 2023.

On the Flipside

• It’s unclear whether other industry players have exposure to Core Scientific.
• It’s unknown whether other debt holders will support Core Scientific.

Why You Should Care

Core Scientific is one of the world’s largest publicly traded Bitcoin mining companies. Its bankruptcy is indicative of the overall state of the mining industry, showing how hard life is now for crypto companies.

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See original on DailyCoin