Bitcoin Miner Iris Energy Faces Default Claim on $103M of Equipment Loans
Bitcoin mining firm Iris Energy (IREN) is facing claims from its lender alleging that it has defaulted on $103 million of equipment loans held by two special-purpose vehicles (SPVs), the company said on Monday.
The reason for the notice of default, which the lender sent to the miner on Nov. 4, is that the company failed to engage in "good faith restructuring discussions" for the debt in question, according to a Monday filing with the U.S. Securities and Exchange Commission. Because Iris failed to engage in such discussions, the lender is claiming it defaulted on payments originally scheduled for Oct. 25, the Monday filing said. As such, the filing continued, the lender looks to trigger an acceleration clause, meaning it is demanding immediate payment of the entire principal and accrued interest. Iris said it "disagrees" with the allegations made by the lender in the Nov. 4 notice.
To review, on Nov. 2, Iris Energy said the bitcoin mining machines in question do not produce enough cash to cover the related debt obligations. The company said at that time that if discussions to restructure the debt fail to lead to an agreement by Nov. 8, it would not be able to meet the debt obligations held by the two SPVs.
The two loans in question – which as of Sept. 30 had principal amounts of $32 million and $71 million – are secured by 1.6 exahash/second (EH/s) and 2.0 EH/s of mining machines respectively, the company said. The debt is held by two wholly-owned non-recourse SPVs, meaning in the event of default, the lender will be able to seize any Iris Energy assets other than the collateral.
Iris Energy is one of several bitcoin mining firms struggling to repay their debt obligations during this bear market that has seen rewards dwindle alongside soaring energy costs. September saw the first Chapter 11 bankruptcy from a major player, Compute North, with other big firms like Core Scientific (CORZ) and Argo Blockchain (ARBK) seemingly teetering on the edge of solvency.
Turning back to this morning's filing, there's also a third loan for $1 million – also held by a wholly-owned SPV and secured by 0.2 EH/s of miners – that received a different notice for another potential event of default from the lender.
If an agreement for restructuring the debt is not reached by tomorrow Iris Energy will not provide further financing support to the SPVs, said the company, likely leading to default and foreclosing of assets.
Only 2.4 EH/s of the the company's machines are unaffected by the equipment loans.
Iris shares are up marginally late on Monday morning, trading at $2.80 each.
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