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.”