Despite Core Scientific filing for bankruptcy, its creditors have faith in company's long-term viability.
Core Scientific, one of the largest Bitcoin (BTC) mining firms in the United States, has received a green light from the US Bankruptcy court to obtain a $37.5 million bankruptcy loan from its existing creditors.
According to the news report shared by Reuters on December 22nd, the request for a temporary bankruptcy loan was approved by the US Bankruptcy Judge David Jones in Houston, Texas.
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The court filings revealed that the loan will be provided by a group of creditors holding around 50% of Core Scientific convertible notes. The creditors are set to provide Core Scientific with a debtor-in-possession (DIP) facility commitment loan, which values at up to $75 million with a 10% annual interest rate.
Reuters report emphasized that Core Scientific will aim to obtain final approval for the loan and borrow another $37.5 million in January 2023.
In the court hearing, creditor representative Kris Hansen revealed that creditors are aware of the current challenges that crypto-related businesses are facing. However, they continue “to have faith” in Core Scientific and its “long-term viability.”
On December 22nd, Core Scientific shared a public statement stating that it will use its bankruptcy loan to “effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors.”
In the statement, Core Scientific claimed that it aims to continue operating normally and provide its hosting and self-mining services.
The Company will continue to operate its existing self-mining and hosting operations, which remain significantly cash flow positive on a debt-free basis. <Core Scientific> is committed to operating normally during the implementation of its restructuring.
It is worth noting that, on December 21st, Core Scientific filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of Texas, citing the declining price of Bitcoin (BTC), rising energy costs and declining revenue.