The world’s largest asset manager has issued a $17 million loan to help insolvent bitcoin miner Core Scientific. The deal is part of a prearranged agreement between the company and its other investors, including BlackRock, to issue a $75 million secured convertible note.
According to a filing made at the U.S Securities and Exchange Commission (SEC) last Thursday, bankrupt bitcoin (BTC) miner Core Scientific (CORZ) has received a $17 million loan from BlackRock. The investment giant alongside other stakeholders of Core Scientific decided to issue a $75 million loan on the miner’s $544 million worth of secured convertible notes.
Convertible note is a short-term debt security that is used by a company’s seed investors. These instruments are designed in such a way that they can be converted from loan to an equity stake of the company in the future.
BlackRock, the world’s largest asset manager, is also Core Scientific’s largest shareholder, holding $37.9 million of the company’s secured convertible notes. As per the SEC filing, the $75 million convertible notes is part of a pre-arranged agreement between the mining firm and its creditors before filing for bankruptcy.
Core Scientific, the bitcoin miner with the largest hashrate – computing power required when validating transactions and creating blocks on a blockchain network, filed for Chapter 11 bankruptcy protection on December 21. Like other miners, Core Scientific was hit hard by the crypto winter of last year. According to its filing made at the Bankruptcy Court for the Southern District of Texas, the miner owes between $1 billion and $10 billion in liabilities to about 5,000 creditors, whereas its assets are worth in the same range. As per its Q3 2022 earnings report, Core Scientific’s assets stand at an estimated $1.4 billion, while its liabilities were at about $1.3 billion.
The company which is responsible for 10% of computing power on the Bitcoin network, operates 143,000 mining rigs and hosts another 100,000 for third-party miners. Its bankruptcy sent shockwaves across the industry, making investors realise how much of a negative impact the market downturn had on its biggest players.
Core Scientific first warned about its insolvency risk back in October, when the firm said that it wouldn’t be able to pay some of its loan instalments, which led to CORZ shares plummeting by 80% on the Nasdaq. A month later, the miner said it may run out of money by the end of the year.
Investment bank B. Riley, who is Core Scientific’s largest creditor at $42 million, proposed a $72 million financing plan which includes $40 million issued immediately with zero contingencies, and the rest that will be made available once the price of BTC hits $18,500. In December, the bitcoin miner reached an agreement with its majority shareholders to be granted a $75 million debtor-in-possession (DIP) facility commitment loan.
DIP is a form of financing that is provided by investors to a company that has filed for Chapter 11 bankruptcy. This loan provides capital and helps the company restructure during its bankruptcy procedure.
Lenders including BlackRock have already committed $57 million in new loans to the miner, and as per the SEC filing, the DIP has a maturity date of June 21, 2023 with terms to extend until September 21, 2023. However, the bankruptcy court has only approved $37.5 million from the loan. Meanwhile, Core Scientific has promised that it will continue to operate its “self-mining and hosting services” as normal while it works on reorganising as part of its bankruptcy procedures.
Last month, Argo Blockchain, a London-based bitcoin miner with one of the largest facilities in the world, was bailed out by crypto asset management firm Galaxy Digital in a $100 million deal. According to the terms of agreement, Galaxy will purchase Argo’s Helios mining farm in Dickens County, Texas, for $65 million, while providing a $35 million loan to help the company restructure its finances.
At the time of writing, BTC is trading at $16,633 – up by 0.7% in the last 24-hours. However, Bitcoin has lost 75% of its value since hitting an all-time high of $69,000 in November 2021.