Core Scientific Files For Chapter 11 Bankruptcy

The Bitcoin mining firm, Core Scientific, has taken a progressive step toward the continuity of its operation amid ongoing bankruptcy proceedings. The mining company has recently filed for a Chapter 11 plan. 

Core Scientific filed the plan in the United States Bankruptcy Court for the Southern District of Texas Houston Division. The major stakeholders of the bankrupt mining firm were involved in the negotiation of the plan.

The Benefits Of The Chapter 11 Bankruptcy Plan

According to the plan, the mining company is working toward building more consensus regarding its sustainability. It focuses on the new operational outlook of Core Scientific following the conclusion of its bankruptcy proceedings.

Further, the mining firm acknowledged a liquidity boost since its Chapter 11 bankruptcy filing. Also, the plan includes overhauling the company’s business plan to ensure a successful comeback.

Additionally, the bankruptcy plan indicated that holders of allowed debtor-in-possession (DIP) claims would get full and final satisfaction.

Such implementation would be from the date of the bankruptcy plan. Also, the holders are entitled to either full payment in cash or an alternative treatment which could be decided later. 

Further, the plan highlighted the termination of all liens granted for securing the DIP claims. This would ensure the removal of secured interest on the firm’s assets.

Core Scientific connected its growing financial performance to the increasing prices of Bitcoin. Also, it noted that the positive turn is due to the spike in network hash rate and a drop in energy costs during operations.

Notably, a Chapter 11 bankruptcy plan is a formal document that describes a firm’s prospects in reorganizing itself and activities to facilitate the repayment of its creditors. The plan would allow the company to remain in operation till its stakeholders devise a functional restructuring plan.

The restructuring plan could sometimes involve reducing business operations and staff to cut down debts. Also, the business entity may have to liquidate some assets to repay its creditors.

Core Scientific And Its Bankruptcy

Core Scientific is a digital asset mining firm founded in 2020 with more focus on Bitcoin. Also, the company provides software solutions and services as well as blockchain infrastructure. The mining firm became insolvent following the drastic crypto winter 2022 as Bitcoin prices plummeted.

Through its quarterly report filed on November 2022 to the US SEC, the mining company disclosed its liquidity issues, reporting a net loss of $434.8 million for Q3 2022.

In December 2022, Core Scientific filed for bankruptcy when it couldn’t sustain its operations due to a lack of revenue. Notably, the firm had rejected the financial assistance of $70 million from one of its biggest creditors, B. Riley.