Core Scientific, Inc. — Form 8-K Summary
Business context and reporting period
Core Scientific, Inc. filed this Current Report on December 27, 2022, regarding events occurring on or beginning December 22, 2022. The company and certain affiliates filed voluntary Chapter 11 bankruptcy petitions on December 21, 2022, and continue operating as debtors-in-possession under Bankruptcy Court supervision.
Financing, liquidity, and capital structure
- The company entered into a senior secured, super-priority debtor-in-possession credit agreement with Wilmington Savings Fund Society, FSB, as administrative agent.
- The new-money DIP facility provides for aggregate commitments of up to $75 million, with approximately $57 million initially committed. Up to $37.5 million may become available upon interim Bankruptcy Court approval, and up to an additional $37.5 million upon final approval, subject to obtaining the required commitments.
- New-money DIP borrowings bear interest at 10%, payable in kind. Commitment fees equal to 2% of aggregate new-money commitments are also payable in kind.
- Up to $75 million of Convertible Notes claims may be converted on a cashless, dollar-for-dollar basis into DIP roll-up loans upon entry of the Final DIP Order. Roll-up loans do not bear interest.
- The DIP facility matures on June 21, 2023, with a potential three-month extension to September 21, 2023, subject to specified conditions.
- Exit fees vary depending on the restructuring outcome, including a potential fee of 15% of accreted new-money loans if an acceptable exit roll transaction is not completed, plus specified fees on roll-up loans.
The filing does not provide current revenue, profit, cash flow, margin, cash balance, or other operating performance metrics.
Restructuring and material changes
- The company entered into a Restructuring Support Agreement with certain Convertible Note holders and DIP lenders that agreed to support and vote for a proposed Chapter 11 plan.
- The contemplated restructuring would exchange Convertible Notes for 97% of the reorganized company’s new common shares, subject to dilution.
- At emergence, the DIP facility would either be refinanced with third-party exit financing or converted into a four-year exit term loan, with DIP lenders potentially receiving warrants for up to 30% of new common shares, subject to dilution.
- The plan also contemplates up to $75 million of new second-lien notes, miner equipment takeback debt, reinstatement of certain secured non-miner financing claims, and recoveries for general unsecured creditors and existing equityholders through new shares and warrants.
Outlook, contingencies, and risks
- Key restructuring milestones include interim DIP approval within five days of the petition date, final DIP approval within 35 days, filing of the plan and disclosure statement within 75 days, confirmation within 150 days, and emergence within 165 days, subject to permitted extensions.
- The DIP facility may terminate as early as January 25, 2023 if a Final DIP Order has not been entered, unless the required lenders agree to a later date.
- Completion of the financing and restructuring remains subject to Bankruptcy Court approval, satisfaction of financing conditions, creditor and other stakeholder actions, and other conditions in the governing agreements.
- Risks include insufficient liquidity, accelerated debt obligations, increased legal and professional costs, adverse Bankruptcy Court rulings, delays or failure to confirm and implement a plan, inability to emerge from Chapter 11, and failure to generate significant operating cash flow.
- Nasdaq notified the company that its common stock and warrants would be delisted because of the Chapter 11 cases and related listing and public-interest concerns. Trading is scheduled to be suspended at the opening of business on January 3, 2023, subject to any appeal or other action.
Important facts for investors to verify
- Whether the Bankruptcy Court approved the interim and final DIP orders and the amount of financing ultimately funded.
- The final amount of DIP borrowings, roll-up claims, accrued in-kind interest, fees, and exit financing requirements.
- Whether the proposed restructuring plan was confirmed and the terms of recoveries and dilution for creditors and existing equityholders.
- Whether Nasdaq delisting occurred, whether the securities continued trading elsewhere, and the resulting liquidity and valuation implications.
- The company’s cash position, operating cash flow, mining capacity, debt obligations, and financial results in subsequent periodic filings.