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

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

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

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

That information is in an Oct. 19 Securities and Exchange Commission (SEC) filing from a “Special Purpose Acquisition Company,” or SPAC, that has planned to merge with GRIID to take GRIID public.

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

The amended agreement limits GRIID’s ability to borrow more than $1 million from lenders other than Blockchain Access UK, apparently leaving GRIID with few options other than the money it earns from mining Bitcoin. A local economist said the SEC filings point to a company in financial trouble.

“The language of the disclosures could certainly indicate some financial problems for GRIID,” said Milligan University professor David Campbell.

“While debt restructuring into a term structure itself may simply be a move to lock in interest rates before they go higher, the fact that it comes with caveats about the profitability of Bitcoin mining and contingencies suggests that out of the SPAC suit. long-term viability of the company is in doubt.”

In fact, one of the “while” segments in the amended IPO seems to cut to the heart of the matter: “WHERE, the market price of Bitcoin has declined significantly since the Effective Date, causing margins for Bitcoin miners to shrink.”

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

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

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

The news comes as Washington County Commissioners await a final settlement proposal in the 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 adjacent to the Bailey Bridge Road substation for the mine, sells GRIID power to operations there, and was the party that requested and received a rezoning in February 2020 for what BrightRidge called a “blockchain data center.”

Washington County sued BrightRidge and Red Dog Technologies over the noisy “mine” operating next to a BrightRidge substation in the rural New Salem community. The suit demands a closure of the mine and claims it violates the county’s zoning laws.

The suit was filed in November 2021, about two months after the county required BrightRidge to shut down 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 transactions of the cryptocurrency. Fans that cool the computer 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 first standard letter to GRIID came on June 9 of this year, the same day the company’s CEO, Trey Kelly, met with county commissioners and residents and told them the company would build a new, quieter facility in the Washington County Industrial Park. An initial agreement to this effect approved by the commission has not been finalized and will require another vote to become official.

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

These details included a promise that any new mine would be regulated by decibel limits and that repeated breaches of noise limits could lead to its closure. GRIID CEO Trey Kelly also said the new equipment that will go in is likely to be much quieter.

Still, some residents living near the industrial park quickly launched a campaign opposing the prospect of a mine near them and have continued to keep the issue alive even through delays in settlement negotiations.

Any proposed settlement will initially be reviewed by the Commission’s Commercial, Industrial and Agriculture (CIA) Committee. The five-member committee could vote for or against the agreement, but even if those members opposed approving it, the proposal could still come to a full commission vote.

Meanwhile, the Limestone mine continues to operate.