Celsius eyes exclusivity extension; gives update on plan progress

By Sarah Lizee

Olympia, Wash., Jan. 26 – Celsius Network LLC is seeking a second extension of its exclusive periods to file and solicit votes on a Chapter 11 plan, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, the company asked the court to extend the exclusive plan filing period through March 31 and the exclusive solicitation period through June 30.

The debtors have been pursuing a dual-track process of marketing all of their assets for sale while simultaneously developing a path towards a standalone reorganization.

Following the marketing process, the debtors received several bids that contemplated various transaction structures involving some or all of the debtors’ assets, and the debtors engaged with potential bidders to increase competitive tension and help bidders put their best bids forward.

The debtors have significant “illiquid” assets that can’t be harvested quickly, including staked ether (which is locked up until the staking periods conclude – the last of which expires in 2026), the debtors’ mining business, retail and institutional loan receivables, and investments in other cryptocurrency companies.

These illiquid assets represent a significant percentage of the debtors’ total assets. To maximize the value of their assets, the debtors will need to either obtain fair prices from a buyer who is willing to recover the value of these illiquid assets over time, or enter into a transaction that allows the debtors or their successors the time to realize the full value of these illiquid assets over time.

To date, the debtors received several bids for the illiquid assets. Aside from certain interest in the mining business, however, these bids have not been compelling, Celsius said.

As such, the debtors, in consultation with the official committee of unsecured creditors, believe the best path forward is to pursue a transaction that harvests the value of the debtors’ illiquid assets over time and distributes that value to account holders.

That transaction would establish a new “recovery corporation,” which will hold the debtors’ liquid and illiquid assets and manage them over time to maximize value as markets improve.

Through the recovery corporation, the value of the debtors’ assets, including the debtors’ liquid and illiquid cryptocurrency, loan receivables, mining assets and proceeds from litigation claims, will be distributed to account holders.

Celsius has received a bid from a potential plan sponsor that is unaffiliated with Celsius or its founders that could manage the recovery corporation.

The company said it could also manage the recovery corporation itself if acceptable terms can’t be reached with the plan sponsor.

Celsius said discussions are crystalizing around a framework.

The company said the interests of the recovery corporation will be “tokenized” and distributed to account holders with claims above a certain threshold as “asset share tokens” that reflect the value of the assets managed by the recovery corporation. Asset share tokens will entitle their holders to dividends from the recovery corporation as assets are monetized and will be freely tradeable by holders.

All creditors with claims under a certain threshold, or creditors who choose to reduce their claims to the threshold, will be offered a one-time distribution of liquid cryptocurrency at a discount to the value of their claims.

The debtors also expect to create a litigation trust to pursue claims against some insiders, claims identified in an examiner’s report, as well as other claims and causes of action that will be agreed upon by the debtors and the committee.

Once negotiations are completed and the documentation is finalized, the debtors anticipate promptly filing a Chapter 11 plan reflecting the path forward.

A hearing on the exclusivity extension is scheduled for Feb. 15.

The Hoboken, N.J.-based cryptocurrency lending platform filed bankruptcy on July 13 under Chapter 11 case number 22-10964.

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