Celsius Network, a bankrupt digital asset lender, has announced its plans to repay creditors using billions of dollars in crypto assets by the end of the year. The company has presented a restructuring plan to a US bankruptcy court, with the goal of generating funds for a new corporate spinoff called “NewCo” and facilitating customer repayments.
According to the filing, the plan outlines the distribution of at least $2.03 billion in cryptocurrency to creditors, with the actual amount depending on the fluctuations in the crypto market. This distribution will occur once the plan becomes effective, either through the NewCo transaction or an orderly wind-down. The NewCo transaction, sponsored by the Fahrenheit Group, involves the creation of a new cryptocurrency company owned by customers, focusing on Bitcoin mining and staking. NewCo aims to maximize liquidity by listing on NASDAQ and will be managed by experienced crypto-native operators from Fahrenheit.
As part of the plan, Fahrenheit has committed up to $50 million as an equity stake in NewCo, aligning the interests of Fahrenheit and creditors who will own shares in the new company. In the event that the NewCo transaction cannot be completed, the plan includes an orderly wind-down option that would provide better recoveries for creditors compared to a Chapter 7 liquidation.
Celsius’s legal representative, Christopher S. Koenig, has revealed that the restructured company, expected to emerge from Chapter 11, will receive $450 million in capital and financial backing. However, the success of the NewCo transaction is crucial, as it would mark a significant milestone as the first revival of a failed crypto platform under Chapter 11, following last year’s wave of insolvencies.
While the approval of Celsius’s plan is still under deliberation by Judge Martin Glenn, some customers who have been unable to access their funds have expressed opposition. Additionally, an affiliate of Lantern Ventures, owed approximately $82 million, has challenged the plan, claiming overvaluation of the new business by Celsius’s advisors. Clearance from securities regulators will also be necessary for the new venture.
It is important to note that if the new company were to fail, liquidation could become a possibility, which could result in lower repayments for customers. Nonetheless, Celsius Network’s proposed plan represents a significant effort to repay creditors and potentially revitalize the company, providing hope for both the cryptocurrency industry and affected stakeholders.
In terms of the company’s native token, CEL, it is currently trading at $0.1535, reflecting a 1.1% decline over the past 24 hours. However, the token has experienced a notable upward trend in the last 30 days, with a substantial surge of over 21% during this period.
Overall, Celsius Network’s plans to repay creditors using crypto assets demonstrate their commitment to resolving their financial situation and potentially reviving the company. The outcome of Judge Martin Glenn’s deliberation and the success of the NewCo transaction will be crucial factors in determining the future of Celsius Network and its stakeholders.