LIMESTONE, Tenn. (WJHL) — The owner of a Limestone Bitcoin mine — who along with BrightRidge is being sued by Washington County — owes its creditors $57.4 million and no longer has guaranteed access to additional funds from them.
GRIID, the parent company of Bitcoin mine operator Red Dog Technologies, entered an amended agreement with Blockchain Access UK Limited on Oct. 9, four months after Blockchain declared GRIID had defaulted on its line of credit.
The new “restructured senior secured term loan” puts the lender first in line for GRIID’s assets — including, presumably, the $10 million-plus worth of Bitcoin mining equipment in Limestone — if the company becomes insolvent. It also states that “Blockchain does not have any commitment 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 by a “Special Purpose Acquisition Company,” or SPAC, that has been planning to merge with GRIID in order to take GRIID public.
The same filing also notes that if the merger doesn’t occur and GRIID hasn’t 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 until mid-2023 when a merger and initial public offering (IPO) of stock could occur.
That amended agreement limits GRIID’s ability to borrow more than $1 million from any lender other than Blockchain Access UK, leaving GRIID with seemingly few options other than the money it makes mining Bitcoin. A local economist said the SEC filings point to a company in financial straits.
“The language in the disclosures could certainly indicate some financial trouble for GRIID,” Milligan University professor David Campbell said.
“While restructuring debt into a term structure by itself might be simply a move to lock in a rate before they go higher, the fact that it comes along with warnings about the profitability of Bitcoin mining and contingencies being laid out by its SPAC suitor suggests the long run viability of the company is in question.”
Indeed, one of the “whereas” segments in the amended IPO agreement appears to cut to the heart of the matter: “WHEREAS, the market price of Bitcoin has dropped significantly since the Effective Date, causing margins for Bitcoin mining enterprises to shrink.”
When the Limestone mine went fully operational in early 2021, Bitcoin’s trading price was over $50,000. It briefly fell into the $30,000s in June and July 2021, then shot back up above $40,000 and generally stayed between $40,000 and $60,000 from late July 2021 through April of this year. But from May 4, when it was over $39,000, to June 16 it dropped by roughly half and has stayed 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 their lawsuit against GRIID and BrightRidge. The parties had earlier agreed to a set of terms, but commissioners later learned a final settlement version still needed to be drafted and approved.
BrightRidge is involved because it leased property next to its Bailey Bridge Road substation for the mine, sells GRIID power for its operations there, and was the party that asked for and got 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” that operates adjacent to a BrightRidge substation in the rural New Salem community. The suit calls for a mine shutdown and claims it violates the county’s zoning laws.
The suit was filed in November 2021, about two months after the county demanded that BrightRidge shut down the mine. The utility said the county’s issue was with Red Dog, not BrightRidge.
Bitcoin mines are a type of blockchain data center that use powerful computer equipment to process extremely complex computations 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 spring 2021 and quickly drew complaints from nearby residents.
Blockchain LLC’s initial default letter to GRIID came June 9 of this year, the same day the company’s CEO, Trey Kelly, faced commissioners and county residents and told them the company would build a new, quieter operation in the Washington County Industrial Park. An initial agreement to that 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 result in the mine’s relocation to the Washington County Industrial Park, but they soon learned the details would require another vote.
Those details included a pledge that any new mine would be governed by decibel limits and that repeated violation of the noise limits could result in its shutdown. GRIID CEO Trey Kelly also said the new equipment that would go in would likely be much quieter.
Even so, some residents who live near the industrial park quickly mounted a campaign opposing the prospect of a mine near them and have continued to keep the matter alive even through delays in the settlement talks.
Any proposed settlement would be reviewed initially 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 mine in Limestone continues to operate.