Compute North bankruptcy case: CFO declares the cause of filing bankruptcy

Crypto winter among other reasons for initiating chapter 11 proceedings
‘Change’ in relationship with Generate Capital, its largest creditor
The company will continue operations after Friday’s hearings

Compute North initiated Chapter 11 proceedings in a Texas court this Thursday. The filing facilitates bankruptcy protection. The mining hosting company owes an estimated $500 million to 200 creditors.

Yesterday, court orders were being given approvals for carrying out routine operations like paying wages, and insurance concerns, Compute North counsel filed a declaration from the Chief Financial Officer (CFO) Harold Coulby that throws light on key events preceding the bankruptcy filing.

Coulby stated in the declaration: “From the supply chain and inventory issues to the dislocation in the capital and cryptocurrency markets, Compute North has been unable to maintain sufficient liquidity to bring planned projects in development online and pay all of its obligations on a current basis”

Generate Capital’s $300 million agreement

Compute North provides the facility (commercial space), maintenance services, and power supply for companies that want to mine cryptocurrency. Essentially, the company takes care of all the logistical and computational (hardware) work that goes into mining crypto. All this requires capital. In a series of funding rounds, multiple investors have pumped in millions of dollars into the Minnesota-headquartered company since 2021. This February, Generate Capital became the company’s largest creditor with an investment of $300 million in an agreement. Via this agreement, the investment firm bought 1% in preferred equity; it reserved the right to refuse to fund new developments or projects; and also reserved the right to appoint a director among the Holdings’ board of directors.

Coulby stated that, in July, Generate Capital invoked the terms of their agreement in order to prevent itself from getting involved as a debtor in the bankruptcy filing. And as a result, now, Compute owes a little over $100 million to Generate Capital.

This development, coupled with a bearish crypto market led to the company filing for bankruptcy. Compute could not finance active data mining sites because of Generate’s move. Compute tried selling off assets and even tried to negotiate with Generate. However, Coulby said “None of these sale or financing transactions were able to be consummated within the time frame available to Compute North to effectuate an out-of-court restructuring,”

The way ahead

Coulby also declared that “Compute North expects to effectuate either a reorganization of its business resulting in a scaled-down organization focusing on ownership and project management of certain facilities (as defined below) or a sale of Compute North’s facilities as a going concern,”

The company is using its reserve cash to pay for legal proceedings, which according to Coulby is ‘extremely limited.’

The next motion, which is to file the creditor’s list regarding the company’s liquidity management, is on September 26. Further hearings will be held on October 11th and October 24th.