The federal judge overseeing bitcoin miner Core Scientific's (CORZ) Chapter 11 bankruptcy process approved a $70 million loan from B. Riley Commercial Capital that will help the company get back on its feet.

Judge David Jones of the Southern District of Texas also said during a hearing on Wednesday that he would agree to a group of stockholders' request to form an official committee to represent their interests in the case, pending a budget for the committee.

Core Scientific filed for bankruptcy in December, after months of a sustained crypto market downturn couple with high energy prices pounding its bottom line. As of the end of November, prior to the bankruptcy, Core Scientific's debts included $552.5 million of principal outstanding under senior secured convertible notes, $41.8 million to B. Riley, and $242.5 million under various equipment financing deals, according to a Feb. 27 filing.

The B. Riley facility, known as debtor-in-possession financing (DIP loan), replaces a previous interim order. It is meant to enable the company to reorganize and includes paying court and adviser fees. It comes with a 10% annual interest rate and has "super priority" over all administrative expenses and unsecured claims, except for some fees known as a carve-out, according to a term sheet filed with the court.

Another hearing will take place on Friday to discuss the appointment of the stockholders' committee. A final budget for the DIP financing will also have to be agreed upon.

B. Riley Commercial Capital is a subsidiary of B. Riley Financial (RILY).

Equipment lender BlockFi had objected to the DIP, saying it didn't offer adequate protections for its collateral, but the issue was resolved prior to the Wednesday hearing.

Read more: Bitcoin Miner Core Scientific to Borrow $70M From B. Riley

Core Scientific Senior Vice President of Capital Markets and Acquisitions Michael Bros said in a Dec. 21 filing that the equipment loans such as BlockFi's are undersecured, with as much as $90 million in collateral.

On Feb. 3, a group of equity holders asked the court to form an official committee they claimed would provide “critical input with respect to valuation and negotiating Chapter 11 plan terms on behalf of equity.” The group said that Core Scientific is solvent, and that given the recent rally in bitcoin prices and the improvement of energy markets, “the value available for equity is increasing.”

In its response, Core Scientific agreed that it is “not hopelessly insolvent,” considering recent market movements, and supported the motion, setting a budget of $4.75 million, including financial advisors’ fees, to be taken from the secured assets in what is known as a carveout.

Despite his agreement to forming the committee, the judge said he will "reserve the benefit" of "hindsight." If he decides that the interests of the equity holders weren't advanced by the committee, or it was done at the expense of other creditors, he might use "a number of tools," including bringing the committee's budget down to zero.

The equity group represents 69 million shares of common stock. That’s less than the issued and outstanding common stock owned by company insiders, which is about 29% of the total at 107 million, according to the office of the U.S. Trustee.

B. Riley previously argued that weeks of negotiations on the financing should not be upended by the last minute request of $4.75 million from the carveout.

The equity holders also question whether Core Scientific was protecting their fiduciary duties during negotiations because it did not adequately shop around for financing options. The equity holders “successfully encouraged” a third party to submit an alternative to B. Riley’s financing proposal, which they believe was the only competing offer on the table.

“Had the Ad Hoc Equity Group been involved from the outset, the Debtors might well have avoided the original agreement with the secured convertible noteholders that allowed for a $6 million termination fee, equating to an internal rate of return in excess of 500%,” the group said.

In its response, Core Scientific rejected these claims as ad hominem attacks and said it spoke to 20 possible lenders for the original financing proposal.

A proposed agreement between the noteholders and the bankrupt firm would have left holders of unsecured debt and equity holders to fight over 3% of the reorganized company, said the stockholders.

CORRECTION (March 2, 2023, 01:05 UTC): Corrects that the judge overseeing Core Scientific's bankruptcy is David Jones, not Marvin Isgur.

UPDATE (March 2, 2023, 11:00 UTC): Updates to reflect final order.