Bitcoin Miner Stronghold Returns 26,200 Mining Rigs to NYDIG to Clear $67M Debt

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Pub­licly-trad­ed Bit­coin min­ing com­pa­ny Strong­hold Dig­i­tal Min­ing (SDIG) said it plans to return more than 26,000 min­ing rigs to New York Dig­i­tal Invest­ment Group (NYDIG) to reduce its debt sig­nif­i­cant­ly. NYDIG is a lead­ing bit­coin firm that helps min­ers finance min­ing equip­ment and pow­er infrastructure.

The min­ing com­pa­ny also intends to restruc­ture a con­vert­ible note for cash after receiv­ing a bind­ing com­mit­ment let­ter from pri­vate cred­it invest­ment man­ag­er White­Hawk Cap­i­tal to amend its financ­ing agreements.

Stronghold Repays $67 Million Debt to NYDIG

Strong­hold will return about 26,200 bit­coin min­ing rigs to NYDIG to elim­i­nate all of its $67.4 mil­lion out­stand­ing debt to the lender, the com­pa­ny said on Tues­day in a press release.

The bit­coin min­er released its Q2 earn­ings report this week after delay­ing it sev­en days pri­or. The firm said the nego­ti­a­tion was the rea­son for the delay. The earn­ings report revealed that Strong­hold had $127.9 mil­lion in debt at the end of the sec­ond quar­ter. Thus, the deal with NYDIG elim­i­nates more than half of the company’s debt.

Stronghold Restructures its Financing

The min­ing com­pa­ny said in the release that it would work with White­Hawk to restruc­ture and expand its cur­rent financ­ing agree­ments into a 36-month note.

The deal will reduce short-term prin­ci­pal pay­ments while pro­vid­ing $20 mil­lion in addi­tion­al bor­row­ing capac­i­ty, which Strong­hold plans to use to pur­chase new min­ing equip­ment opportunistically.

Fur­ther­more, Strong­hold said it restruc­tured its Con­vert­ible Notes and War­rants to reduce the prin­ci­pal out­stand­ing amount by $11.3 mil­lion in exchange for low­er­ing the strike price on out­stand­ing war­rants from $2.50 to $0.01.

“By return­ing min­ers to NYDIG that served as the col­lat­er­al for the non-recourse financ­ing agree­ments and restruc­tur­ing the White­Hawk financ­ing agree­ments and the Con­vert­ible Notes, we will be able to elim­i­nate over half of our total prin­ci­pal amount of debt out­stand­ing and the sig­nif­i­cant asso­ci­at­ed inter­est and prin­ci­pal pay­ments,” the com­pa­ny said.

Bitcoin Miners Are Struggling

Since the mar­ket crash in Q2, bit­coin min­ers have been sell­ing mined BTC or min­ing machines to pay off their debt or cov­er oper­a­tional costs. For instance, min­ers sold 100% of their out­put when bit­coin plunged below $30,000 in May.

Speak­ing on the mat­ter, Matthew Kim­mell, an ana­lyst at Coin­Shares, said:

“Liq­uid­i­ty is key for min­ers in a bear mar­ket. At cur­rent prices, min­ers are receiv­ing less cash flow per Bit­coin sold com­pared to both last year and Q1 2022, while still poten­tial­ly fac­ing the same infra­struc­ture, machine, and ener­gy costs.”

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