North American bitcoin mining and hosting company, Core Scientific has announced a major financial move with the whole conversion of its Secured Convertible Notes mandatory for 2029
The move is in accordance with terms under Indenture dated January 23rd, 2024 among core Scientific as the issuer, Wilmington Trust Company as trustee and Collateral Agent together with certain other parties. The decision to convert these financial instruments into equity underscores the company’s ongoing recovery and strategic refocusing post-bankruptcy.
Core Scientific CEO Adam Sullivan called the conversion a significant milestone, in the company’s post-bankruptcy trajectory, expressing optimism about the future.
Sullivan said while this conversion demonstrates further headway following the company restructuring, it also reinforces an ability to improve its financial flexibility. This new capability is anticipated to drive growth investments in Core Scientific’s suite of services, including accelerating portfolio diversification and focused sustainment strategies that will accrete maximum stakeholder value.
Details of the Conversion and Its Market Implications
The trigger for the mandatory conversion was activated on July 5, 2024, following the company’s stock trading above a specified threshold in the Indenture over 20 consecutive trading days.
Scheduled for July 10, 2024, the conversion process will see each registered note holder receive shares of common stock equivalent to their principal amount at a conversion price of $5.8317, alongside cash compensation for any fractional shares based on the closing stock price on July 9, 2024.
According to the announcement, holders of the notes that are in global form at the Depository Trust Company (DTC) need not take any action, and holders of physical notes will receive instructions for exchanging their existing-notes.
Furthermore, This conversion will, when complete, turn approximately $260 million of convertible debt into some 45m shares of common stock. This large influx of equity is a turning point for Core Scientific, implying new capitalization and possibly some changes in the market dynamics that govern its stock.
The conversion is expected to be dilutive for current shareholders but allow the company’s debt load to decrease, resulting in a cleaner balance sheet and possibly increased shareholder value over time.
Furthermore, in a related financial development, the company announced that a contingent payment obligation to general unsecured creditors under its Chapter 11 reorganization plan had been extinguished on July 1, 2024. This obligation, previously valued at $3 million, was settled as the company’s stock exceeded another threshold, enhancing Core Scientific’s financial standing further.
