Celsius Network, a distressed digital asset lender, has unveiled its strategy to initiate repayments to its creditors by the end of this year, utilizing substantial crypto assets. The company has proposed a restructuring plan, detailed in a recent submission to a U.S. bankruptcy court, with the goal of raising funds for a newly formed corporate entity called “NewCo” and expediting customer reimbursements.
Celsius Commits to Eliminating $2 Billion in Debt
As per the submission, the plan outlines the distribution of a minimum of $2.03 billion worth of cryptocurrencies to creditors, with the actual amount subject to fluctuations in the cryptocurrency market.
The distribution is set to take place promptly once the plan gains effectiveness, either through the NewCo transaction or a well-organized winding-down process. The NewCo transaction, backed by the Fahrenheit Group, stands as a pivotal element of this strategy.
This transaction entails the establishment of a novel cryptocurrency enterprise owned by customers, with a primary focus on Bitcoin mining and staking. NewCo, with the aim of optimizing liquidity by securing a listing on NASDAQ, will be overseen by seasoned cryptocurrency experts from Fahrenheit.
The Fahrenheit Group has pledged to inject as much as $50 million as an equity investment in NewCo, thereby aligning the interests of Fahrenheit with those of the creditors who will hold shares in this fresh venture.
In case the NewCo transaction encounters hurdles and cannot be executed, the plan incorporates a systematic winding-down option. This alternative is designed to offer creditors more favorable recoveries compared to a Chapter 7 liquidation.
Christopher S. Koenig, the legal representative of Celsius, also disclosed that the restructured entity, expected to emerge from Chapter 11 proceedings, is poised to receive substantial financial backing, totaling $450 million.
Nonetheless, the primary focus remains on the successful execution of the NewCo transaction. Its success would signify a significant milestone, as it would mark the first revival of a previously failed cryptocurrency platform under Chapter 11, a noteworthy development in light of the cryptocurrency industry’s wave of insolvencies last year.
As Judge Martin Glenn considers the approval of Celsius’s plan, there are customers who have faced difficulties accessing their funds and have voiced their opposition to the plan.
Furthermore, an affiliate of Lantern Ventures, which is owed approximately $82 million, has contested the plan, alleging that Celsius’s advisors have overvalued the new business. Additionally, the new venture will require clearance from securities regulators.
It’s crucial to emphasize that in the event of a failure of the new company, liquidation may become a viable option, which could potentially lead to reduced repayments for customers.
Nevertheless, Celsius Network’s proposed plan signifies a substantial endeavor aimed at repaying creditors and potentially revitalizing the company. This initiative offers hope for both the cryptocurrency industry and the stakeholders impacted by its challenges.
Currently, the company’s native token, CEL, is trading at $0.1535, showing a 1.1% decrease in the last 24 hours. It’s worth noting that over the past 30 days, CEL has displayed a significant upward trend, with a remarkable surge of more than 21% during this timeframe.
