It appears that a gamble by Bitfarms Ltd (TSX: BITF) to default on its debt as a means of renegotiating a loan has paid off handsomely for the company.
In mid-January, the firm indicated via press release that it was considering defaulting on a loan between Backbone Mining Solutions, a subsidiary of the Bitfarms, and that of BlockFi Lending. The debt was related to a $32 million equipment financing facility, with the value of the security significantly underwater as a result of the equipment depreciating so quickly.
Bitfarms at the time said the equipment was worth roughly just $5.0 million, resulting in a loan to value of over 400%.
With $21 million in debt remaining, which was secured just by the equipment that debt purchased and some of the related bitcoin, Bitfarms debated taking a gamble by defaulting on the debt to force renegotiations. That gamble evidently worked, with the company this morning revealing that its $21 million debt obligation was reduced down to $7.75 million, which is to be paid via a single cash payment.
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That payment was reportedly made on February 8, with its assets under the Backbone Mining Solutions subsidiary now unencumbered.
READ: Bitfarms Sees Flat Bitcoin Production In January As Debt Paydown Continues
“Lowering our debt nearly 85% from a high of $165 million in June 2022 to $25 million today has significantly decreased principal and interest obligations, which boosts our cash flow and positions us well for future growth,” commented CFO Jeff Lucas.
The company as a result of the settlement expects to be debt free before February 2024.
Bitfarms last traded at $1.43 on the TSX.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
