Genesis, a lending platform that has disclosed a total debt of US$1.8 billion, has been rumored to be facing bankruptcy since the FTX incident. However, recent news pointed out that it has billions of dollars in debt relationship with its parent company DCG. If Genesis files for bankruptcy, DCG may also end up together.
The possible future direction of DCG and Genesis
In the latest edition of the encryption current affairs commentary program "The Chopping Block", Haseeb Qureshi, managing partner of Dragonfly Capital, said that Genesis incurred $2.1 billion in bad debts during the 3AV incident, and its parent company DCG reported a loss of $2.1 billion based on book value at the time. The bank bought the bad debt with a 10-year promissory note to help it survive the crisis.
However, when the FTX incident caused Genesis to fall into crisis again, if Genesis filed for bankruptcy liquidation, the 10-year promissory note worth US$2.1 billion would immediately mature, and DCG would have to pay this huge amount of US dollars in cash. However, DCG currently does not have that much cash.
(Related articles: Timeline of institutional lending platform Genesis｜From public emphasis on the safety of funds to the edge of bankruptcy)
In this regard, Haseeb Qureshi believes that things may go in three ways:
1. Genesis filed for bankruptcy, and DCG also filed for bankruptcy because it was unable to pay US$2.1 billion. As a result, both parties entered complex bankruptcy procedures.
2. Genesis also filed for bankruptcy, but with the mutual consent of Genesis creditors, the 10-year promissory note was auctioned at a price lower than the book price to avoid DCG bankruptcy (assuming investors believe that DCG bankruptcy will make everything worse ).
3.Genesis reorganizes the company, with the mutual consent of Genesis creditors, to reduce the claims available to creditors and avoid entering bankruptcy proceedings that are harmful to large creditors.
Messari founder analyzes the leverage held by Genesis and its creditors
Regarding what Haseeb Qureshi revealed, Messari founder Ryan Selkis analyzed the current situation on Twitter. He said that the 10-year promissory note can be regarded as a current asset (Current Asset) for Genesis, which will significantly reduce DCG’s ability to limit Genesis’ bankruptcy liability. ability. Because whenever Genesis files for bankruptcy, DCG has to pay a large sum.
At the same time, the urgency for Genesis to file for bankruptcy will also be reduced, after all, they hold "assets" in their hands.
There is also less urgency for Genesis creditors to demand that Genesis file for bankruptcy through a default notice. Because the liquidation of liquid assets is legally more likely to cause DCG bankruptcy than the 10-year note.
"This would make it more likely that DCG would reorganize rather than bankrupt Genesis. Assuming the promissory note is truly redeemable (and Genesis can demand payment), DCG's odds in bankruptcy court will plummet. A prolonged silence could It shows that Genesis creditors are giving DCG time to resolve this issue," said Ryan Selkis.
(Extended reading: Genesis said it needs more time to find a solution, Messari said the best solution may be the group’s recapitalization)
This article laid the fuse for the 3AV incident! DCG carries US$2.1 billion in bad debts and dares not let Genesis file for bankruptcy. First appeared on Chain News ABMedia.
