BlackRock sought to commit $17 million to Core Scientific.
According to the US Securities and Exchange Commission filing, this is part of the $75 million loan convertible note holders backed by the miners.
Grayscale Bitcoin Trust and bankrupt Bitcoin miner Core Scientific (CORZ) have both received huge investment raises from Crypto asset manager Valkyrie Investments and BlackRock respectively.
Valkyrie is famous for launching a Bitcoin trust fund and Bitcoin-related exchange-traded fund (ETF) in 2021. GBTC has over $10 billion in assets. Comparatively, Valkyrie manages just $180 million in total assets. Regardless, Valkyrie believes it can effectively sponsor and manage GBTC.
We understand that Grayscale has played an important role in the development and growth of the bitcoin ecosystem with the launch of GBTC and we respect the team and the work they have done. However, in light of recent events involving Grayscale and its family of affiliated companies, it’s time for a change.
Valkyrie also announced the launch of a new fund Valkyrie Opportunistic Fund, LP. According to reports, the idea is to capitalize on the GBTC’s discount on the value of its Bitcoin. As part of the proposal, the Tennessee-based firm sought to ensure that the GBTC redeems at net asset value (NAV) for clients. In contrast to the 200 basis points, Valkyrie proposed a fee of 75 basis points.
BlackRock commits $17 million to Core Scientific
BlackRock also sought to commit $17 million to Core Scientific. According to the US Securities and Exchange Commission filing, this is part of the $75 million loan convertible note holders backed by the miners.
BlackRock reportedly controls $37.9 million in secured convertible bonds. It is reported that the $17 million is part of the $75 million convertible bills. According to the filing, this was part of Core’s prearranged bankruptcy process.
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However, without knowing how the discussions with CORZ’s creditors are going, we believe that a scenario where CORZ needs to file for Chapter 11 protection should be taken seriously, especially if BTC prices decline further from current levels.
Core Scientific was impressed by the struggling price of Bitcoin and the high cost of energy. It was reported that the miner expects help from convertible bond holders. This is said to be in the form of two debtor-in-possession (DIP) structures, amounting to $75 million. The lenders have already pledged $57 million out of the $75 million, and that includes the BlackRock loan.
As indicated in the restructuring plan, holders of covered convertible debt bonds will obtain shares. Unsecured holders and current capital can obtain warrants. In this case, they will get more shares as the company grows according to chief mining officer, Russell Cann. In October, the company warned it could consider bankruptcy if its financial condition does not improve. Its filing revealed that cash resources may be depleted by the end of the year.
There are substantial doubts about the company’s ability to continue as a going concern for any reasonable period of time.
A similar company, Compute North, previously filed for bankruptcy. Reports have estimated that the company owns $500 million to more than $200 million.