- Unusual strategy for bankruptcy funding
- Mining farms under financial pressure
- Financial state of Rhodium Enterprises
Bitcoin mining firm Rhodium Enterprises, which recently filed for bankruptcy, received court approval to take a loan in either US dollars or Bitcoin.
Unusual strategy for bankruptcy funding
The company was authorized to choose between receiving $30 million or 500 Bitcoin from Galaxy Digital, a blockchain firm led by Mike Novogratz. However, the dollar loan would have a 14.5% annual interest while the interest rate on the Bitcoin loan is cheaper at 9.5%. With the lender’s approval, Rhodium could repay the Bitcoin loan in US dollars based on the “reasonable published market spot prices” at the time of repayment. The approval is unusual for bankruptcy financing in the crypto sector due to Bitcoin’s price volatility, which makes it challenging to predict the total amount of loan payments.
Mining farms under financial pressure
Bitcoin mining firms have been facing significant financial pressure due to reduced mining rewards following the Bitcoin halving in April. Additionally, concerns have arisen over their mounting debt and previous mismanagement. Companies like Riot Platforms and Cleanspark acquired other miners with turn-key facilities to increase hashrate and their power pipeline, while capital-constrained miners like IREN and Cipher focused on securing greenfield opportunities, which require less immediate capital.
Financial state of Rhodium Enterprises
On Aug. 24, Rhodium Enterprises filed for voluntary bankruptcy under Chapter 11 in the Southern District of Texas, disclosing liabilities of up to $100 million. The filing included six subsidiaries — Rhodium Encore, Jordan HPC, Rhodium JV, Rhodium 2.0, Rhodium 10MW, and Rhodium 30MW. The company's debts range between $50 million and $100 million, while its total assets are valued between $100 million and $500 million.
By filing for Chapter 11 bankruptcy voluntarily, Rhodium Enterprises can reorganize its debts while continuing to operate, allowing it to negotiate a revised repayment plan under new terms.
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