Texas approves debt financing plan for BTC miner Rhodium
Rhodium filed for Chapter 11 with up to $100 million in debt and up to $500 million in assets. The borrower financing plan is provided by Galaxy Digital. Galaxy Digital offers Rhodium a loan of $30 million or 500 BTC with 9.5%-14.5% interest.
Rhodium Enterprises, a Texas-based Bitcoin mining company, has received a lot of attention following its Chapter 11 bankruptcy filing on August 24, 2024.
With liabilities ranging from $50 million to $100 million and assets estimated at $100 million to $500 million, Rhodium's financial struggles highlight the growing challenges in the cryptocurrency mining sector.
Riot Platforms Rhodium 26M
At the root of Rhodium's financial woes is its strained relationship with its landlord and energy supplier Winston.
That tension contributed to Rhodium defaulting on a $54 million loan in July, shortly before the company secured an additional $78 million in loans. The tension ended after a lawsuit was filed by rival mining company Riot Platforms, which claimed Rhodium was owed more than $26 million in unpaid fees.
Texas approves debtor-in-possession financing plan for Rhodium
Despite these obstacles, Rhodium found an unusual debtor-in-possession financing plan approved by a Texas court.
The plan, proposed by Galaxy Digital – a blockchain company run by Mike Novogratz – gives Rhodium a choice between a $30 million loan at 14.5% annual interest rate or a 500 Bitcoin loan at 9.5% interest rate.
In particular, the Bitcoin miner has the option to repay the Bitcoin loan in US dollars based on the market value at the time of repayment.
The approval of this financial plan is especially surprising given the volatility of Bitcoin's price, which adds to the uncertainty over Rhodium's payment obligations. Over the past month, Bitcoin has fallen nearly 11%, reflecting widespread market volatility.
Rhodium's struggles are not alone; They are emblematic of the broader challenges facing the cryptocurrency mining industry. The recent Bitcoin halving has reduced mining rewards and rising electricity costs have eroded profit margins.
As Rhodium tries to reorganize and recover, the move highlights the critical condition of the crypto-mining sector in an increasingly volatile market.
