(Reuters) – U.S. bitcoin miner Core Scientific received court approval on Thursday to fund its Chapter 11 case with a $37.5 million loan from a group of existing creditors.
U.S. Bankruptcy Judge David Jones approved Core Scientific’s bankruptcy loan on an interim basis at a court hearing in Houston, Texas. The company will seek final approval of the loan and permission to borrow an additional $37.5 million in January, although the company’s attorney said it is open to better financing offers from other lenders.
Kris Hansen, who represents the creditors extending the new loan, said in court that existing stakeholders continue to have faith in Core Scientific’s long-term viability despite the company’s recent challenges and bitcoin’s falling price.
After rapid growth in 2020 and 2021, bitcoin – the most popular digital currency by far – is down more than 60% this year, pressuring the crypto mining sector.
Austin, Texas-based Core Scientific filed for bankruptcy on Wednesday, blaming the sharp decline in bitcoin prices, rising energy costs for bitcoin mining and a $7 million unpaid debt from U.S. crypto lender Celsius Network, one of its biggest customers.
The company said in court filings that it would not liquidate and intends to pursue a restructuring backed by creditors who hold over 50% of the company’s convertible notes.
It is one of the largest cryptocurrency mining companies in the United States, and it mints bitcoins both for itself and for customers, such as Celsius, which owns computers at Core Scientific’s facilities.
Celsius, which filed for bankruptcy protection in July, had argued that U.S. bankruptcy law prevented Core Scientific from charging it for higher electricity costs under the two companies’ bitcoin mining agreement. Now that Core Scientific is also bankrupt, attorneys for both companies said at the hearing they hoped to settle the dispute.
Celsius is “very invested in the long-term future of Core,” said Chris Koenig, an attorney for Celsius.
BlockFi, a crypto lender which filed for bankruptcy late last month, was part of a group that provided a $54 million loan to finance some of Core Scientific’s equipment purchases.
Matt Ferris, an attorney for BlockFi, said Thursday that Core Scientific should continue to pay equipment lenders during the Chapter 11 case, to protect them against the loss or degradation of their collateral.
The case is Core Scientific Inc., U.S. Bankruptcy Court for the Southern District of Texas, No. 22-90341.
For Core Scientific: Ray Schrock of Weil, Gotshal & Manges LLP
For the ad hoc group of convertible noteholders: Kris Hansen of Paul Hastings
For Celsius: Chris Koenig of Kirkland & Ellis
For BlockFi: Matt Ferris of Haynes & Boone
Core Scientific files for bankruptcy as crypto winter bites
How crypto lender Celsius stumbled on risky bank-like investments
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