Core Scientific gets interim OK of replacement DIP loan via B. Riley

By Sarah Lizee

Olympia, Wash., Feb. 2 – Core Scientific, Inc. received interim approval to access $35 million of a new $70 million replacement new money debtor-in-possession facility via prepetition lender B. Riley Commercial Capital, LLC, according to an interim order filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Texas.

The company had previously received interim approval to access $37.5 million of $75 million in new money under a DIP facility with Wilmington Savings Funds Society, FSB as agent. Following a final order, this financing would have provided for a rollup of $75 million of prepetition secured convertible notes in addition to the new money.

Interest on the original DIP loan was 10%, with a 2% upfront fee and a 3% exit fee, all payable in kind. It was set to mature six months from the petition date with a possible three-month extension.

However, following entry of the interim order, the debtors and their advisers conducted a marketing process and sought proposals for alternative financing to replace the original DIP facility.

The company reached an agreement with B. Riley on the terms of the replacement DIP financing and a plan to pay off the existing DIP loan.

The B. Riley financing matures 12 months after the petition date, subject to a three-month extension with a 3.5% extension fee. Interest is 10% payable in kind, or 12% following an event of default. There is a $75,000 agent fee per month payable in cash.

Core Scientific said the replacement DIP facility provides the debtors with significant flexibility, particularly as the replacement DIP facility has no plan-related milestones and is not conditioned on seeking approval of any specific Chapter 11 plan, unlike the previous financing.

The official committee of unsecured creditors expressed support for the new financing ahead of the hearing on interim approval.

“If approved, the debtors would have been obligated to execute the RSA’s restructuring transaction, which would have given 97% of the company’s reorganized equity value to the convertible noteholders and contingently provided less than 3% of such equity value to unsecured creditors,” the committee said about the previous financing in a statement.

“Accordingly, the developments over the past week, culminating in the debtors’ decision to abandon the original DIP in favor of the replacement DIP, are extremely beneficial for unsecured creditors.”

One of the key issues at the interim DIP hearing was the original DIP facility’s large $6 million termination fee, which the committee had objected to.

The court overruled the committee’s objection and approved the fee, saying that while it is indeed expensive, it’s a consequence of “not having been able to get it the first time around.”

A continued hearing on the DIP motion is scheduled for Feb. 27.

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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