Core Scientific Offers 27,000 Mining Rigs to Settle $38.6M Debt

Core Scientific, the largest Bitcoin miner by computing power, has submitted a proposal to the U.S. Bankruptcy Court for the Southern District of Texas, suggesting a deal to repay $38.6 million of their outstanding debt.

This would be done by transferring 27,403 cryptocurrency mining rigs to lender and creditor NYDIG.

The proposal was submitted on February 2nd, and the machines in question make up roughly 18% of their entire array of 153,000 mining rigs.

In October 2020, Core Scientific borrowed $77.5 million from NYDIG to acquire mining equipment, however, due to a combination of rising energy and debt service costs and decreasing crypto prices, the company has been unable to make loan payments since Q3 of 2022.

Core Scientific has explained in the filing that giving up the mining rigs in exchange for the complete elimination of their debt to NYDIG will provide substantial advantages to the company and its assets, as these specific machines are no longer needed for their current operations and future business plans and because the value of the machines is less than the outstanding NYDIG debt.

Approval from the bankruptcy court is required for this deal to go through.

On December 21st, Core Scientific filed for Chapter 11 bankruptcy, becoming the first publicly traded cryptocurrency miner to do so.

At the time, they stated that the company will continue to run their self-mining and hosting operations, which remain highly profitable even without considering their debt, and that they are committed to maintaining normal operations during the restructuring process.

According to a CNBC report, despite generating positive cash flow, Core Scientific was unable to keep up with debt payments for leased mining equipment. The company estimated its liabilities to be between $1 billion and $10 billion and had between 1000 and 5000 creditors.

In late October, Core Scientific submitted a SEC filing that revealed the adverse impact of falling bitcoin prices, increased electricity costs, and other factors on its operations and liquidity. The company stated that they had taken measures to cut costs, delay construction expenses, reduce capital expenditures, and boost hosting revenue.

Core Scientific faced financial difficulties due to declining Bitcoin prices and increased energy costs, among other factors. For these reasons, the company's management took steps to reduce expenses and increase revenue, but was unable to make debt payments. As a result, creditors may take legal action or claim collateral.

The company's board also stopped making debt payments in October and November. On October 26, 2022, Core Scientific had 24 Bitcoins and $26.6 million in cash, compared to 1,051 Bitcoins and $29.5 million in cash in September of the same year.

As of the time of writing, the company's stock was trading at $0.37, a 24% decrease from the session. Its all-time high of $14.32 was reached in November 2021 during the peak of the cryptocurrency market.