Bitcoin Miner Greenidge Generation on the Join List of Miners Eyeing Bankruptcy
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Formerly one of the biggest publicly traded Bitcoin miners in the US, Greenidge Generation Holdings Inc., issued a warning that it would file for bankruptcy while negotiating a debt restructuring with its lender, New York Digital Investment Group (NYDIG).
The company, perhaps best known for a protracted legal battle with environmentalists over the effects of its activities on Seneca Lake in New York, is the latest miner to buckle under the bearish pressure in the market and eye bankruptcy.
According to a document submitted to the US Securities and Exchange Commission (SEC), Greenidge and NYDIG have signed a “non-binding term sheet” to restructure their approximately $74 million in debt.
The lender would sign a hosting contract and buy mining equipment from Greenidge under the terms of the agreement. In return, NYDIG would agree to lower its debt by between $57 and $68 million. If the deal goes through, Greenidge would essentially change from a mining company to a hosting company.
Bitcoin Miners Unable to Fulfil Debt Obligation Due to Tough Market Conditions
During the previous bull run, bitcoin miners raised billions of dollars through loan financing to support their rapid expansion. Low Bitcoin prices, rising energy expenses, and fierce competition, however, have severely reduced profit margins and made it challenging for many of these companies to pay off debt.
Major Bitcoin miners like Core Scientific and Argo Blockchain have recently issued bankruptcy warnings, partly as a result of their rising debt with cryptocurrency lenders.
In the previous two months, Greenidge’s average monthly cash burn rate was almost $8 million. That phrase is frequently used to refer to the amount of money a business spends on financing overhead before turning a profit or a loss from operations.
Principal and interest payments to NYDIG accounted for around $5.5 million of that expense. According to the document, the company anticipates a similar cash burn rate and payments to NYDIG in December.
Shares of Greenidge are currently trading at roughly 31 cents after falling by about 98% this year. During the same time frame, Bitcoin has fallen by about 63%.
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