Bitcoin (BTC) mining company Bitfarms has announced plans to modify its existing loan agreement with BlockFi – a move the company says will reduce its debt during the bear market.
On January 13, Bitfarm announced that it was working with lenders to modify the 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 is secured against BMS’s existing assets, including miners and a certain percentage of BTC produced by the mining rig.
When BMS received the loan facility, Bitcoin was trading north of $40,000. The value of the flagship digital asset began to fall below $20,000, reaching less than $15,600 in November, according to data from Cointelegraph Markets Pro and TradingView.
As a result of the bear market, the assets securing BMS’s loans have declined to about $5 million, while the outstanding principal and interest is about $20 million.
Bitfarms “determined that it would be better to seek better terms from BlockFi and potentially take other steps to reduce BMS’s obligations,” the company said.
Jeff Lucas, chief financial officer of Bitfarms, further explained:
“Given the current challenging market conditions, we are seeking to modify the Washington state debt facility to obtain terms that are more in line with our market outlook and business strategy.”
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Bitfarms and its subsidiaries have $36 million in unrestricted crypto assets with $47 million in debt, including $20 million in BlockFi debt. In an effort to reduce costs, the company has increased operational efficiency by using new miners.
️ Ben Gagnon, Chief Mining Officer: “In December, we deployed a new miner and underclocked the cheapest miner. This increased efficiency by 15%, resulting in a reduction in power consumption of almost 4 MW and representing significant cost savings.”#BITF #BTC pic.twitter.com/YR5dUtBa54
– Bitfarms (@Bitfarms_io) January 10, 2023
BlockFi ran into difficulties of its own after filing for Chapter 11 bankruptcy in November. Bitcoin lenders are closing their doors after crypto exchange FTX – a savior when the Terra ecosystem collapsed – is out of danger.
FTX’s fall continues to rock 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.