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BTC $96,420 +2.34% ETH $3,280 +1.82% SOL $185.40 -0.92% BNB $642.50 +0.45% XRP $2.18 +3.12% DOGE $0.082 -1.50% ADA $1.05 +0.80% AVAX $42.10 +1.15%
08/30/2024

Bankrupt Bitcoin Miner Rhodium Gets Court Approval to Borrow in BTC or USD

Bitcoin mining company Rhodium Enterprises, which recently filed for bankruptcy, has received court approval to borrow funds in either U.S. dollars or Bitcoin. The company can choose between receiving $30 million USD or 500 Bitcoin from Galaxy Digital, a blockchain firm led by Mike Novogratz. However, the USD loan carries an annual interest rate of 14.5%, while the Bitcoin-denominated loan comes at a lower rate of 9.5%, according to Bloomberg. With lender approval, Rhodium can repay

Bankrupt Bitcoin Miner Rhodium Gets Court Approval to Borrow in BTC or USD

Bitcoin mining company Rhodium Enterprises, which recently filed for bankruptcy, has received court approval to borrow funds in either U.S. dollars or Bitcoin.

The company can choose between receiving $30 million USD or 500 Bitcoin from Galaxy Digital, a blockchain firm led by Mike Novogratz. However, the USD loan carries an annual interest rate of 14.5%, while the Bitcoin-denominated loan comes at a lower rate of 9.5%, according to Bloomberg.

With lender approval, Rhodium can repay its Bitcoin-denominated debt in U.S. dollars based on a "reasonable spot market price" at the time of early repayment.

An Unusual Strategy for Crypto Bankruptcy Financing

This approval is uncommon in crypto bankruptcy financing due to Bitcoin's price volatility, which makes it difficult to predict total debt repayment amounts regardless of the interest rate. As shown in the chart below, Bitcoin's price has dropped nearly 11% over the past month, according to CoinMarketCap data.

On August 24, Rhodium Enterprises filed a voluntary Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of Texas, disclosing liabilities of up to $100 million USD.

The bankruptcy filing covers six subsidiaries: Rhodium Encore, Jordan HPC, Rhodium JV, Rhodium 2.0, Rhodium 10MW, and Rhodium 30MW. According to the filing documents, the company's liabilities range from $50 million to $100 million USD, while its total assets are valued between $100 million and $500 million USD.

Related: Thai Authorities Raid Illegal Bitcoin Mining Operations Behind Local Power Outages

By voluntarily filing for Chapter 11 bankruptcy, the company can restructure its debt while continuing operations. This allows it to negotiate a revised repayment plan under new terms.

Mining Farms Face Financial Pressure

Bitcoin miners are facing significant pressure as mining rewards declined following the Bitcoin halving event in April. Compounding the situation are growing debt concerns and prior mismanagement.

"Well-capitalized miners like [Riot Platforms] and [CleanSpark] have been acquiring other miners with existing infrastructure to boost near-term hashrate and expand their energy pipeline," JPMorgan said in a recent report.

Capital-constrained miners like Iren and Cipher are focusing on securing new growth opportunities that require less immediate capital, the report added.

On August 21, Bitcoin miner Bitfarms announced its acquisition of Stronghold Digital Mining for approximately $125 million USD, including roughly $50 million in assumed debt.