- Voluntarily Files for Reorganization under Chapter
11
- Will Enable the Company to Continue to Operate Normally
While Navigating the Challenges Facing Its Industry
AUSTIN,
Texas, Dec. 21, 2022 /PRNewswire/ -- Core
Scientific, Inc. (NASDAQ: CORZ)("Core Scientific" or "the
Company"), a leader in high-performance blockchain computing data
centers today announced that, after a comprehensive review of
potential alternatives and exhaustive discussions with various
Company stakeholders, the Company expects to enter into a
restructuring support agreement (the "Restructuring Support
Agreement") with the Ad Hoc Noteholder Group, representing more
than 50% of the holders of its convertible notes.
To implement the comprehensive restructuring transaction
contemplated by the Restructuring Support Agreement, on
December 21, 2022, the Company filed
voluntary petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of Texas. The Company
plans to move swiftly through the restructuring process.
During this process and upon emergence, the Company will
continue to operate its existing self-mining and hosting
operations, which remain significantly cash flow positive on a
debt-free basis. The Company is committed to operating
normally during the implementation of its restructuring. The
Company remains dedicated to providing hosting services and
self-mining in its state-of-the-art data
centers.
In connection with the Restructuring Support Agreement, the Ad
Hoc Noteholder Group has agreed to provide commitments for a
debtor-in-possession facility (the "DIP Facility") of up to
$56 million and has agreed to support
the syndication of up to an additional $19
million in new money DIP Facility loans to all holders of
convertible notes. These funds, along with ongoing cash
generated from operations, are anticipated to provide the necessary
financing to effectuate the planned restructuring, facilitate the
emergence from Chapter 11, and cover the fees and expenses of legal
and financial advisors.
The Restructuring Support Agreement will be subject to a
"fiduciary out" for the Company to pursue better
alternatives. As contemplated, the restructuring will reduce
the Company's funded indebtedness by hundreds of millions of
dollars and reduce annual interest expense by tens of millions of
dollars.
Pursuant to the contemplated Restructuring Support Agreement,
the Company's existing convertible noteholders will equitize their
debt into a significant majority of the common stock of the
reorganized company. In addition, holders of general
unsecured claims and existing common shareholders would also
receive meaningful recoveries in the form of reorganized common
stock and warrants exercisable for significant portions of the
common stock of the reorganized enterprise upon obtaining certain
valuation thresholds. Both the common stock and the warrants
will enable stakeholders to capture a share of the Company's future
growth.
The filing of these cases was necessitated by a decline in the
Company's operating performance and liquidity suffering from the
prolonged decrease in the price of bitcoin, the
increase in electricity costs necessary to power the Company's data
centers, and the failure by certain of its hosting customers to
honor their payment obligations. In response to these
factors, the Company has actively taken steps to decrease monthly
costs, delay construction expenses, reduce and delay capital
expenditures and increase hosting profitability.
The Company extensively explored potential financing
alternatives and actively negotiated with various stakeholders. In
consultation with its advisors, the Special Committee of the Board
of Directors of the Company determined that the restructuring
contemplated by the Restructuring Support Agreement represents the
optimal path forward and best positions the Company for long-term
success.
Core Scientific is being advised by Weil, Gotshal & Manges
LLP as its legal advisor, AlixPartners, LLP as its financial
advisor and PJT Partners LP as its investment banker.
For additional information about the cases please visit
https://cases.stretto.com/CoreScientific. The Company has
also established an Information Line at Toll-Free (888) 765-7875
and for international callers please use (949) 404-4152.
ABOUT CORE SCIENTIFIC
Core Scientific is one of the largest publicly traded blockchain
computing data center providers and miners of digital assets in
North America. Core Scientific has
operated blockchain computing data centers in North America since 2017, using its facilities
and intellectual property portfolio for colocated digital asset
mining and self-mining. Core Scientific operates data centers in
Georgia, Kentucky, North
Carolina, North Dakota and
Texas. Core Scientific's
proprietary Minder® fleet management software combines the
Company's colocation expertise with data analytics to deliver
maximum uptime, alerting, monitoring and management of all miners
in the Company's network. To learn more, visit
http://www.corescientific.com.
FORWARD LOOKING
STATEMENTS
This press release includes "forward-looking statements'' within
the meaning of the "safe harbor" provisions of the United States
Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the use of words such as
"estimate," "plan," "project," "forecast," "intend," "will,"
"expect," "anticipate," "believe," "seek," "target" or other
similar expressions that predict or indicate future events or
trends or that are not statements of historical matters. The
Company's actual results may differ materially from those
anticipated in these forward-looking statements as a result of
certain risks and other factors, which could include the following:
risks and uncertainties relating to the Company's chapter 11 cases
(the "Chapter 11 Cases"), including but not limited to, the
Company's ability to obtain Bankruptcy Court approval with respect
to motions in its Chapter 11 Cases, successfully enter into and
implement a restructuring plan, emerge from Chapter 11 and achieve
significant cash flows from operations; the effects of the Chapter
11 Cases on the Company and on the interests of various
constituents, Bankruptcy Court rulings in the Chapter 11 Cases and
the outcome of the Chapter 11 Cases in general, the length of time
the Company will operate under the Chapter 11 Cases, risks
associated with any third-party motions in the Chapter 11 Cases,
the potential adverse effects of the Chapter 11 Cases on the
Company's liquidity or results of operations and increased legal
and other professional costs necessary to execute the Company's
reorganization; finalization and receipt of the DIP Facility;
satisfaction of any conditions to which the Company's DIP financing
is subject and the risk that these conditions may not be satisfied
for various reasons, including for reasons outside of the Company's
control; the consequences of the acceleration of the Company's debt
obligations; the trading price and volatility of the Company's
common stock and the ability of the Company to remain listed on The
Nasdaq Global Select Market as well as other risk factors set forth
in the Company's Annual Report on Form 10-K and Quarterly Reports
on From 10-Q filed with the Securities and Exchange
Commission. These statements are provided for illustrative
purposes only and are based on various assumptions, whether or not
identified in this press release, and on the current expectations
of the Company's management. These forward-looking statements are
not intended to serve, and must not be relied on by any investor,
as a guarantee, an assurance, a prediction or a definitive
statement of fact or probability. Actual events and circumstances
are difficult or impossible to predict and will differ from
assumptions. Many actual events and circumstances are beyond the
control of the Company. These forward-looking statements are
subject to a number of risks and uncertainties, including those
identified in the Company's reports filed with the U.S. Securities
& Exchange Commission, and if any of these risks materialize or
our assumptions prove incorrect, actual results could differ
materially from the results implied by these forward-looking
statements. Accordingly, undue reliance should not be placed upon
the forward-looking statements.
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SOURCE Core Scientific, Inc.