Bitfarms, has paid an insolvent cryptocurrency lender BlockFi a one-time cash settlement of $7.75 million to satisfy a $21 million debt.
According to a press release from February 9, Bitfarms and BlockFi modified their prior loan arrangement to permit the cryptocurrency miner to pay the $21 million principle and interest debt owed to BlockFi in exchange for a one-time cash payment of $7.75 million.
According to the statement, on February 18, 2022, BlockFi gave Backbone Mining Solutions (BMS), a US subsidiary of Bitfarms, a $32 million equipment financing loan.
The 20 megawatt mining facility for Bitfarms, headquartered in Washington, is owned and run by BMS. The 6,100 Bitmain S19j pro miners owned by Bitfarms were used as security for the loan, however following loan repayment, the equipment is now free and clear.
The loan payback decreases Bitfarms’ debt commitments from the $165 million it owed in June 2022 to just $25 million in less than nine months, according to Jeff Lucas, the company’s chief financial officer.
These numbers show an 85% decrease in the debt load for crypto miners over the past nine months. Lucas added that Bitfarms was able to lower its debt commitments, increase liquidity, and increase its financial flexibility thanks to the debt payback, capital expenditure requirements rearrangement, and removal in December of last year.
The company’s outstanding debt, which is backed by new mining machinery at its Quebec plant, will also mature in the first quarter of 2024, according to the CFO.
It indicates that the business will be debt-free by the time of the upcoming halving event in May 2024. One of the cryptocurrency companies that declared bankruptcy in 2022 as a result of a debilitating crypto winter and the demise of prominent crypto companies like Terra Luna, Three Arrows Capital (3AC), and FTX is Bitfarms’ lender, BlockFi.
The bitcoin mining business, which has been severely harmed by high energy prices and low cryptocurrency values, was heavily financed by the crypto-native lender.
The majority of loans that BlockFi provided to bitcoin miners were secured by mining rigs, whose prices have been subject to significant fluctuations throughout the weak market.
According to media reports from earlier in the year, BlockFi planned to issue loans worth about $160 million that were backed by almost 68,000 cryptocurrency mining equipment.
According to insider information, the New Jersey-based business started the loan bidding process last year. Given the present pricing of bitcoin mining equipment, they claim that some loans have already fallen into default and appear to be undercollateralized.
