Galaxy Digital Saves Bitcoin Miner Argo From Bankruptcy 

Galaxy Digital Saves Bitcoin Miner Argo From Bankruptcy 

Argo has been bailed out by Galaxy Digital in a $100 million deal. The crypto financial firm will purchase Argo’s mining facility in Texas for $65 million and provide a $35 million loan to help the company during its restructuring. 

Argo Blockchain (ARBK) has been saved from filing for bankruptcy protection after the company agreed to sell its Helios bitcoin mining facility in Dickens County, Texas, to Galaxy Digital for $65 million. As part of the deal, the crypto financial services firm will also issue a $35 million senior-secured loan to Argo, which will be collateralized by the miner’s equipment. 

Senior-secured loan is a debt financing obligation issued by a bank or financial institution to a company in the event of a possible bankruptcy. The debt obligation is usually repackaged and sold to investors. The issuer holds legal claim to the borrower’s assets above all obligations, and as a senior loan, it is considered way above any other claims against the borrower. 

“Over the last few months, we have been looking for a way to continue mining through the bear market, reduce our debt load and maintain access to the unique power grid in Texas. This deal with Galaxy achieves all of these goals, and it lets us live to fight another day,” said Peter Wall, CEO of Argo, in an interview given to crypto news outlet CoinDesk. 

The deal which was completed on December 28, will see Argo enter into a two-year hosting agreement with Galaxy Digital, where the digital asset financier will offer Helios to third-party miners, creating additional revenue streams for the bitcoin mining company. 

Located in an area of 160-acre with up to 180 megawatts (MW) worth of computing power capacity when mining bitcoin, Helios was Argo’s largest mining facility. The company had plans to increase the site’s capacity to reach 800 MW with 20 exahashes per second (EH/s) of computing power. If Helios is expanded to its full capacity, it will become one of the largest mining facilities and make Galaxy Digital, who now owns the space, one of the largest bitcoin miners in the world. 

Troubles began for the crypto miner soon after Helios was opened in April, as the industry was facing its strongest bear market in years. Low bitcoin prices added with high operational costs hit Argo really hard. The cost to operate the facility, which is powered by electricity bought on the spot market, rose due to natural gas prices running rampant this year, leading to Argo’s profit margin, which stood at 74% in January, dropping to 37% in July, and sinking to a mere 20% in August. The London-based company doesn’t have a fixed-rate electricity agreement at Helios, a main reason for soaring operational costs. 

Galaxy Digital Saves Bitcoin Miner Argo From Bankruptcy 

Argo then signed agreements to host 10,000 mining machines of up to 32MW for third-party bitcoin miners. The company would receive a quarter of the net profit from BTC mined using the machines, earning passive income in the process. The low margins led to the London-based miner reducing expectations for its own hashrate for the rest of the year. Argo (ARB) shares on the London Stock Exchange plunged in October after the company announced that a $27 million loan deal to fund its operations had fallen through. Wall Street investment banks Canaccord Genuity, and Jefferies, which represent 10 ordinary shares in Argo’s (ARBK) American Depositary Shares (ADS), cut their rating to hold from buy, and lowered target for the company’s ADS from $10 to $1, and $13 to $1.10, respectively. 

Argo then warned investors that it may soon have negative cash flow, meaning that it was spending more than it received on a regular basis. On December 12, the bitcoin miner said it was close to restructuring and may have to file for bankruptcy protection, and on 27th, Argo requested a 24-hour suspension for its shares on the Nasdaq Stock Exchange. At the time, the firm said it was in negotiations to add more liquidity by selling some of its assets and carrying out an equipment financing transaction to strengthen its balance sheet. 

Argo is one among several miners who are struggling to stay afloat during a time when energy prices are rising while Bitcoin (BTC) price is falling. In the last two months, Core Scientific, one the largest bitcoin miners by hashrate, and Compute North, another big player in the industry, filed for Chapter 11 bankruptcy protection. Last week, Greenidge said that it reached a debt restructuring agreement with another mining company, NYDIG. 

The deal with Argo will be the second such agreement for Galaxy Digital this month. Earlier in December, the company purchased crypto self-custody platform GK8 from bankrupt crypto lender Celsius in a deal agreed by a judge at the U.S Bankruptcy Court for the Southern District of New York. Helios will be Galaxy’s second bitcoin mining facility after its own minting site in Texas, which is currently under construction and expects to be fully operational in January 2023. 

“Galaxy is aspiring to be one of the most trusted nodes of the decentralised future. The acquisition of Helios represents a new stage over our two-year journey in bitcoin mining that increases our operating scale and breadth of solutions, creating sustainable value for the biggest decentralised digital-asset network and shareholders alike,” said Amanda Fabiano, head of mining at Galaxy Digital, in a statement announcing the deal. 

At the time of writing, BTC is trading at $16,579 – down 0.1% in the last 24-hours. 

Also Read Russia’s Largest Bank Issues Gold-Backed Digital Token

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