Bitcoin Miner Stronghold Digital Significantly Restructures Debt

Stronghold Digital Mining (SDIG) said Tuesday it had negotiated with its lenders to dramatically restructure its financing agreements to eliminate more than half of its total debt and associated interest and principal payments.

In a notice to the U.S. Securities and Exchange Commission earlier on Tuesday explaining that the negotiations were the reason it had delayed reporting its second-quarter results three times over the last few days, Stronghold said the debt restructuring and refinancing agreements were necessary "for the Company to be able to continue as a going concern for at least the next 12 months."

The restructuring consists of returning roughly 26,200 miners to NYDIG to eliminate $67.4 million in equipment financing agreements, restructuring and expanding its financing agreements with Whitehawk Finance, and amending its May 2022 convertible notes and warrants.

"Collectively, the NYDIG, WhiteHawk, and Convertible Notes and Warrants restructurings (i) reduce principal amount outstanding by approximately $79 million (approximately 55% of total principal amount outstanding as of June 30, 2022), (ii) reduce cash interest and principal payments through year-end 2023 by approximately $113 million, and (iii) improve Stronghold’s forecasted cash flow by approximately $40 million through year-end 2023 through a reduction in interest and principal payments and monetization of the power capacity formerly dedicated to miners," the company wrote in a press release.

Shares in Stronghold Digital were down almost 11% during the day, and were down another 6% after-hours following the release of details of the restructuring. Publicly traded miners have been battered by the bitcoin bear market, with their shares falling more than 60% on average this year. Stronghold has done even worse, its shares dropping more than 70%. And the group has done even worse than bitcoin itself, which has lost less than half of its value.

A summary of Stronghold's restructuring moves from its Q2 analyst call.

Stronghold reported revenues of $29.2 million for the second quarter, below the consensus analyst estimate of $30.3 million, according to FactSet. It also reported a net loss of $40.2 million for the quarter, compared to a net loss of $3.2 million in the second quarter of 2021, with the increase driven primarily by a rise in expenses and impairments on its bitcoin holdings, the company said.

UPDATE (Aug. 16, 2022 18:08 UTC): Added additional quote from Stronghold and information about miners' stock declines.

UPDATE (Aug. 16, 18:19 UTC): Added information about Stronghold's second-quarter results.

UPDATE (Aug. 16, 21:14 UTC): Updated headline and added new information throughout.