Digital Currency Group and Genesis could break up on debt repayment plans

Withdrawal from provisional agreement on reorganization plan

Crypto asset (virtual currency) conglomerate Digital Currency Group (DCG) reported today that some creditors have pulled out of a tentative agreement to reorganize its lending arm subsidiary Genesis Capital.

DCG Statement on Genesis filing Motion for Mediation: pic.twitter.com/pRluUnL49C

— Digital Currency Group (@DCGco) April 25, 2023

If the restructuring plan is not approved, DCG’s debts to Genesis will be due in May 2023 and DCG could face a forced sale of its GBTC and other assets.

DCG is therefore requesting a new court to appoint an intermediary in bankruptcy proceedings. This move indicates the intention of the DCG side to proceed with the readjustment toward the approval of the reorganization plan.

connection:DCG and Genesis Agree with Creditor Group on Debt Consolidation, etc.

The reorganization plan, which was agreed in February, is a reorganization presented to Genesis creditors by Genesis and its parent company DCG, which filed for bankruptcy under Chapter 11 (Chapter 11) in January. plan.

The plan involves deferring approximately ¥80 billion ($575 million) of debt owed by DCG to Genesis through loan refinancing through June 2024 and either selling Genesis or transferring its shares to creditors. was.

As of January, DCG had debts to Genesis of “approximately ¥60 billion (approximately $450 million) and 4,550 BTC (equivalent to approximately ¥10 billion (approximately $78 million)), with maturity of 23 years. It was revealed by DCG that it will be in May. DCG reportedly used these funds to buy back its own shares, as well as invest in cryptocurrencies and buy GBTC on the public market.

connection:DCG CEO Explains Business-to-Business Loan with Genesis

As long as the reorganization plan was in place, DCG was able to avoid the forced sale of its assets and ease its cash flow problems. In the meantime, DCG attempted to sell Genesis, hoping to use the proceeds to pay off Genesis Capital’s $340 million debt to its creditors.

Is it difficult to raise funds?

Now DCG is willing to raise money to pay off its debt, according to Ram Ahluwalia, CEO of analytics firm PeerIQ. However, it is difficult to raise new funds in time.

DCG is known to have had only ¥35 billion ($262 million) in cash at the end of 2022. In addition, since there is no evidence of the sale of the investee portfolio or the use of DCG subsidiary investment company Grayscale Investments, virtual currency media CoinDesk, foundry, the largest bitcoin mining company in the United States, etc. It is suggested that they are looking for another solution.

In August 2022, DCG pledged about 63 billion yen ($465 million) worth of GBTC to yield service Gemini Earn as collateral, about half of which has already been liquidated by Gemini. The other half has gone up in price, but even if DCG were to sell them, it would be $300-400 million short of debt repayment to Genesis.

12/ Nevertheless, the immediate focus is on the here and now.

Add May 11th to your calendars.

That is when the 4,500 bitcoin loan is due to Genesis. That’s $135 MM assuming BTC is at $30K.

— Ram Ahluwalia, higher for longer crypto CFA (@ramahluwalia) April 26, 2023

According to Ahluwalia, the immediate focus will be on May 11, when Genesis’ 4,500 BTC loan expires. If the BTC price was $30,000 (4 million yen), it would be equivalent to $135 million (18 billion yen). This amount of debt will be further expanded by the rise in the price of Bitcoin.

Source: YChart

There is concern that DCG’s assets may be liquidated due to the default risk of the loan agreement. It’s unclear how much of the venture capital stocks, GBTC, and other token investments will include illiquid and illiquid assets.

Due to these uncertainties, the discount rate of the Bitcoin Investment Trust (GBTC), which had recovered to -35%, has fallen again to -40%.

connection:Crypto Lending Firm Genesis Files For Bankruptcy With Gemini, Van Eck And Other Creditors

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