Crypto Lender Vauld Facing $400 Million Debt, Opening Door for Nexo Acquisition

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  • Vauld is revealing the full scope of its $402 million debt to creditors.
  • The debt is largely owed to individual retail investors.
  • The company is still in exclusive talks with Nexo (NEXO-USD) regarding a potential acquisition.
Vauld - Crypto Lender Vauld Facing $400 Million Debt, Opening Door for Nexo Acquisition

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Vauld is struggling right now as it tries to restructure in the face of great debts. As the scope of the company’s insolvency comes to light, though, investors remind themselves of a piece of news from earlier in the month. The company has a lifeline through Nexo (NEXO-USD). Could one expect to see the two companies coming together in the near future?

The steep decline in the crypto market capitalization beginning in May has created astonishing outcomes for crypto companies. Asset managers like Vauld have been hit particularly hard. These companies, bogged down with over-leveraged loans, were deeply in the hole with creditors when crypto prices tanked. It’s an event not unlike the 2008 housing crisis, with lenders taking the place of homeowners.

These platforms facing insolvency are taking a variety of approaches to getting back out. Take Celsius (CEL-USD), which filed for Chapter 11 bankruptcy protection and hopes to pay down its multi-billion-dollar debt through crypto miningBlockFi took an immediate bailout from Sam Bankman-Fried’s FTX, though not before paring its workforce in an effort to cut spending. Three Arrows Capital is being forced to liquidate by a Bahaman court; the company’s co-founders are resisting this fate as much as possible, going missing entirely and refusing to cooperate with creditors.

Vauld users know the company is insolvent. It halted all withdrawals from its platform, citing challenges from “volatile market conditions” and announced plans to restructure. Withdrawal halts are a Hail Mary for lenders in debt, preserving liquidity by any means necessary. However, until today, investors have not known the scope of the company’s financial instability. As Vauld reveals its situation, investors wonder whether a previously discussed acquisition is still in play.

Vauld Bankruptcy Details Bring Nexo Offer Back Into Play

Vauld is giving investors a better look into its financial situation, following its announcement that it is pursuing a protection filing from a Singapore court. The news brings Nexo’s bailout offer back into the fold.

If granted, the protection will prevent lawsuits from investors and give it some space for restructuring. The process is similar to that of a Chapter 11 filing in the U.S. In the meantime, the company is disclosing a debt of about $402 million to creditors. Of this roughly $400 million, $363 million of the debt consists solely of individual retail deposits.

The company owes $125 million of this debt to its 20 largest creditors, including a $34 million debt to its largest creditor. It owes another $35 million to its largest secured creditor. Known backers of the exchange include FTXCoinbase (NASDAQ:COIN) and Valar Ventures.

With all of this financial trouble coming to light, investors are remembering Nexo’s offer to acquire the company earlier in the month. The two parties signed a letter of intent, giving Nexo a 60-day period of exclusive talks with the company about a full acquisition. Nexo says the deal would help it fulfill its plan to expand further into the southeast Asian and Indian markets. Indeed, Vauld’s headquarters are in Singapore, and most of its users are based in India.

On the date of publication, Brenden Rearick did not have (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.


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/crypto-lender-vauld-facing-400-million-debt-opening-door-for-nexo-acquisition/.

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