Core Scientific trades debt for equity, reduces $260M debt load

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Core Scientific’s stock performance triggers mandatory conversion of $260 million in secured convertible notes due in 2029.

Core Scientific trades debt for equity, reduces $260M debt load

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Bitcoin miner Core Scientific has announced the mandatory conversion of its outstanding secured convertible notes due in 2029.

According to a July 8 announcement, the conversion will result in the exchange of approximately 45 million shares of Core Scientific’s common stock for $260 million of convertible debt.

The mandatory conversion was triggered on July 5, when the trading price of Core’s stock, based on the daily volume weighted average price (VWAP), stayed above $2.1 billion for 20 consecutive trading days. The notes will convert into common stock on July 10. Holders will receive shares based on a conversion price and cash for any partial shares they are entitled to.

Core’s secured convertible notes offered two interest options: 10% per year paid entirely in cash, or 6% per year in cash plus 6% per year in stock, calculated based on the 20-day average trading price.

As of this writing, Core's shares (CORZ) trade at $10.14 on the Nasdaq, down 1.5%. In the past six months, however, the stock has gained 194.2%.

CORZ performance in six months. Source: Google Finance

Core Scientific’s bankruptcy

The convertible notes were issued as part of Core’s bankruptcy proceedings. In January, Core Scientific emerged from bankruptcy after its plan of reorganization was confirmed by the bankruptcy court for the Southern District of Texas.

Under the plan, noteholders received $1.201 per $1 face value for notes due in August and $1.628 per $1 face value for convertible notes due in April.

“The conversion [...] highlights the significant progress we have made since our emergence from bankruptcy earlier this year,” said Core’s CEO Adam Sullivan in a statement.

Unsecured creditors

Core Scientific also announced the extinguishment of a contingent payment obligation for unsecured creditors.

According to the terms set in Core’s Chapter 11 plan, the company originally estimated a $3 million liability to unsecured creditors. The mechanism was designed to provide additional compensation to general unsecured creditors if the company’s stock did not meet performance benchmarks.

Core’s shares performance over the past weeks eliminated the obligation, which means the company is no longer required to make additional payments to general unsecured creditors.

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