Core Scientific files amended plan ahead of disclosure statement hearing

By Sarah Lizee

Olympia, Wash., Nov. 13 – Core Scientific, Inc. filed a third amended Chapter 11 plan of reorganization with the U.S. Bankruptcy Court for the Southern District of Texas ahead of the disclosure statement hearing scheduled for Nov. 14.

The changes reflect an agreement in principle the company recently reached with an informal group of convertible noteholders and the official committee of unsecured creditors.

The deal sees a plan enterprise value of $1.5 billion, as previously reported.

Settled claim amounts for convertible notes are as follows:

• For the April notes, the sum of $350 million, post-petition interest at the contract rate following Jan. 15, 2024, a share of any equity rights offering (ERO) shortfall equity distribution amount, and a share of any fee-related equity distribution to convertibles;

• For the August notes, the sum of $360 million, post-petition interest at the contract rate following Jan. 15, 2024, a share of any ERO shortfall equity distribution amount, and a share of any fee-related equity distribution to convertibles treatment (other than on account of amounts rolled-up under the exit delayed-draw term loan);

• $150 million of new secured notes;

• $260 million of new secured convertible notes;

• $300 million of equity, subject to dilution from new secured convertible notes, warrants and management incentive plan (MIP);

• Contingent payment obligations of up to $130 million total, freely assignable and publicly tradeable;

• Any ERO shortfall distribution amount up to around 3.1% of equity;

• Any incremental equity payable to convertible noteholders for fees paid in excess of the equity committee’s $6.75 million fee cap or amounts paid on account of the equity informal group substantial contribution claim.

Terms for miner equipment financing and non-miner equipment financing will be the same as in the current plan, subject to minor adjustments.

Terms for mechanics liens include various settlements, with the remainder of claims to be consistent with the current plan.

General unsecured creditors will receive a full claim in equity in the reorganized business at plan equity value, subject to dilution from the new secured convertible, warrants and the MIP.

The official equity committee will get pre-effective date consultation rights regarding resolution of all disputed general unsecured claims greater than $1 million.

Existing equity will receive residual equity in the business after the $260 million convertible note amount is provided, subject to reduction by Bitmain equity, equity purchased in ERO and ERO shortfall distribution amount (if any), the ERO backstop fee, fee-related equity distribution to convertibles, and GUC equity. Existing equity will also receive new warrants and rights to invest $55 million via the ERO.

An $80 million delayed-draw term loan exit facility will be provided by some of the convertible noteholders, consisting of $40 million of new money and a $40 million rollup of convertible claims. All convertible noteholders may participate through the syndication process.

The facility will bear interest at 9% cash with a 1% cash undrawn fee.

The maturity is set at three years.

There is a 3% backstop fee on the new money, and an upfront fee of up to 2% of pro forma equity on account of the ERO regarding a shortfall.

The $150 million of new secured notes will mature in four years and bear interest at 12.5%, payable in cash with the first interest payment due June 15, 2024 and quarterly after that.

The $260 million of new convertibles will mature in five years and bear interest at either 6% cash/6% PIK in stock using 20 consecutive trading day volume-weighted average price (VWAP) or 10% cash. The first interest payment would be due June 15, 2024, and the rest due quarterly after that.

The new convertibles will have an optional conversion at $1.65 billion total enterprise value, settled in stock or a combination of cash and stock, with cash capped at par value of debt, at the company’s option.

There is a mandatory conversion at $2.1 billion total enterprise value, with the VWAP calculated using 20 consecutive trading days.

The convertibles will be non-callable for life.

Core Scientific is an Austin, Tex.-based Bitcoin mining company that filed bankruptcy on Dec. 21, 2022 in the U.S. Bankruptcy Court for the Southern District of Texas under Chapter 11 case number 22-90341.

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