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Celsius Network Turns to Crypto Mining Subsidiary to Bail It Out of Bankruptcy

  • Celsius (CEL-USD) says it will bring itself out of debt via crypto mining subsidiary, Celsius Mining.
  • A judge has approved the company's request for $5 million to finish its mining facility in Texas.
  • Celsius owes more than $5 billion to creditors.
Celsius (CEL-USD) crypto logo over dark chart background. Celsius bankruptcy filing.
Source: shutterstock.com/Ivan Babydov

As Celsius (CEL-USD) moves along with its Chapter 11 bankruptcy protection proceedings, the company has to think fast. It doesn’t have much time to drum up a way to pay back creditors. Looking to stay true to its promise and not shutter operations, the Celsius Network is turning to a crypto mining subsidiary to bail itself out.

Let’s not pretend Celsius didn’t help itself into its current situation. Sure, the company couldn’t have predicted the crypto crash. However, it did refuse a bailout that could have saved it from its ongoing insolvency issues. Allegedly, one company offered Celsius $6 billion but backed out of the deal when Celsius refused to disclose its financial information.

In its determination to retain its privacy, Celsius underwent every measure to avoid bankruptcy. From hiring a new legal team to its fast and furious debt repayment effort, things looked like they could possibly start to work out. Last week, however, Celsius ended up filing for bankruptcy protections.

Chapter 11 filings don’t force the liquidation of a company’s assets. Rather, they give the company a chance to reorganize and become profitable again. Only the most determined companies opt for Chapter 11 over other types of bankruptcy protections. After all, they are largely unsuccessful efforts; less than 10% of all Chapter 11 filings end with a company turning profitable. Most often, the filing just prolongs the inevitable.

Having already shown its determination to stay afloat, however, Celsius is looking to join the elite group of rehabilitated Chapter 11-filing companies. Now, it’s sharing just how it plans to do so.

Celsius Network Looks to Crypto Mining to Reverse Bankruptcy

The Celsius Network owes over $5 billion to creditors — and it doesn’t have long to get going. As part of Chapter 11 proceedings, the company is to produce a plan of reorganization. The company’s Celsius Mining subsidiary, which itself has joined the bankruptcy proceedings, will be an integral part of this plan.

Well before the bankruptcy talk, Celsius Mining was looking like a major piece of the company’s puzzle. The satellite company was even preparing for an initial public offering (IPO), filing a private S-1 draft with the U.S. Securities & Exchange Commission in March. But with its own bankruptcy as well as Celsius’, it’s now taking up a new role.

Yesterday, Celsius CEO Alex Mashinsky brought Celsius Mining into the fore of the plan to save the company. Mashinsky says the subsidiary will provide the funds needed to shed Celsius’ debt. This promise comes with a request for $5 million to finish its mining center in Texas. Celsius says it already holds 43,000 mining rigs and plans to nearly triple its fleet by late 2023.

The chief judge presiding over yesterday’s court proceedings granted these funds on an interim basis. However, the decision doesn’t come without pushback. U.S. Trustee Program attorney Shara Cornell says the half-finished facility has already helped plunge Celsius into debt. Cornell asked, “Why not just consider liquidating it and move on?”

Already deeply invested in its plan, it’s unlikely that Celsius will throw in the towel any time soon. And, now with some support from the court in its long-shot plan, the Celsius Network is likely feeling a bit more control over its destiny. Still, given market price declines and the miners needed to hit 10,100 Bitcoin (BTC-USD) this year, the company is facing a steep uphill battle.

On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/celsius-network-turns-to-crypto-mining-subsidiary-to-bail-it-out-of-bankruptcy/.

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