Investment bank B Riley, one of bitcoin miner Core Scientific's (CORZ) top lenders, has proposed a new $72 million financing plan so the struggling company can avoid bankruptcy.
"In our opinion, the vast majority of Core Scientific's issues are self-imposed and can be corrected in conjunction with an open, transparent discussion and ongoing participation with its creditors and equity holders," B Riley said in a statement. The investment bank, which has an outstanding loan of $42 million with Core, said that its proposed new financing will be "on favorable terms, providing more than two years of runway for the company to achieve profitability."
B Riley said it is prepared to fund the first $40 million of the new financing immediately, with "zero contingencies." The remainder of the financing is contingent on all principal payments to equipment lenders being suspended at bitcoin prices of $18,500 and below. Above that threshold, however, free cash flow from operations will be distributed to equipment lenders.
Core, which was the largest bitcoin miner by computing power, first warned of the risk of bankruptcy in late October, sending its shares plummeting about 80% on Nasdaq. In November, it reiterated that it may run out of money by the end of this year. Core Scientific is one of several miners struggling to keep afloat as rising energy prices increase costs, while stubbornly low bitcoin prices slash revenues. The company went public in Jan. 20 after merging with Power & Digital Infrastructure Acquisition in a special purpose acquisition company (SPAC) transaction.
B Riley said that Core has about $300 million in total loans that have a very short maturity and were taken on by the miner during the peak of the crypto market. "These debts were incurred as part of an aggressive, ill-conceived strategy by the company to continue to build out power facilities and expand miners while never selling bitcoin on hand and never hedging prices," the investment bank said in a statement.
A culmination of these strategies has led the company to sell all the bitcoins in its inventory at a loss, which led the company to its current state, the bank added in its statement.
The shares of the miners rose 22% on Wednesday but have fallen 98% this year, while shares of peers such as Marathon Digital (MARA) and Riot Blockchain (RIOT) have both tumbled more than 80% over the same time period.