Texas has authorized a debtor-in-possession financing scheme for the BTC miner Rhodium

The debtor-in-possession financing plan that Bitcoin miner Rhodium applied for under Chapter 11 with assets of up to $500 million and obligations of up to $100 million has been approved by the state of Texas.

Galaxy Digital is providing Rhodium with the option of a $30M loan or 500 BTC, with an interest rate ranging from 9.5% to 14.5%.

Rhodium Enterprises, a Bitcoin mining company headquartered in Texas, has recently attracted substantial notice as a result of its Chapter 11 bankruptcy filing on August 24, 2024.

Rhodium’s financial difficulties have underscored the emerging obstacles in the cryptocurrency mining industry, with liabilities varying from $50 million to $100 million and assets valued between $100 million and $500 million.

The fraught relationship between Rhodium and its landlord and power supplier, Whinstone, is the root of its financial distress.

Rhodium defaulted on a $54 million loan in July, shortly before the company secured $78 million in additional lending, as a result of this tension. The strain has resulted in the filing of a lawsuit by Riot Platforms, a rival mining firm, which alleges that Rhodium owes over $26 million in outstanding fees.

Rhodium has successfully obtained approval from a Texas court for an unconventional debtor-in-possession financing scheme, despite these setbacks.

Galaxy Digital is a blockchain company run by Mike Novogratz. Under this scheme, Rhodium may choose between two loans: one for $30 million at 14.5% APR per year, or one for 500 Bitcoin at 9.5% APR.

It is important to note that the Bitcoin miner has the option to repay the Bitcoin loan in US dollars, based on the market prices at the time of repayment.

The approval of this financing plan is particularly noteworthy in light of the volatility of the Bitcoin price, which further complicates Rhodium’s repayment obligations. Bitcoin has experienced a nearly 11% decline in the past month, which is indicative of the broader market instability.

The challenges that Rhodium is experiencing are not unique; they are indicative of the more extensive obstacles that the cryptocurrency mining industry is currently encountering. The recent halving of Bitcoin has resulted in a decrease in mining rewards, while the cost of electricity has increased, which has eroded profit margins.

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