Rhodium Enterprises, Inc., a Bitcoin mining firm that filed for bankruptcy on August 24, has received court approval for an unconventional financing plan as it navigates Chapter 11 bankruptcy proceedings. According to a Bloomberg report, the firm has been granted the option to borrow funds in either US dollars or Bitcoin, a rarity in the realm of bankruptcy financing. The lender, Galaxy Digital, led by Mike Novogratz, has offered Rhodium up to $30 million in US dollars or 500 Bitcoin, with the loans carrying annual interest rates of 14.5% and 9.5%, respectively. In an unusual twist, the Bitcoin loan can be repaid in dollars based on market exchange rates at the time of payment, subject to the lender’s approval.
This financing structure is notable due to the inherent volatility of Bitcoin, which can complicate the prediction of total repayment amounts, even with the fixed interest rates. Rhodium’s decision to seek funding in Bitcoin is part of a broader trend among crypto firms facing financial distress. For instance, Bittrex Inc. also explored Bitcoin-based financing as it wound down its US operations and sought to repay its customers.
According to court documents filed by David Dunn, the company’s co-chief restructuring officer, rhodium’s financial troubles have been largely attributed to a deteriorated relationship with its landlord and power supplier, Whinstone US, Inc. Rhodium, which operates Bitcoin mining facilities in Texas, is one of many crypto mining firms currently facing significant financial pressure.
According to an article by Cointelegraph, Bitcoin mining companies have been under strain due to a combination of reduced mining rewards following the recent Bitcoin halving and mounting debt issues. While cash-rich firms like Riot Platforms and Cleanspark have expanded their operations by acquiring other miners with turn-key facilities to boost their hashrate, companies with tighter budgets, such as Iren and Cipher, have focused on securing greenfield opportunities that demand less immediate capital.
In a related development, Bitfarms, another Bitcoin mining firm, announced on August 21 its acquisition of Stronghold Digital Mining for approximately $125 million. This acquisition includes assumed debt of about $50 million, further highlighting the financial complexities faced by players in the Bitcoin mining industry.
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