The Core Scientific Inc (NASDAQ: CORZ) stock price rallied 85.3% after voluntarily filing for Chapter 11 bankruptcy protection in the Southern District of Texas. The company plans to move through bankruptcy quickly as it restructures its operations.
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The crypto mining company will use the Restructuring Support Agreement signed with an Ad Hoc group of noteholders on December 21, 2022, representing over 50% of the holders of its convertible notes, to reorganise its operations.
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Investors cheered that the firm will continue operating its existing self-mining and hosting operations, which remain significantly cash flow positive on a debt-free basis. The company reiterated its commitment to maintaining its normal operations during bankruptcy.
The Ad Hoc Noteholder Group has agreed to provide commitments for a debtor-in-possession facility DIP Facility) of up to $56 million. The group has also agreed to support the syndication of up to $19 million in new money DIP Facility loans to all holders of convertible notes.
The new DIP funding facilities packages are outlined in the Restructuring Support Agreement.
The company expects to use the new funds and the cash generated from operations to provide the necessary financing to implement the planned restructuring and facilitate its emergence from Chapter 11 bankruptcy.
The company expects the restructuring process to reduce its funded indebtedness by hundreds of millions of dollars and lower its annual interest expenses by tens of millions. However, the Restructuring Support Agreement allows the firm to opt out and seek better alternatives.
Core Scientific’s existing convertible noteholders will convert their debt into most of the reorganised firm’s common stock. Furthermore, holders of general unsecured claims and current common shareholders will also receive meaningful recoveries in the form of common stock and exercisable warrants in the reorganised entity.
The crypto mining company noted that it had been forced to file for bankruptcy protection due to the continued decline in Bitcoin prices that had affected its liquidity position.
Investor interest in the company remains high since over 37.97 million shares had changed hands at the time of writing.
*This is not investment advice.
Core Scientific (CORZ) stock price chart.
The Core Scientific stock price rallied 85.29% to trade at $0.0945, rising from Wednesday’s closing price of $0.0510.
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