Celsius Network, a distressed digital asset lender, has unveiled its strategy to commence the repayment of outstanding debts to creditors using a substantial amount of cryptocurrency assets before the end of the current year. This strategic move is detailed in a recent submission to a US bankruptcy court, outlining a comprehensive restructuring plan designed to generate funds for a newly proposed corporate entity called “NewCo” and facilitate the reimbursement of customers.
Celsius’s Commitment to Clearing $2 Billion Debt
According to the submission, the plan charts a course for the distribution of no less than $2.03 billion in cryptocurrency to creditors, with the actual amount contingent upon fluctuations in the cryptocurrency market. This distribution is set to take place as soon as is practically feasible, following the successful implementation of the plan, either through the NewCo transaction or a methodical winding down process. The NewCo transaction, supported by the Fahrenheit Group, is a pivotal element of this plan.
The NewCo initiative entails the establishment of a fresh cryptocurrency enterprise that will be customer-owned and will primarily focus on Bitcoin mining and staking. NewCo, with aspirations to enhance liquidity by securing a listing on NASDAQ, will be overseen by proficient crypto-native experts from Fahrenheit. To align interests, Fahrenheit has committed to investing up to $50 million as an equity stake in NewCo, granting creditors ownership stakes in the newly formed entity.
In the event that the NewCo transaction encounters obstacles and cannot proceed, the plan includes a systematic winding-down alternative that would offer creditors superior recoveries compared to a Chapter 7 liquidation.
Celsius’s legal representative, Christopher S. Koenig, also disclosed that the revamped company, expected to emerge from Chapter 11 proceedings, is poised to receive a capital injection and financial backing totaling $450 million. However, the primary focus remains on the successful execution of the NewCo transaction, a development that would signify a significant milestone as the first revival of a troubled crypto platform under Chapter 11, following a series of insolvencies in the industry the previous year.
While Judge Martin Glenn deliberates the approval of Celsius’s plan, certain customers who have faced difficulties accessing their funds have voiced their dissent. Additionally, an affiliate of Lantern Ventures, owed approximately $82 million, has challenged the plan, citing an overvaluation of the new venture by advisors working with Celsius. Furthermore, regulatory clearance from securities authorities will be imperative for the new endeavor.
It is imperative to acknowledge that should the new venture falter, the prospect of liquidation could arise, potentially resulting in reduced reimbursements for customers. Nevertheless, Celsius Network’s proposed plan represents a substantial endeavor to honor its obligations to creditors and potentially rejuvenate the company, offering optimism for both the cryptocurrency sector and those affected by this situation.
At present, Celsius Network’s native token, CEL, is trading at $0.1535, reflecting a 1.1% decline over the past 24 hours. Notably, the token has witnessed a significant upward trajectory in the last 30 days, displaying a substantial surge of more than 21% during this period.