NYDIG had previously stated it would object to a $70 Million lifeline loan for Core if its own deal wasn’t finalized.
Core Scientific (CORZ) will hand over about 18 percent of its cryptocurrency mining rigs, or 27,403 machines, to lender NYDIG in exchange for extinguishing $38.6 Million in debt, reports by a Feb. 2 filing with the bankruptcy court for the southern district of Texas.
Core, which as of the end of December 2022 operated 153,000 machines for its self-mining operations, filed for Chapter 11 bankruptcy late a year ago. The NYDIG deal has is still to be approved by the bankruptcy judge.
The bear market in cryptocurrency has taken a toll on the mining industry, particularly on leveraged corporations, as high energy prices coupled with a low Bitcoin (BTC) price have led to consolidation and capitulation. Core borrowed about $77.5 Million from NYDIG to buy mining equipment starting October 2020, but has essentially stopped paying off the loans since the end of the third quarter.
The agreement will attract ” substantial benefits” because the value of the machines is lower than the outstanding principal and the machines are no longer required for its operations, Core stated in the filing. Prices for Bitcoin (BTC) mining rigs have dropped about 85 percent in the past year, reports by data from Luxor Technologies.
On Jan. 31, Core agreed to borrow $70 million from financing bank B. Riley. On Feb. 1, NYDIG filed a reservation of rights letter with the court saying it could object to the financing if Core didn’t finalize an agreement over its own debt. The lender has previously argued that it isn’t well-protected against the diminution of the value of the machines under the post-bankruptcy financing arrangements.
About 60 percent of the machines posted as collateral for the NYDIG loans are Bitmain Antminer S19s, an old model, whereas around the rest are newer Antminer S19j Pros.
Earlier in 2023, Core moved to reject its hosting contracts with Celsius Network LLC Mining, which is likewise bankrupt.
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