Core Scientific files Chapter 11 plan and disclosure statement

By Sarah Lizee

Olympia, Wash., June 21 – Core Scientific, Inc. filed a Chapter 11 plan of reorganization and related disclosure statement Tuesday with the U.S. Bankruptcy Court for the Southern District of Texas.

The company said the plan provides for 100% recoveries to all classes of creditors in the form of equity in the reorganized parent, takeback debt, a combination of equity and takeback debt, or reinstatement of claims.

It also provides for distributions to existing equity holders, in the form of new common interests, of all residual value remaining after the payment of claims.

On June 9, the debtors and their advisers launched a marketing process to raise capital and have reached out to a number of parties within and outside the debtors’ capital structure regarding a potential capital raise.

Core Scientific said whether the debtors will ultimately need to raise any new capital, the amount of such new capital, and whether in the form of equity, debt, or hybrid capital may depend on a number of factors, including whether the plan is consensual.

If the debtors choose to raise new capital in connection with the plan, the terms will be disclosed in a plan supplement.

Because the debtors are solvent, the plan generally provides for a waterfall, where all creditors are entitled to payment in full, unless they agree to a lesser treatment, with the residual value going to the debtors’ current equity holders and subordinated creditors.

The debtors do not have a deal on a consensual restructuring with the informal noteholder group at this time. As such, the debtors do not know whether class 1 April convertible notes secured claims or class 2 August convertible notes secured claims will vote to accept the plan. The allowed amount of claims in class 1 is $239.63 million, and the allowed amount of claims in class 2 is $325.17 million, in each case plus accrued interest at 10%.

Each convertible note class that votes to accept the plan will receive a recovery of 50% in new common interests and 50% in new debt. Each convertible note class that rejects the plan will receive a recovery consisting of 100% in new debt, and the debtors will seek confirmation of the plan over the rejection under the “cram-up” provisions of the bankruptcy code.

In light of the amount of debt that will result from either class rejecting the plan, however, the plan eliminates the individual elections for class 3 miner equipment lender claims and class 8 general unsecured claims if either class 1 or class 2 does not vote to accept the plan.

In that case, all holders of allowed claims in those classes will receive the default treatment option for the applicable class.

Class 6, which consists of secured mortgage claims, will retain its election regardless of whether class 1 or class 2 accepts the plan.

Core Scientific is an Austin, Tex.-based Bitcoin mining company. The company filed bankruptcy on Dec. 21, 2022 under Chapter 11 case number 22-90341.

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