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In another attempt to collect funds to repay creditors, the now-bankrupt crypto lender Celsius is now looking to sell $14.4 million in coupons and credits for Bitcoin mining company Bitmain.
The proposed deal, filed with the U.S. Bankruptcy Court for the Southern District of New York Thursday, comprises $7.4 million in coupons that give holders a 10%-30% discount on future purchases of Bitmain’s mining rigs.
According to Celsius interim CEO Christopher Ferraro’s statement, the Bitmain coupons expire six months after their purchase and are worthless after that, with their value on the secondary market depreciating “significantly” as they approach their expiration dates. “While the estimated discount is significant, it would be a mistake to hold onto the Bitmain coupons hoping to realize more value in a sale at a later date. The alternative to selling the Bitmain coupons is that they expire worthless,” said Ferraro.
Celsius is selling another $7 million in Bitmain credits.
When firms order a large number of mining machines, they are delivered in batches and paid for in installments. However, as energy prices and Bitcoin can fluctuate in value over the course of an order's fulfillment, it can sometimes happen that the value of the order has dropped below how much the firm has paid. To make up that difference, Bitmain issues credits.
Unlike vouchers, credits do not expire and are redeemable for 100% of their face value in cash from Bitmain two years after the final delivery date of the purchased mining rigs.
Until recently, the Bitmain credits were transferable; however, Ferraro stressed, the Chinese company updated its terms of service at the beginning of the year, restricting the ability to transfer the credits.
“Immediate monetization of the Bitmain Credits is in the best interests of the Debtors’ estates and their creditors,” said Ferraro, adding that Celsius anticipates it can realize up to 88% of the face value of the credits in possession of the company.
He added that “the sale of the Bitmain credits offers the Debtors a golden opportunity to realize value on an illiquid and risky asset.”
Celsius scrambles to raise money
The latest money-raising proposal comes amid concerns about the bankruptcy proceedings' hefty cash burn.
The Celsius committee of unsecured creditors earlier this week objected to the lender's motion for an additional extension to its restructuring plan deadline. The committee argued that “if the Debtors pursue their current schedule, they simply cannot emerge from bankruptcy by that time.”
Additionally, William Harrington–a trustee from the U.S. Department of Justice tasked with overseeing administrative processes in the case–said the rate at which legal professionals are “consuming” Celsius’ assets is a reason to rule against the extended timeline, despite the crypto lender’s claim that many creditors will have to weigh in on the proposed plan.
The bankruptcy court had previously ruled that Celsius could sell $18 million worth of stablecoins held in Earn accounts to help fund its administrative expenses.