Bankrupt Bitcoin Miner Rhodium Secures Court Approval for Loan in BTC or USD

Rhodium Enterprises, a Bitcoin mining company that recently filed for bankruptcy, has received court approval to secure a loan in either Bitcoin or U.S. dollars.

The court granted the company the option to choose between a $30 million loan or a 500 Bitcoin loan from Galaxy Digital, a blockchain firm led by Mike Novogratz. Notably, the dollar loan would carry a 14.5% annual interest rate, whereas the Bitcoin loan offers a more favorable 9.5% interest rate, as per a Bloomberg report.

With this approval, Rhodium can repay the Bitcoin loan in U.S. dollars based on the “reasonable published market spot prices” at the time of repayment, prior to the due date.

Unconventional Strategy for Bankruptcy Financing

This court approval marks an atypical approach to bankruptcy financing within the cryptocurrency sector, primarily due to Bitcoin’s notorious price volatility. Such fluctuations make it difficult to predict the total repayment amount, regardless of the applicable interest rate. According to CoinMarketCap, Bitcoin prices have experienced a nearly 11% decrease over the past month.

On August 24, Rhodium Enterprises filed for voluntary Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas, acknowledging liabilities totaling 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 are reported to be between $50 million and $100 million, while its total assets range from $100 million to $500 million.

By opting for Chapter 11 bankruptcy, Rhodium can reorganize its debts and continue operations, enabling them to negotiate revised repayment terms.

Financial Struggles of Mining Farms

Bitcoin mining companies are currently facing significant financial challenges, stemming from reduced mining rewards following the Bitcoin halving that took place in April. Additional concerns regarding their accumulated debt and prior management issues have further exacerbated their situation.

According to a recent report from JPMorgan, cash-rich miners like Riot Platforms and Cleanspark have been acquiring other miners with existing facilities to enhance their immediate hashrate and increase their power pipeline.

Meanwhile, capital-constrained miners such as IREN and Cipher are concentrating on securing opportunities that require less immediate capital.

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