Bankrupt crypto miner Rhodium received court approval for an unusual debtor-in-possession financing plan on Friday that offers options to borrow in either US dollars or Bitcoin. As reported by Bloomberg, Texas has approved an unconventional debtor-in-possession financing for Bitcoin mining company Rhodium Enterprises as the firm operates under Chapter 11 bankruptcy. This innovative credit structure enables Rhodium to obtain a cash advance in either USD or BTC as it grapples with its financial woes.
The funding is provided by Galaxy Digital, a blockchain company established by Mike Novogratz. Rhodium can now borrow a sum of $30 million at an annual interest rate of 14.5% or 500 Bitcoin at an interest rate of 9.5%. However, it is equally important to note that Rhodium can decide to pay back the loan in US dollars using the current Bitcoin exchange rate when paying back the loan, therefore it is not fixed to paying back in bitcoins.
Rhodium’s Financial Troubles Include $100M Debt and $26M Lawsuit
Rhodium, which declared bankruptcy protection on August 24, has financial difficulties. Company information reveals, total debt of $100 million and total assets within the range of $100 million to $500 million. The bankruptcy filing also includes six of its subsidiaries: Rhodium Encore, Jordan HPC, Rhodium JV, Rhodium 2.0, Rhodium 10MW, and Rhodium 30MW. Such issues as relations between the company and its landlord and power supplier, Whinstone have been cited as a major reason for the company’s financial woes.
These problems come after the company missed a $54 million loan earlier this year in July and has been in the process of getting $78 million. Some of the issues affecting Rhodium are general issues affecting miners of digital currencies including the recent Bitcoin halving and the increase in the cost of electricity that has greatly cut down on the profits of miners. Further, another competition Riot Platforms has also sued Rhodium for allegedly owing them more than $26 million in fees.
This situation shows the difficult financial situation that the cryptocurrency mining industry is facing, demonstrating the risks of business in a field with unstable rates.
