Texas miner Rhodium files for Chapter 11, securing Bitcoin or USD financing from Galaxy Digital amid $100M debt.
Rhodium’s strained ties with Whinstone and default on $54M loan drive bankruptcy filing, with six subsidiaries affected.
Rival Riot Platforms sues Rhodium for $26M in unpaid fees, highlighting wider cryptocurrency mining sector challenges.
Rhodium Enterprises, a Texas-based Bitcoin mining company, has been approved for a rare financing option as it navigates Chapter 11 bankruptcy protection. The unusual debtor-in-possession financing plan allows the struggling miner to choose between borrowing in U.S. dollars or Bitcoin, a development is a shift in the cryptocurrency industry's approach to financing distressed companies. Rhodium, which filed for bankruptcy on August 24, faces substantial debts while continuing its mining operations.
Financing Plan with Galaxy Digital’s Support
The financing plan, approved by a U.S. court, includes a proposal from Galaxy Digital, a prominent blockchain firm led by Mike Novogratz. Notably, Galaxy Digital has offered Rhodium two choices for financing: a $30 million loan at an annual interest rate of 14.5%, or 500 Bitcoin at a reduced rate of 9.5%.
This financing flexibility provides Rhodium with the option to repay the Bitcoin loan in U.S. dollars, based on market exchange rates at the time of repayment. This arrangement offers an unusual twist, as it merges traditional and crypto-based financing options.
Struggles Leading to Bankruptcy Filing
Rhodium's bankruptcy filing highlights the financial distress it faced, which worsened due to a strained relationship with Whinstone, its landlord and power supplier. Rhodium’s total debt currently stands at $100 million, with assets estimated between $100 million and $500 million.
Furthermore, six subsidiaries, including Rhodium Encore and Jordan HPC, also filed for bankruptcy alongside the parent company. These financial issues follow a history of debt problems for Rhodium, which defaulted on a $54 million loan in July. The company also saw lending increases of $78 million prior to its bankruptcy.
Rival Lawsuit and Broader Industry Challenges
Rhodium's financial troubles reflect a broader challenge faced by the cryptocurrency mining industry, worsened by factors such as rising electricity costs and recent Bitcoin halving events.
A lawsuit filed by rival company Riot Platforms further adds to Rhodium’s problems, with Riot seeking over $26 million in unpaid fees from the bankrupt miner. These challenges highlight the difficulties many cryptocurrency miners are currently experiencing, as reduced mining margins impact operations across the sector.
