In order to help the ailing business escape bankruptcy, investment bank B Riley, one of Core Scientific’s (CORZ) key creditors, has suggested a new $72 million financing package.
B Riley: Most struggling miners’ issues are self-imposed and can be corrected
In his statement, B Riley stated that the vast majority of Core Scientific’s challenges are self-imposed and can be remedied in conjunction with a “candid, open dialogue and continued cooperation with its creditors and equity holders.”
The investment bank, which now owes Core $42 million on loan, claimed that the terms of the new funding it proposes will provide Core “more than two years of runway to attain profitability.”
According to B Riley, there are “zero contingencies,” and the company is ready to invest the first $40 million of the new financing immediately. Must stop All principal payments to equipment lenders, and they can only resume them once bitcoin prices drop to $18,500 or less for the remaining finance to be provided.
However, if free cash flow from operations rises over that level, it will be distributed to lenders for capital for equipment.
After announcing the possibility of bankruptcy for the first time in late October, Core, the largest bitcoin miner by processing power, saw an 80% drop in its stock price on NASDAQ. It reaffirmed in November that it might exhaust its financial resources before the end of the year.
Is Core scientific struggling to thrive?
As energy costs rise and bitcoin prices continue to hold historically low levels, Core Scientific is one of several miners battling to stay afloat. In a special purpose acquisition company (SPAC) transaction, the company merged with Power & Digital Infrastructure Acquisition before becoming public on January 20.
According to B Riley, Core now has loans with a total value of roughly $300 million that were taken out by the miner at the height of the crypto market and have a relatively short maturity.
The investment bank claimed that “these loans were created as part of an aggressive, poorly planned strategy by the company to continually expanding mining operations and power facilities while never trading bitcoin on the spot or hedging prices.”
The conclusion of these tactics caused the business to sell every bitcoin it had on hand at a loss, which contributed to the company’s current situation, the bank said in its statement.
The miners’ shares increased 22% on Wednesday but have lost 98% of their value this year, while shares of similar companies like Riot Blockchain (RIOT) and Marathon Digital (MARA) have lost more than 80% of their value in the same time frame.