Creditor offers Bitcoin miner core scientific $72M to avoid bankruptcy

Financial services platform B. Riley has offered Bitcoin (BTC $17,676) miner Core Scientific $72 million in financing to avoid bankruptcy and preserve value for Core Scientific stakeholders.

B. Riley, a top lender to Core Scientific with $42 million in loans currently outstanding, outlined the terms of the financing agreement in a Dec. 14 letter noting it's prepared to fund the first $40 million “immediately, with zero contingencies.”

The finance platform suggested that the remaining $32 million would be conditional on the BTC miner suspending all payments to equipment lenders while Bitcoin prices are below $18,500.

The last time the price of Bitcoin was above $18,500 was on Nov. 9, before it fell over 14% in one day.

B. Riley’s assessment of the predicament Core Scientific is in was scathing, suggesting it had deployed “an aggressive, ill-conceived strategy […] to continue to build out power facilities and expand miners while never selling Bitcoin on hand and never hedging prices.”

It noted due to this approach Core Scientific was forced to sell 9,618 BTC in April at a value of $362 million, representing a significant loss for the miner.

Core Scientific admitted in a quarterly report filed on Nov. 22 that it did not have enough cash to get through 2023. It also said it had doubts about its ability to raise funds through financing or capital markets.

In an Oct. 26 filing, the firm pointed to the low price of Bitcoin, rising electricity costs and a refusal from bankrupt crypto lender Celsius to repay a $2.1 million loan as the reason for its financial woes.

B. Riley seemed confident Core Scientific would accept the financing offer and reminded the miner of its responsibility to shareholders, noting:

In our view it would be a gross violation of the fiduciary duties owed by the Board and Management for those fiduciaries—who must put our interests ahead of their own—to authorize a Chapter 11 filing.

Since the beginning of 2022, the share price of Core Scientific has fallen 97.7%, from $11.02 to $0.25.

A one-year chart showing Core Scientific share price on Nasdaq. Source: TradingView