Business Context and Reporting Period
This Form 6-K filing by Iris Energy Limited (IREN) covers the month of November 2022, with a filing date of November 7, 2022. The report primarily addresses a Notice of Default and Acceleration received by two wholly-owned special purpose vehicles (Non-Recourse SPVs) from their lender regarding limited recourse equipment financing facilities.
Key Financial Metrics
- Debt: As of September 30, 2022, the two Non-Recourse SPVs held approximately $32 million and $71 million in principal loan amounts, respectively. A third SPV holds a separate $1 million facility.
- Liquidity: The Group, excluding the Non-Recourse SPVs, held $53 million in cash as of October 31, 2022 (unaudited preliminary balance).
- Assets: The facilities are secured by 1.6 EH/s and 2.0 EH/s of Bitcoin miners, respectively. The Group retains 2.4 EH/s of miners and all data center capacity unaffected by the default notice.
- Revenue and Profit: The filing text does not provide specific revenue, profit, or margin figures for the period.
Material Changes and Events
- Default Notice: On November 4, 2022, lenders alleged an event of default due to the Non-Recourse SPVs' failure to engage in good faith restructuring discussions regarding principal payments originally due October 25, 2022. The lender purported to accelerate the entire principal and accrued interest.
- Dispute: The Non-Recourse SPVs disagree with the allegations in the acceleration notice.
- Insurance Default: A separate notice alleged a potential default regarding insufficient insurance coverage, requiring cure within 10 business days.
- Operational Impact: Effective November 4, 2022, certain subsidiaries terminated hosting arrangements with the Non-Recourse SPVs, freeing up data center capacity and power for third-party hosting or self-mining.
Outlook, Risks, and Management Commentary
- Restructuring Status: The Non-Recourse SPVs are negotiating modified terms. Iris Energy stated it does not intend to provide further financial support if a suitable agreement is not reached.
- Consequences of Default: If no agreement is reached, the SPVs expect to be unable to make scheduled payments on November 8, 2022. This could lead to foreclosure on the secured miners, bankruptcy, or liquidation of the SPVs.
- Project Updates: Construction continues at the Mackenzie site (British Columbia) and the 600MW Childress site (Texas). Decisions on expanding Childress capacity beyond 20MW are being assessed based on available capacity in British Columbia.
- Risks: Significant risks include the loss of mining assets, reduced operating capacity, inability to raise additional financing, and potential litigation costs. The filing includes standard forward-looking statement disclaimers regarding Bitcoin prices, hashrate, and regulatory changes.
Investor Verification Checklist
- Verify the outcome of the restructuring negotiations between the Non-Recourse SPVs and the lender.
- Confirm whether the $103 million in principal debt ($32M + $71M) will be repaid, refinanced, or result in asset foreclosure.
- Monitor the status of the alleged insurance default and whether it is cured within the 10-business-day window.
- Assess the utilization of the newly available data center capacity in British Columbia and its impact on revenue generation.
- Review the company's ability to meet capital commitments for hardware purchases with Bitmain given the liquidity constraints of the SPVs.