Court permits Core Scientific to borrow $70M to replace existing loan

Investment bank B. Riley is already a Core Scientific creditor and tried to provide funds before the Bitcoin miner filed for Chapter 11.

Core Scientific has received permission from the bankruptcy court for the Southern District of Texas to take out a loan of up to $70 million from investment bank B. Riley, one of the company’s biggest creditors. The loan would be used to pay off the bankrupt Bitcoin miner’s existing debtor-in-possession (DIP) financing loan, which also came from B. Riley.

Core Scientific stated its intention of replacing its original DIP loan in advance at the beginning of its Chapter 11 bankruptcy process, saying it would find better terms with more flexibility. The company is seeking to use $35 million to replace the original loan, with the remaining funds to be available in one or more additional borrowings.

The replacement loan “is the result of extensive marketing and hard-fought negotiations with numerous potential lenders,” Core Scientific stated in its motion. The creditors’ committee and an ad hoc shareholders’ committee have approved the move. The loan will ensure Core Scientific has “sufficient liquidity to operate their businesses and administer their estates in the ordinary course for the duration of these Chapter 11 cases.”

#Bitcoin miner Core Scientific (#CORZ) has agreed to borrow $70 million from investment bank B. Riley to replace existing hardware and keep the company running while it goes through Chapter 11 bankruptcy. pic.twitter.com/JPRnUIXRAo

— MoonDefi (@moondefi1) January 31, 2023

B. Riley had offered Core Scientific $72 million in financing in mid-December in an effort to keep the company solvent. The bank ascribed Core Scientific’s financial woes to “an aggressive, ill-conceived strategy” in its offer letter.

Core Scientific filed for bankruptcy on Dec. 21.

The company received the court’s permission to take out a $37.5 million DIP loan from its creditors at 10% annual interest on Dec. 23, with an additional $37.5 million to be made available in January. A creditors’ representative told Reuters at the time that stakeholders “have faith” in the company.

Core Scientific’s financial problems became known in October. In addition to high electricity and low Bitcoin (BTC) prices, the company’s financial well-being took a blow when Celsius defaulted on its bills after declaring bankruptcy.