Bankrupt Bitcoin miner Rhodium has received court approval for loans in BTC or USD
Recently filed for bankruptcy, Rhodium Enterprises, a bitcoin mining company, has reportedly received court approval to take out loans in both US dollars and bitcoins.
The company was given a choice between accepting $30 million or 500 Bitcoin (BTC) from Galaxy Digital, a blockchain company run by Mike Novogratz. However, the US dollar loan will have an annual interest rate of 14.5%, while the interest rate on the Bitcoin loan is cheaper at 9.5%, according to a Bloomberg report.
With the Lender's approval, Rhodium may repay the Bitcoin Loan in US Dollars based on “reasonable published market prices” when paid prior to the due date.
An unusual strategy for bankruptcy funding
The approval is unusual for bankruptcy financing in the crypto sector due to Bitcoin's price volatility, which makes it difficult to predict total loan payments regardless of interest rates. As shown in the chart below, the price of Bitcoin is down about 11% in the past month, according to CoinMarketCap data.
Source: CoinMarketCap
In the year On August 24, Rhodium Enterprises filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court with debts of up to $100 million.
The filing includes six subsidiaries: Rhodium Encore, Jordan HPC, Rhodium JV, Rhodium 2.0, Rhodium 10MW, and Rhodium 30MW. According to the filing, the company's debt is between $50 million and $100 million, and its total assets are estimated at $100 million to $500 million.
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By voluntarily filing for Chapter 11 bankruptcy, the company can reorganize its debt while continuing to operate. This allows them to negotiate new terms with a revised payment plan.
Mining farms under financial pressure
Following the April halving of Bitcoin, Bitcoin mining companies are under heavy pressure due to the drop in mining rewards. In addition, the ever-increasing debt and past mismanagement have raised concerns.
“The rich miners love it [Riot Platforms] And [Cleanspark] They have found other mining rigs to increase their near-term hashrate and increase their power lines,” JPMorgan said in a recent report.
Capital-constrained miners such as Iron and Cipher are focused on securing greenfield opportunities that require immediate capital, the report added.
In the year On August 21, Bitcoin mining company BitFarms announced that it had acquired Strong Digital Mining for $125 million, which takes into account about $50 million in debt.
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