Holders of the allowed debtor-in-possession (DIP) claims for the bankrupt Bitcoin miner Core Scientific will receive full and final satisfaction of their claims, the company said in a joint Chapter 11 plan filed yesterday (Tuesday).
Filed before a bankruptcy court in Texas, Core Scientific said its liquidity had increased since it sought Chapter 11 bankruptcy protection last December. It attributed the increase to improved Bitcoin prices, an increase in Bitcoin network hash rate, and a reduction in mining cost.
Core Scientific’s Compensation Plan
The holders of the DIP claims will get full payment in cash or other agreed payment alternatives, the plan noted. Moreover, any liens granted to secure the allowed DIP claims would be terminated, removing the secured interest over the company’s assets. Chapter 11 bankruptcy protection allows a business to continue operating while it reorganizes its debt.
In May, the federal judge overseeing the bankruptcy proceedings, Judge David Jones for the Southern District of Texas, said that Core Scientific should fast-track its plans to emerge from bankruptcy protection, according to a report by CoinDesk. In response, the miner’s legal team said the company could reach a reorganization plan by September.
Core Scientific asked for more time to develop a business plan in light of the changing cryptocurrency mining business. Bitcoin prices and hash rates were on the rise, and the electricity cost had dropped, it said. For this reason, the miner’s activities were more profitable and could generate more revenues to repay the $6 million debt.
Improving Operations
According to the production update released in May, the company produced 1,314 bitcoins under self-mining operations, which is a 16% increase from the previous month. Its number of operated miners increased by 1,000, and the mining hash rate increased from 14.8 EH/s to 14.9 EH/s.
Notably, according to a court decision issued in January, Core Scientific closed mining machinesassociated with Celsius Mining, its largest customer. The closure was due to a disagreement between the two firms. Core Scientific claimed Celsius was not paying its dues, while Celsius objected, saying the miner had raised energy rates.
Core Scientific was one of the largest cryptocurrency mining companies before collapsing due to market instability caused by the implosion of FTX last November. It went public in 2021 with over $4 billion valuation, and after declaring bankrupt, the value dropped to approximately $70 million.
This article was written by Jared Kirui at www.financemagnates.com.
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