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 (SPV), the company said on Monday.
The reason for the notice of default, which the lender sent to the miner on Nov. 4, is 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 not be able to seize any Iris Energy assets other than the collateral.
The loans appear to be from troubled lender NYDIG, based on past press releases.
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 including Core Scientific (CORZ) and Argo Blockchain (ARBK) seemingly teetering on the edge of solvency.
In the Monday 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 Tuesday, 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.
CORRECTION AND UPDATE (Nov. 7, 22:53 UTC): Corrects description in the fourth paragraph of non-recourse financing to say that in the event of default the lender will not be able to seize any assets other than the collateral; adds detail about NYDIG in the fifth paragraph.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.