Core Scientific Strengthens Balance Sheet and Supports Growth Plans with Proceeds from Recent Convertible Notes Offering

Rhea-AI Summary

Core Scientific (NASDAQ: CORZ) has significantly strengthened its financial position by repaying $267 million in debt using proceeds from its recent convertible senior notes offering. The company has:

1. Reduced interest rates from approximately 12.5% to 3%
2. Removed restrictive covenants on certain notes
3. Increased cash on hand by $172.8 million after all payments

This strategic move provides Core Scientific with greater financial flexibility to invest in site acquisitions for high-performance computing (HPC) hosting growth and strengthen its bitcoin mining operations. CEO Adam Sullivan emphasized that this transaction is a key step in positioning the company for future growth and creating shareholder value.

Positive

• Repaid $267 million in high-interest debt
• Reduced interest rates from 12.5% to 3%
• Increased cash on hand by $172.8 million
• Removed restrictive covenants on certain notes
• Gained financial flexibility for growth initiatives

Negative

• Issued new convertible senior notes, potentially diluting existing shareholders

Insights

Financial Analyst

This debt refinancing move by Core Scientific is a significant positive for the company's financial health. By replacing high-interest debt (12.5%) with lower-cost convertible notes (3%), they've substantially reduced their interest burden. This should improve cash flow and profitability in the near term.

The $172.8 million increase in cash provides Core Scientific with a robust war chest for expansion, particularly in high-performance computing (HPC) hosting. This diversification could help mitigate risks associated with bitcoin mining volatility. However, investors should monitor how effectively this capital is deployed and its impact on future revenue growth.

The removal of restrictive covenants is another plus, giving management more operational flexibility. Overall, this refinancing strengthens Core Scientific's balance sheet and positions them for potential growth, but execution will be key to realizing these benefits.

Tech Expert

Core Scientific's strategic focus on expanding their HPC hosting capacity is a smart move in the evolving digital infrastructure landscape. As demand for high-performance computing grows across industries like AI, machine learning and big data analytics, this diversification could provide a more stable revenue stream compared to the volatile bitcoin mining sector.

The increased financial flexibility from this refinancing could allow Core Scientific to invest in cutting-edge technologies and infrastructure, potentially giving them a competitive edge in the HPC hosting market. However, this space is becoming increasingly crowded, so the company will need to differentiate itself through superior technology, energy efficiency, or specialized services to capture market share.

Investors should keep an eye on Core Scientific's technological developments and partnerships in the HPC sector as indicators of their growth potential in this area.

Market Research Analyst

Core Scientific's debt restructuring and cash infusion come at a crucial time in the bitcoin mining industry. With the upcoming bitcoin halving event expected in 2024, miners are under pressure to optimize operations and reduce costs. This refinancing gives Core Scientific a competitive advantage, allowing them to invest in efficiency improvements and expand capacity when many competitors may be struggling.

The company's pivot towards HPC hosting is also strategically sound. The global HPC market is projected to grow at a CAGR of 5.5% from 2021 to 2026, reaching $49.4 billion. By diversifying into this sector, Core Scientific is positioning itself to capture a share of this growing market while hedging against bitcoin mining uncertainties.

However, investors should monitor the company's execution in both sectors. Success will depend on effectively balancing resources between bitcoin mining optimization and HPC expansion, as well as navigating potential regulatory challenges in the crypto space.

• Repays $267 million in debt, reducing interest rate from approximately 12.5% to 3%
• Removes restrictive covenants associated with certain notes
• Increases cash on hand to fund site acquisitions for HPC hosting growth

AUSTIN, Texas--(BUSINESS WIRE)-- Core Scientific, Inc. (NASDAQ: CORZ) (“Core Scientific” or the “Company”), a leader in digital infrastructure for bitcoin mining and high-performance computing, today announced it has repaid a total of $267 million in debt with proceeds from its offering of convertible senior notes first announced on August 13, 2024, which closed on August 19, 2024.

The Company repaid $150 million in secured notes, $61 million in an exit facility and $56 million in miner equipment loans, in addition to interest and other fees. Interest rates on the prior borrowings were as high as 12.5% as compared to 3% for the new convertible notes. Net proceeds from the offering after all payments (including commissions and estimated offering expenses) totaled $172.8 million, significantly increasing cash on hand available for site acquisition and other growth initiatives.

“Our recent convertible note issue represents another key step in our commitment to strengthen our balance sheet and position Core Scientific for future growth,” said Adam Sullivan, Core Scientific’s Chief Executive Officer. “With this transaction completed, we are moving forward with additional financial flexibility to invest in the continued expansion of our HPC hosting capacity while strengthening our bitcoin mining business. We will continue to take steps to bolster our financial foundation as we execute our growth strategy to create value for our shareholders.”

About Core Scientific

Core Scientific is a leader in digital infrastructure for bitcoin mining and high-performance computing. We operate dedicated, purpose-built facilities for digital asset mining and are a premier provider of digital infrastructure, software solutions and services to our third-party customers. We employ our own large fleet of computers (“miners”) to earn bitcoin for our own account and provide hosting services for large bitcoin mining and high-performance computing customers at our eight operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (3). We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”).

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “intend,” “will,” “expect,” “anticipate” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements include, but are not limited to, statements regarding the use of the proceeds from the offering of convertible senior notes to expand our HPC hosting business and strengthen our bitcoin mining business and Core Scientific’s ability to create significant shareholder value. Forward-looking statements represent Core Scientific’s current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions, including market interest rates, the trading price and volatility of Core Scientific’s common stock and risks relating to Core Scientific’s business, including those described in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”).

These statements are provided for illustrative purposes only and are based on various assumptions, whether or not identified in this press release, and on the current expectations of the Company’s management. These forward-looking statements are not intended to serve, and must not be relied on by any investor, as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company. These forward-looking statements are subject to a number of risks and uncertainties, including those identified in the Company’s reports filed with the SEC, and if any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Accordingly, undue reliance should not be placed upon the forward-looking statements. The Company does not assume any duty or obligation (and does not undertake) to update or supplement any forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240820992654/en/

Investors:

ir@corescientific.com

Media:

press@corescientific.com

Source: Core Scientific, Inc.

FAQ

How much debt did Core Scientific (CORZ) repay in August 2024?

Core Scientific repaid a total of $267 million in debt using proceeds from its convertible senior notes offering in August 2024.

What was the interest rate reduction for Core Scientific (CORZ) after repaying its debt?

Core Scientific reduced its interest rates from approximately 12.5% on the prior borrowings to 3% on the new convertible notes.

How much additional cash did Core Scientific (CORZ) gain from the convertible notes offering?

After all payments, Core Scientific increased its cash on hand by $172.8 million from the convertible notes offering.

What are Core Scientific's (CORZ) plans for the additional cash from the convertible notes offering?

Core Scientific plans to use the additional cash for site acquisitions to expand its HPC hosting capacity and strengthen its bitcoin mining business.