Bitcoin miner at center of lawsuit now in debt of $57 million, borrowing options dwindle | WJHL

LIMESTONE, Tenn. (WJHL) – The owner of a Limestone Bitcoin mine – which, along with BrightRidge, is being sued by Washington County – owes creditors $57.4 million and has no longer guaranteed access to additional funds from their part.

GRIID, the parent company of Bitcoin mine operator Red Dog Technologies, entered into an amended agreement with Blockchain Access UK Limited on October 9, four months after Blockchain said GRIID defaulted on its line of credit.

The new “restructured senior secured term loan” puts the lender first in line for GRIID’s assets — including, presumably, the more than $10 million worth of Bitcoin mining equipment at Limestone — should the company become insolvent. It also states that “Blockchain has no commitment to extend additional credit to GRIID under either the Prior Credit Agreement or the New Credit Agreement.”

This information is in an October 19 filing with the Securities and Exchange Commission (SEC) by a “special purpose acquisition company,” or SPAC, which was considering merging with GRIID in order to take GRIID public.

Tim Hylton of Limestone, Tenn. stands on his property with a bitcoin mine behind him. The mine is at the center of a lawsuit between Washington County, mine owner GRIID and BrightRidge, the local utility that leases land to GRIID and sells power from the mine. (Photo WJHL)

The same filing also notes that if the merger does not occur and GRIID has failed to meet any of several requirements, GRIID will owe SPAC, called Adit Edtech, $50 million. Adit Edtech’s board of directors is being asked to approve an amended merger agreement that will run until mid-2023, when a merger and initial public offering (IPO) of shares could take place.

This amended agreement limits GRIID’s ability to borrow more than $1 million from any lender other than Blockchain Access UK, leaving GRIID with seemingly few options other than the money it makes mining Bitcoin. A local economist said documents filed with the SEC point to a company in financial trouble.

“The language used in the disclosures could certainly indicate financial problems for GRIID,” said David Campbell, a professor at Milligan University.

“While restructuring debt into a term structure in itself may simply be a decision to lock in a rate before it rises, the fact that it comes with warnings about the profitability of mining of Bitcoin and the contingencies planned by its suitor SPAC suggests the long-term viability of the company is in question.

Indeed, one of the “considering” segments of the Amended IPO Agreement seems to cut right to the heart of the matter: “WHEREAS, the market price of Bitcoin has fallen significantly since the Effective Date , leading to lower margins for bitcoin mining companies. »

When the Limestone mine became fully operational in early 2021, Bitcoin’s trading price was above $50,000. It briefly dipped into the $30,000s in June and July 2021, then climbed back above $40,000 and generally stayed between $40,000 and $60,000 from late July 2021 to April this year. But from May 4, when it topped $39,000, to June 16, it fell by about half and has remained in a tight range between $19,000 and $21,000 ever since.

Milligan’s Campbell said the tea leaves didn’t look good.

“As the Fed continues to push interest rates higher, the financial environment will continue to make it harder for GRIID to survive,” he said.

The news comes as Washington County commissioners await a final settlement proposal in their lawsuit against GRIID and BrightRidge. The parties had previously agreed to a set of terms, but commissioners later learned that a final version of the settlement still needed to be drafted and approved.

BrightRidge is involved because it leased property next to its Bailey Bridge Road substation for the mine, sells GRIID power for its operations there, and is the party that applied for and was granted rezoning in February 2020 for what BrightRidge called a “blockchain data center”. ”

Washington County sued BrightRidge and Red Dog Technologies over the noisy “mine” that operates next to a BrightRidge substation in the rural community of New Salem. The lawsuit calls for the mine to be closed and says it violates county zoning laws.

The complaint was filed in November 2021, about two months after the county demanded that BrightRidge close the mine. The utility said the county’s problem was with Red Dog, not BrightRidge.

Bitcoin mines are a type of blockchain data center that uses powerful computing equipment to process extremely complex calculations so that new Bitcoins can be “mined” and to validate cryptocurrency transactions. Fans that cool IT equipment can create high noise levels – and have in the case of the Limestone mine, which reached full operation in the spring of 2021 and quickly drew complaints from nearby residents.

Blockchain LLC’s default initial letter to GRIID came on June 9 of this year, the same day the company’s CEO, Trey Kelly, faced commissioners and county residents and told them that the company would build a new, quieter operation in the Washington County Industrial Park. A first agreement in this sense approved by the committee has not been finalized and will require another vote to become official.

County commissioners approved a settlement agreement on June 9 that would see the mine moved to the Washington County Industrial Park, but quickly learned the details would require another vote.

People protest the potential relocation of a Bitcoin mine to the Washington County Industrial Park ahead of the July 25 meeting of the Washington County Commission in Tennessee. (Photo WJHL)

These details included a commitment that any new mine would be governed by decibel limits and that repeated violation of noise limits could result in its closure. GRIID CEO Trey Kelly also said the new gear coming in would likely be much quieter.

Even so, some residents who live near the industrial park were quick to mount a campaign against the prospect of a mine near them and have continued to keep the case alive despite delays in settlement talks.

Any proposed regulations would initially be reviewed by the commission’s Trade, Industry and Agriculture (CIA) committee. The five-member committee could vote for or against the deal, but even if those members objected to its approval, the proposal could still be put to a full committee vote.

Meanwhile, the Limestone mine continues to operate.

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