The ongoing crypto winter seems to have snared its latest victim after Australian Bitcoin mining company Iris Energy received a notice of demand from its lender and Bitcoin rig maker Bitmain Technologies for allegedly failing to honor a $107.8 million loan.
Bitmain demands loan repayment in full
In a November 21 filing with the Securities and Exchange Commission (SEC), Iris Energy stated that it had received default and acceleration notices from Bitmain regarding a $107.8 financing facility extended to two of its wholly owned special-purpose vehicles (SPVs).
According to the filing, Bitmain sent the notice, demanding the debt be repaid in full after Iris Energy failed to engage in “good faith restructuring discussions” on the financial facility.
“The Non-Recourse SPVs have received default and acceleration notices from the lender in respect of the facilities, including a demand that each facility be immediately repaid in full,” the company said.
Iris subsidiaries forced to unplug mining gear
In the filing, Iris Energy said that the two subsidiaries had been forced to unplug mining hardware used as collateral for the loan. The SPVs had approximately $32 million and $71 million in principal amounts as of September 30, and they were secured by 1.6 exahash/second (EH/s) and 2.0 EH/s of Bitcoin miners, respectively.
Iris stated that as a result of the notice, certain other subsidiaries of the company had terminated their respective hosting arrangements with the two SPVs, and none of the subsidiaries’ 3.6 EH/s of miners are operational.
The two SPVs currently generate insufficient cash flow to service their respective debt financing obligations, generating around $2 million in monthly gross profit from Bitcoin mining, compared to monthly payment obligations of $7 million.
Both failed to make scheduled principal payments by the extended due date of November 8, 2022, and received a default notice from Bitmain last week as a result.
Company exploring opportunities to utilize remaining assets
Iris Energy had $53 million in cash and cash equivalents as of October 31, 2022, excluding the Non-Recourse SPVs. The BTC mining company also stated that the news has had no impact on its data center capacity or development pipeline and is continuing to “explore opportunities to utilize its available data center capacity.”
However, the company admitted that the default and acceleration notice will “have a material adverse effect” on the business and its financial condition, cash flows, and operating results.”
Iris stock suffers a steep drop in value
The effects are already evident in the company’s share value. In after-hours trading, Iris Energy stock (IREN) fell 18% on the day to trade at $1.65. On November 21, it reached an all-time low, 94% below the $24.8 all-time high it reached when it first began trading in November 2021.
Iris has now whittled down its mining power capacity by approximately 3.6 EH/s. It stated that capacity is still around 2.4 EH/s, which includes 1.1 EH/s of operational hardware and 1.4 EH/s of rigs in transit or awaiting deployment.
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