Core Scientific, Prominent Bitcoin Miner, Files Chapter 11 Plan

Core Scientific, a Bitcoin mining company that has fallen into bankruptcy, has recently submitted a Chapter 11 plan as part of its ongoing bankruptcy proceedings.

The filing took place at the United States bankruptcy court for the Southern District of Texas Houston Division, following negotiations with key stakeholders. Core Scientific aims to foster consensus regarding the future direction of the restructured company once it emerges from bankruptcy.

Since filing for Chapter 11 bankruptcy, Core Scientific has witnessed a notable increase in liquidity. The company is now concentrating on revamping its business plan to ensure a successful comeback. Core Scientific attributes its improved financial performance to several factors, including the surge in bitcoin prices, an upswing in network hash rate, and reduced energy expenses.

Chapter 11 bankruptcy allows companies to continue their operations while stakeholders work toward reaching a consensus on a restructuring plan. This plan might involve implementing measures such as downsizing business operations to reduce debt or liquidating assets to repay creditors. The Chapter 11 bankruptcy plan is a formal document that outlines the company’s intentions for reorganization and debt repayment.

According to the bankruptcy plan, once it becomes effective, holders of approved debtor-in-possession (DIP) claims will receive complete and final satisfaction of their claims. These claimants will be either fully paid in cash or provided with alternative treatment as agreed upon. Additionally, any liens established to secure the DIP claims will be terminated, thereby removing the secured interest over the company’s assets.

To address its financial situation, Core Scientific obtained court approval from the Southern District of Texas bankruptcy court to secure a loan of up to $70 million from B. Riley, a major creditor. This loan will be utilized to repay the existing debtor-in-possession financing loan, which was also extended by B. Riley.

Core Scientific initiated the bankruptcy filing on December 21, 2022, in response to declining revenue and low market prices. Interestingly, this occurred shortly after a creditor extended an offer to assist Core Scientific in avoiding potential bankruptcy.

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