Core Scientific voluntarily files for reorganization under Chapter 11

Chicago, Dec. 21 – Core Scientific, Inc. filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas on Wednesday, according to a press release.

The company expects to enter into a restructuring agreement with an ad hoc noteholder group, representing more than half of the holders of its convertible notes.

Pursuant to the agreement, the company’s existing convertible noteholders will equitize their debt into a significant majority of the common stock of the reorganized company.

Additionally, holders of general unsecured claims and existing common shareholders will receive meaningful recoveries in the form of reorganized common stock and warrants exercisable for significant portions of the common stock of the reorganized company upon obtaining certain valuations thresholds.

The ad hoc noteholder group has agreed to provide commitments for up to $56 million in the form of a debtor-in-possession facility and has agreed to support the syndication of up to an additional $19 million in new money DIP facility loans to all holders of convertible notes.

These funds, along with ongoing cash generated from operations, are anticipated to provide the necessary financing to effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisers.

The restructuring support agreement will be subject to a “fiduciary out” for the company to pursue better alternatives.

As contemplated, the restructuring will reduce the company’s funded debt by hundreds of millions of dollars and reduce annual interest expense by tens of millions of dollars.

During the bankruptcy process and upon emergence, the company will continue to operate its existing self-mining and hosting operations, which the company says will remain significantly cash flow positive on a debt-free basis.

Core Scientific said that the filing of the cases was necessitated by a decline in the company’s operating performance and liquidity suffering from the prolonged decrease in the price of bitcoin, the increase in electricity costs necessary to power the company’s data centers and the failure by certain of its hosting customers to honor their payment obligations.

Core Scientific estimates $1 billion to $10 billion in assets and $1 billon to $10 billion in liabilities in its petition.

The top five unsecured claims are listed as BRF Finance Co., LLC with a $42.36 million claim, Dalton Utilities with a $6.71 million claim, Shell Energy Solutions with a $3.81 million claim, U.S. Customs and Border Patrol with a $3.38 million claim and Cooley LLP with a $2.86 million claim.

Core Scientific is being advised by Weil, Gotshal & Manges LLP as its legal adviser, AlixPartners, LLP as its financial adviser and PJT Partners LP as its investment banker.

The company has used the names Power & Digital Infrastructure Acquisition Corp., XPDI and Core Scientific Holding Co. in the last eight years.

Core Scientific is an Austin, Tex.-based bitcoin mining company. The case number is 22-90341.

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