Nuclear, creditors clash over shareholders’ role as bitcoin rallies
Bankrupt miner Core Scientific Inc. and its secured creditors are at odds over how big a role shareholders should play in the Chapter 11 process.
Bankrupt miner Core Scientific Inc. and its secured creditors are at odds over how big a role shareholders should play in the Chapter 11 process.
The rally in bitcoin prices and lower energy costs mean shareholders may not be wiped out in the bankruptcy, Core Scientific said in court papers Friday.
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The rally in bitcoin prices and lower energy costs mean shareholders may not be wiped out in the bankruptcy, Core Scientific said in court papers Friday.
Lawyers for Apollo Global Management Inc., BlackRock Inc. and other secured creditors disagreed, saying there is no credible evidence of the company’s soundness other than the “ever-changing and volatile price of bitcoin.”
Debate over Core Scientific’s possible solvency sets up a courtroom battle over whether the company should cover the legal costs of its shareholders to participate in the Chapter 11 case through an official committee.
As a bitcoin miner, Core Scientific sees a direct impact on the bottom line as the cryptocurrency’s price fluctuates. Bitcoin’s price is now around $23,330, up 48% from a recent low of around $15,760 in November, around the time crypto exchange FTX collapsed. Bitcoin prices have risen since then, reflecting a modest rise in other risky assets as the influence of non-professional, individual traders over the crypto market diminishes.
Core Scientific on Friday acknowledged the volatility of bitcoin, which “can rise significantly or decline significantly in a short period of time, as it has done in the past.” But with the price hovering above $20,000 for well over two years now, shareholders deserve a voice in the Chapter 11 proceedings, Core Scientific said.
Privately held Core Scientific said it is now supporting a pending shareholder request for official committee status because it is no longer “hopelessly insolvent.” The company proposed a budget of $4.75 million to an official committee of shareholders.
Apollo, BlackRock and other secured creditors argued in their own filing that Core Scientific should not be allowed to spend money on its shareholders when it cannot demonstrate that it can cover its debt. The company owes $1.5 billion in secured debt, $70 million in unsecured debt and $200 million in other obligations that must be met in full before any recovery flows to equity, the creditor group claimed.
Core Scientific filed for bankruptcy with a proposed restructuring plan with its secured convertible bondholders to convert debt into 97% ownership of the company, subject to dilution. It has since terminated that restructuring agreement and refinanced a bankruptcy loan provided by the convertible noteholders as bitcoin has risen in price.
The Ministry of Justice’s bankruptcy division previously rejected a request from the company’s shareholders to form an official committee. The bankruptcy court in Houston overseeing the company’s case can still order the formation of an equity committee, if the court determines that shareholders’ interests are not already adequately represented.
