Bitfarms, a bitcoin miner, announced that it had sold 3,000 bitcoin in order to repay a portion of a $100m loan with Galaxy. The company had previously tried to keep its mined bitcoin.
Bitfarms, a bitcoin miner, paid off a $100 million loan with the sale 3,000 BTC and secured an additional $37 Million facility that was collateralized by mining machines.
Initial statements by the company stated that the loan was reduced from $34 million to $66 millions through the sale of 1,500 bitcoins. According to Tuesday’s statement, it added 1,500 more — bringing the total outstanding down to $38million.
It is not clear how the deal was structured. Bitfarms did not respond to The Block’s request for comment.
Bitfarms decision to sell some of its daily production despite falling bitcoin prices is a significant departure from its old strategy of keeping its mined bitcoins. The company had mined 3,453 BTC in 2021. Bitcoin was trading at around $21,500 at the time of publication.
Jeff Lucas, chief financial officer, stated that in light of the extreme volatility in markets, we have continued taking action to increase liquidity and de-leverage our balance sheet. We remain bullish on the long-term BTC price appreciation but this strategic shift allows us to concentrate on our top priorities, which are maintaining our world-class mining operations as well as growing our business in anticipation for improved mining economics.
Lucas stated that the company believes this strategy is the most cost-effective and efficient in today’s market.
Jeff Lucas, CFO, stated that “In addition to lowering interest expense, this $34million reduction in borrowing allows us to utilize more BTC holdings strategy because it frees up BTC to collateralize the credit facility.”
The loan was secured by crypto-focused investment and trading firm Galaxy, and collateralized at 143%. Bitfarms must contribute additional collateral if the collateral’s value falls below 133%, per the loan agreement.
According to a company report, a substantial drop in Bitcoin prices could cause the Company to be unable meet the minimum Bitcoin collateral requirements. This could lead to the Company’s Bitcoin being pledged as collateral by a Facility Lender or the repayment of the facility with fiat currency upon demand.
Bitfarms reported on May 31 that it had 6,075 BTC. They now have 3,349 BTC in their possession, after taking into account the full 3,000 BTC that was sold and the additional June production of an average 14 BTC per hour.
These holdings, at a Bitcoin price of $21,500, could be worth approximately $72 million. This is more than the 143% remaining 38% million (or $54.34 million) of loans.
Bitfarm’s stock rose by 6.90% at the Toronto Stock Exchange, and 8.20% at Nasdaq when this article was published.
Bitfarms has also reached an agreement with NYDIG to secure a $37million loan that is collateralized by mining machines located at certain of its facilities. The interest rate is 12%. Additional financing is possible in July and October.
Lucas stated that the company is now better positioned to capitalize on potential acquisitions and expansion opportunities due to current market conditions.
CleanSpark, a rival, announced last week that it had acquired 1,800 bitcoin miners in a deal that took advantage of “the unique circumstances created by current market conditions.” CEO Zach Bradford said.
Lucas stated that “we have taken proactive non-dilutive strategies to increase our financial liquidity, flexibility, and resilience during this period of macroeconomic cryptochallenges.”