Bitcoin Miner Greenidge Reaches Debt Restructuring Deal With NYDIG as Bankruptcy Looms

Bitcoin mining firm Greenidge Generation (GREE) came to an agreement with its lender NYDIG about restructuring $74.7 million of debt, though a bankruptcy is still on the cards.

Cash burn is unsustainable and the firm’s board is engaged “in active discussions about the potential for, and timing of, a voluntary bankruptcy filing,” Greenidge said in a Tuesday filing with the U.S. Securities and Exchange Commission. If the deal with NYDIG is finalized, Greenidge still needs $20 million in fresh funding through 2023 to avoid bankruptcy.

Under the deal, which is currently in the form of a non-binding term sheet, NYDIG will purchase 2.8 exahash per second (EH/s) worth of Greenidge’s bitcoin mining machines, and extinguish $57 million-$68 million of the debt. That will leave Greenidge with 1.2 EH/s of machines, and the miner will also pledge the rest of its unencumbered assets to secure the rest of the loan, which will be somewhere between $6 million to $17 million.

The loan in question had about $74.7 million outstanding as of Sept. 30. Prior to reaching a deal with NYDIG, Greenidge had estimated it would have to spend a minimum of $66.5 million in principal payments throughout 2023.

Greenidge will host NYDIG’s machines, effectively changing its business model from self-mining to hosting, the filing said. Hosting has proved a difficult business model to maintain in 2022, particularly for miners like Greenidge that are exposed to natural gas prices. Greenidge’s costs of revenues, which come both from mining bitcoin and selling energy produced in its natural gas plant in upstate New York, grew by 104% year-on-year in Q3, according to Greenidge’s quarterly earnings report.

Greenidge is one of several miners that have warned about cash burn rates, including Argo Blockchain (ARBK) and Core Scientific (CORZ).

During October and November, Greenidge burned through $8 million a month, of which $5.5 million went on NYDIG payments. It expects the same cash burn rate for December, which would put a significant hole through its remaining $22 million of cash and cash equivalents. If Greendige doesn’t secure funding, it may run out of cash in the next two months.

The miner will host up to 74 megawatts (MW) of NYDIG’s machines. As of Sept. 30, Greenidge “powered approximately 76 MW of mining capacity capable of producing an estimated aggregate hash rate of 2.4 EH/s.” The firm owns a 106 MW natural gas power plant in New York.

Greenidge will also transfer its coupons with machine manufacturer Bitmain to NYDIG. Within three months of the debt restructuring and hosting deals being agreed upon, Greenidge will also transfer machines awaiting deployment to NYDIG, and later provide the lender with an additional 39 MW of hosting.

The miner has also faced regulatory turbulence in its home state of New York, where environmental concerns led to its air permit renewal being denied this summer.

UPDATE (Dec. 20, 13:10 UTC): Adds additional details and background.