Restructuring plan includes $410 million in new notes and new convertible notes
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Core Scientific expects to emerge from Chapter 11 by the end of 2023 after reaching agreements with debt and equity holders regarding a proposed reorganization plan, the firm said.
On Tuesday, Core filed a Restructuring Term Sheet with the bankruptcy court and the Securities and Exchange Commission, a key step in gaining the support of key stakeholders for the court’s approval of its third amended bankruptcy reorganization plan, which has yet to be formalized.
Notably, the Term Sheet outlines some of Core’s liabilities following the bankruptcy exit, including $150 million in new notes and $260 million in new convertible notes. These are part of the restructuring effort related to Core’s issuance of over $500 million in convertible notes in April and August 2021.
According to the Term Sheet, the new notes and convertible notes will mature in four and five years, respectively.
In terms of payables, the new notes will carry a 12% interest rate, with the first payment due on June 15, 2024. As for the new convertible notes, Core has the option to pay either a 10% cash interest on the $260 million principal quarterly or a combination of 6% in cash interest and 6% in stock. The first payment is also scheduled for June 2024, approximately two months after the next bitcoin halving.
Core filed for Chapter 11 bankruptcy protection in December 2022, a move prompted by the market crash and the strain it placed on the firm’s leveraged hodl strategy.
While Core has continued its proprietary and hosting business operations, its share of the bitcoin mining market has been notably eroded by competitors like Marathon due to constraints on its growth plan during the Chapter 11 proceedings.
In January 2023, Core alone accounted for 5.1% of the total bitcoin mined, a figure that decreased to 3.37% by September. In an effort to expedite expansion ahead of the halving, Core entered into an agreement with Bitmain in September to purchase 4 EH/s in S19XPs using cash and equity.
The speed at which the company can reclaim its market share remains uncertain, given that the halving is scheduled to occur four months after Core’s anticipated emergence from bankruptcy.
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