Stronghold Digital Mining introduced on Jan. 3 that it has reached an settlement with its noteholders to restructure $17.9 million of excellent debt.
Notes are like an IOU from a borrower to a lender and represent an obligation to pay common curiosity to the lender along with the compensation of the principal at a future date. Due to this fact, noteholders successfully check with traders or lenders of the corporate.
Beneath the settlement, the ten% convertible notes representing a debt of $17.9 million, together with principal and curiosity accrued by maturity, shall be extinguished. In trade, Stronghold Digital will subject a collection of convertible most well-liked shares with a face worth of round $23.1 million to the noteholders, it stated in a press launch.
The popular inventory will be transformed to Stronghold Digital’s Class A typical inventory at a conversion worth of $0.40. If all the popular shares to be issued are transformed, 57.8 million frequent inventory shares shall be issued, representing round 46% of the whole frequent inventory pool, the agency stated.
The popular shares to be issued won’t carry any dividend and won’t require any money funds associated to amortization, coupon funds, or different funds, the agency added.
Stronghold expects to hold out the trade of notes for convertible most well-liked shares by Feb. 20. The trade requires approval from stockholders and Nasdaq.
Greg Beard, co-chairman and CEO of Stronghold Digital, stated within the press launch that the deleveraging transaction will materially scale back the debt burden and enhance the agency’s liquidity. He added:
“We acknowledge the numerous variety of shares of frequent inventory that may very well be issued because of the Alternate Settlement, however we imagine that is essential to protect money, scale back our monetary obligations, and higher place the Firm to outlive a doubtlessly extended crypto market downturn.”
Beard stated that after the completion of the transaction, the agency’s complete excellent principal debt will fall beneath $55 million.
As of the tip of 2022, Stronghold Digital had $12.4 million in money and 6 Bitcoin (BTC) value rather less than $100,000 at present costs. In its third quarter 2022 earnings report, Stronghold reported having $27 million in money and 19 BTC value slightly below $300,000 on the time.
Over the previous 12 months, Stronghold Digital’s share worth has declined 96.43% from $13.16 to simply $0.47.
BTC miners are grappling with crippling debt
Stronghold Digital’s newest restructuring plan is a part of a collection of such offers that the agency has carried out since mid-2022.
In August 2022, Stronghold Digital introduced that it had reached an settlement to return 26,200 Bitcoin miners to NYDIG to eradicate $67.4 million value of excellent gear financing debt.
On the similar time, Stronghold Digital stated that it had reached an settlement with WhiteHawk Finance to restructure its gear financing settlement to increase the fee interval from 14 months to 36 months. The miner additionally secured a further $20 million of borrowing capability from WhiteHawn upon closing the present mortgage.
The identical month, Stronghold additionally amended its Might 2022 convertible notes and warrants to cut back the principal excellent by $11.3 million.
Amid a crypto winter that some count on to final for two to three years, a lot of Bitcoin mining companies are resorting to cost-cutting and debt restructuring. In accordance with Hashrate Index information, public BTC mining companies collectively owed $4 billion, as of December 2022.
Core Scientific, filed for chapter in December 2022, after being unable to take care of mounting debt that stood at roughly $1.3 as per Hashrate Index information. Greenidge introduced a $74 million debt restructuring deal on Dec. 20, 2022.
Argo Blockchain offered its mining facility in Texas to Galaxy Digital for $65 million on Dec. 28, 2022, and received a bailout mortgage from the agency, serving to Argo repay its loans to NYDIG.