On Jan. 13, Bitfarm disclosed that it is working with creditors to modify a loan agreement for Backbone Mining Solutions, or BMS, which owns and operates Bitfarms’ 20-megawatt mining facility in Washington state. BMS received a $32 million equipment financing loan from Bitcoin lender BlockFi in February 2022. The loan was secured against existing BMS assets, including its miners and a certain percentage of BTC produced by its mining rigs.
When BMS received the loan facility, Bitcoin was trading north of $40,000. The value of the flagship digital asset has since plunged below $20,000, reaching a low of around $15,600 in November, according to data from Cointelegraph Markets Pro and TradingView.
As a result of the bear market, the assets securing BMS’ loan have fallen to around $5 million, while the outstanding principal and interest are roughly $20 million.
Bitfarms “determined that it would be advisable to seek more favorable terms from BlockFi and potentially take other steps to reduce the BMS obligations,” the company said.
Jeff Lucas, Bitfarms’ chief financial officer, further explained:
“Considering today’s challenging market conditions, we are seeking to modify our Washington state debt facility to achieve terms that are better aligned with the market outlook and our business strategy.”
Bitfarms and its subsidiaries hold roughly $36 million worth of unencumbered crypto assets against approximately $47 million worth of debt, which includes the $20 million BlockFi loan. In an effort to cut costs, the company has increased operational efficiency by deploying new miners.
️ Ben Gagnon, Chief Mining Officer: “In December, we deployed new miners and underclocked our least cost-efficient miners. This improved their efficiency by 15%, resulting in a reduction of nearly 4 MW of power consumption and representing substantial cost savings.”#BITF #BTC pic.twitter.com/YR5dUtBa54
— Bitfarms (@Bitfarms_io) January 10, 2023
BlockFi is having difficulties of its own after filing for Chapter 11 bankruptcy in November. The Bitcoin lender shuttered its doors after crypto exchange FTX — its savior during the Terra ecosystem collapse — imploded with little warning.
The fallout of the FTX collapse continues to reverberate across the market. The exchange’s former CEO, Sam Bankman-Fried, faces eight criminal charges and up to 115 years in prison for his alleged role in defrauding investors.