Stronghold Pledges 5k Bitcoin Miners as Loan Collateral

The MinerVA debacle continues haunting Stronghold

Stronghold has pledged 5,000 bitcoin miners totaling 600 PH/s that it bought in December for $8.5 million as collateral of an existing term loan agreement, new filing shows.

On Friday, the Pennsylvania-based power generation and bitcoin mining company said it amended for the third time a Credit Agreement with WhiteHawk Capital and other lenders on Feb. 13, setting covenants on the December hardware purchase.

“Pursuant to the Third Amendment, among other items, the Company was permitted to the purchase the December 2023 Purchase Miners, so long as the December 2023 Purchase Miners were purchased from cash proceeds of the December 2023 Equity Raise and such December 2023 Purchase Miners are Collateral.”

Stronghold wrote in the filing.

Stronghold raised $15.4 million in gross proceeds from a private placement in December. When announcing the bitcoin miner purchase on Jan. 2, it said it would use the cash raised via the private placement to fund the expansion and the miners will arrive no later than January.

The amended agreement also required Stronghold to accelerate payment of $3.23 million that is otherwise due on July 31 and Aug 30 by using the cash proceeds from the private placement.

Stronghold’s lending relationship with WhiteHawk dates back to the 2021 bull run when Stronghold borrowed $40 million in an equipment financing loan. The loan was secured by 15,000 MinerVA bitcoin miners that were supposed to arrive in full by the end of 2021.

It turned out that MinerVa Semiconductor Corp., a team based in Canada led by a person named Marc Ma, failed to deliver the MinerVA equipment by either quantity or quality.

In October 2022, Stronghold and WhiteHawk terminated their equipment financing agreement and replaced it with a secured $58 million Credit Agreement. The collateral was “substantially all of the assets” of Stronghold and its material subsidiaries.

The parties entered into a first amendment to the Credit Agreement in February 2023 to modify certain covenants on Stronghold. It was amended again in March 2023 and for the third time this month.

Stronghold had a cash liquidity of $5.6 million as of Sept. 30, 2023. Based on the latest amendment to the Credit Agreement, Stronghold is required to maintain at least $2.5 million of liquidity until June 30 2025, and at least $5 million after July 1, 2025.