Core Scientific’s DIP facility draws some pushback; hearing moved

By Sarah Lizee

Olympia, Wash., Jan. 18 – Core Scientific, Inc.’s proposed $150 million debtor-in-possession facility drew a limited objection from secured lender Barings BDC, Inc., according to documents filed with the U.S. Bankruptcy Court for the Southern District of Texas.

MassMutual Asset Finance LLC, Trinity Capital Inc., Wingspire Equipment Finance LLC, BlockFi Lending LLC and Anchorage Lending CA, LLC filed joinders to the objection.

Barings said it objects on a limited basis to some aspects of the financing to ensure that the DIP is used for the benefit of the estate and its stakeholders and not as a tool to disadvantage equipment lenders as compared to other prepetition secured creditors.

Barings said it currently doesn’t seek adequate protection in the form of cash payments, but notes the need for some form of adequate protection beyond what the debtors and DIP lenders have proposed and reserves the right to affirmatively seek appropriate relief via subsequent filings in the event it is unable to come to a consensual resolution with the debtors.

Barings said that, in light of the express reservation of rights on adequate protection, the DIP – and specifically, the proposed DIP budget – presents a significant likelihood that those rights are, at a minimum, compromised, and to the extent cash adequate protection payments were to be ordered, potentially could result in the debtors being forced to choose between defaulting on the DIP and returning collateral that is critically needed to generate post-petition revenue.

Barings also said the nature of the debtors’ business and the underlying collateral are unique, and providing certain waivers to the prepetition secured noteholders without granting the same waivers to the equipment lenders is inequitable and inappropriate.

The objection said that granting waivers only to prepetition secured noteholders turns the economic realities of the debtors’ businesses and the cases on their head, and raises the possibility that the equipment lenders could be unfairly surcharged for the costs associated with the debtors’ use of the equipment lenders’ collateral, or stripped of any security interest they hold in the proceeds of their collateral – including Bitcoin.

Meanwhile prepetition secured noteholders and DIP lenders enjoy both the protections from 506(c) surcharges and the revenue associated with the debtors’ use of the equipment lenders’ collateral, Barings said.

The final hearing on approval of the DIP facility has been moved to Feb. 1. The objection deadline for the official committee of unsecured creditors was moved to 5 p.m. ET on Jan. 25.

As previously reported, the company gained interim approval to access $37.5 million of the facility.

Core Scientific got approval of a roll-up loan of its convertible notes on a dollar-for-dollar basis.

In an amount equal to the new money commitments, the notes will be exchanged for, and converted into, DIP loans.

Wilmington Savings Fund Society, FSB is the agent.

Interest is 10%, paid in kind.

There is a 2% paid-in-kind upfront fee and a 3% paid-in-kind exit fee.

The DIP financing matures six months from the petition date, with a possible three-month extension built into the agreement.

Core Scientific is an Austin, Tex.-based bitcoin mining company. The company filed bankruptcy on Dec. 21 under Chapter 11 case number 22-90341.

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