Core Scientific emerges from bankruptcy, cuts debt by $400 million

By Sarah Lizee

Olympia, Wash., Jan. 23 – Core Scientific, Inc.’s Chapter 11 plan of reorganization went into effect on Tuesday, according to a notice filed with the U.S. Bankruptcy Court for the Southern District of Texas.

The company said in a press release that it emerges from Chapter 11 with a strengthened balance sheet and expects to commence the listing of its common stock, tranche 1 warrants and tranche 2 warrants on the Nasdaq Global Select Market under the symbols CORZ, CORZW and CORZZ, respectively, on Wednesday.

Core Scientific said it is positioned as one of the largest bitcoin miners in North America, with specialized data centers in five U.S. states operating 724 megawatts of power.

The plan of reorganization, which was confirmed on Jan. 16, reduced Core Scientific’s debt by $400 million through the conversion of equipment lender and convertible note holder debt to equity.

The plan also provides a pathway to de-lever the balance sheet further, assuming the conversion of remaining convertible debt, the cash exercise of all applicable warrants and the use of cash to pay down debt, the company said.

Core Scientific also announced its new board of directors, comprising six new independent directors. They are Todd Becker, president, chief executive officer and director of Green Plains Inc.; Jeff Booth, founding partner at Ego Death Capital; Jordan Levy, managing partner at SBNY (formerly SoftBank Capital NY) and Seed Capital Partners, and co-managing partner of Z80 Labs; Jarrod Patten, founder, president and chief executive officer of global real estate advisory firm RRG, and director of Microstrategy Inc.; Yadin Razov, founder and managing partner of Terrace Edge Ventures LLC; Eric Weiss, founder and chief investment officer for Blockchain Investment Group LP and Bitcoin Investment Group LP; and Adam Sullivan, president and chief executive officer of Core Scientific, Inc.

Core Scientific said the plan is the result of lengthy negotiations with the debtors’ five key stakeholders, including the informal noteholder group, the miner equipment lenders, the official committee of unsecured creditors, debtor-in-possession lender and largest unsecured creditor B. Riley, and the official committee of equity holders.

The negotiations resulted in three separate settlements incorporated in the plan.

The plan provides for preservation of the debtors’ business as a going concern and over 240 jobs and 100% recovery to all creditors, excluding holders of subordinated section 510 claims and a significant recovery to existing equity holders.

The plan also includes the infusion of $95 million in new-money exit capital through an oversubscribed $55 million equity rights offering and $40 million in new-money financing through the $80 million exit facility provided by some convertible noteholders.

Holders of April convertible-note secured claims will receive their pro rata share of $150 million of new secured notes, $260 million of new secured convertibles, $260 million of new common interests, $40 million rolled into the exit facility, contingent payment obligations of up to $130 million over three years, and incremental equity distributions.

Holders of August convertible note secured claims will receive their pro rata share of $260 million of new secured convertibles, $260 million of new common interests, $40 million rolled into the exit facility, contingent payment obligations of up to $130 million over three years, and incremental equity distributions.

Holders of miner equipment lender secured claims will have the option to elect one of the following three treatments:

• Secured takeback debt in the principal amount of their secured claim and a class 8A claim equal to their deficiency claim;

• Equitization of their entire claim; or

• Secured takeback debt in the principal amount of 80% of their entire claim, with the remaining deficiency claim waived.

Holders of other secured claims will have their claims reinstated.

Holders of secured mortgage claims will have the option to elect one of the following two treatments:

• The mortgage agreement will be amended to include a maturity date of Dec. 31, 2025; or

• Holders will receive cash in the amount of 95% of their claims.

Holders of class 8A general unsecured claims will receive new common interests equal to the value of their claims and a pro rata share of the GUC settlement additional equity distribution amount, which is $3.25 million, and the GUC contingent payment obligations of up to $7.1 million.

Holders of section 510(b) claims will receive their pro rata equity share, shared with existing common interests, of new common interests from the residual equity pool, and new warrants. Holders will also receive cash or new common interest or a combination of those equal to the value of subscription rights holders would have received in class 12 below.

Holders of class 12 existing common interests will receive a pro rata equity share, shared with 510(b) claims, of new common interests from the residual equity pool, and new warrants. Holders will also receive subscription rights in connection with the rights offering.

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

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