Core Scientific: Court approves appointment of equity committee

By Sarah Lizee

Olympia, Wash., March 8 – Core Scientific, Inc.’s case will have an official committee of equity holders, according to an order filed Tuesday with the U.S. Bankruptcy Court for the Southern District of Texas.

The court asked the U.S. trustee overseeing the case to appoint the committee as soon as possible.

As previously reported, Core Scientific said that it supports formation of an official equity committee with a limited scope and budget.

The equity committee will have a budget of $4.75 million. The scope of the equity committee’s appointment is limited to valuation and negotiations, in each case related to determining the terms of confirmation of a Chapter 11 plan.

The official committee of unsecured creditors decided not to oppose the equity group’s motion, noting that since the cases started two months ago, things have changed dramatically.

Initially, the debtors planned to execute a restructuring support agreement that would have handed 97% of the reorganized equity value to prepetition convertible noteholders, while leaving other stakeholders with little to no recovery.

More recently, the committee worked with the debtors to close on replacement debtor-in-possession financing and terminate the RSA.

The committee said that since the debtors’ business plan remains in its infancy, it believes the equity group’s effort to push the valuation question to the forefront of the cases is premature. But the committee said it appreciates that the debtors’ decision to support the equity group’s motion is premised on a view that there is a substantial likelihood that equity holders will receive a meaningful recovery.

“If the debtors are solvent – which would be the first solvent crypto bankruptcy case since the onset of the crypto winter – that would require all unsecured creditors to be paid in full, including interest, a dramatic turnaround from the fate they were facing under the RSA,” the committee said in its response.

“Taking all of these considerations into account, the committee has decided not to oppose the motion.”

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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