- Rhodium filed for Chapter 11 with up to $100 million in debt and up to $500 million in assets.
- Debtor Possession Financing Scheme is offered by Galaxy Digital.
- Galaxy Digital offers a $30 million loan or 500 BTC on Rhodium at an interest rate of 9.5% – 14.5%.
Rhodium Enterprises, a Texas-based Bitcoin mining company, has been in the spotlight recently after it filed for Chapter 11 bankruptcy on August 24, 2024.
With debts ranging from $50 million to $100 million and assets valued at $100 million to $500 million, Rhodium’s financial woes highlight the growing challenges facing the cryptocurrency mining sector.
Riot Platforms claims Rhodium owes it $26 million.
At the heart of Rhodium’s financial woes is its strained relationship with its landlord and power supplier, Winston.
These tensions contributed to Rhodium defaulting on a $54 million loan in July, just before the company was due to raise another $78 million. These tensions culminated in a lawsuit filed by rival mining firm Riot Platforms, claiming Rhodium owed it more than $26 million in unpaid fees.
Texas Approves Debtor-Owned Financing Plan for Rhodium
Despite these setbacks, Rhodium secured an unusual debtor-in-possession financing plan approved by a Texas court.
The plan, offered by Galaxy Digital, a blockchain company led by Mike Novogratz, gives Rhodium the option to choose between a $30 million loan at a 14.5% annual interest rate or a 500 bitcoin loan at a 9.5% annual interest rate.
In particular, Bitcoin miners have the option to repay their Bitcoin loans in US dollars, depending on the market price at the time of repayment.
The approval of this funding plan is particularly notable given the volatility of the Bitcoin price, which adds uncertainty to Rhodium’s repayment obligations. Last month, Bitcoin fell by about 11%, reflecting the broader market volatility.
Rhodium’s struggles are not isolated, but are emblematic of broader challenges facing the cryptocurrency mining industry. The recent Bitcoin halving has reduced mining rewards, while rising electricity costs have eroded profit margins.
As Rhodium struggles to regroup and recover, its journey highlights the volatile state of the cryptocurrency mining sector in an increasingly volatile market.