Stronghold Digital Mining, a Bitcoin miner, has agreed to convert $17.9 million in convertible debt into $23.1 million in convertible preferred shares with noteholders, according to a press release on Tuesday.
The exchange is the Bitcoin miner's most recent effort to improve its balance sheet. Stronghold and the lender NYDIG came to an agreement in August to repay a debt of $67.4 million by giving back 26,200 mining equipment.
The business ended its hosting agreement with Northern Data of Germany in September in an effort to free up more cash. The company's co-chairman and CEO, Greg Beard, said:
"We are happy to announce another deleveraging deal that will strengthen our balance sheet, significantly lower our debt, and enhance our liquidity position."
According to the terms of the agreement, which was announced on Tuesday, the 10% convertible notes will be replaced by a new series of convertible preferred shares that can be converted into common shares for a price of 40 cents per share. The deal is expected to close on February 20 and reduce the business's debt to less than $55 million.
Although a sizable number of shares of ordinary stock could be issued as a result of the Exchange Agreement, Beard said, "We feel this is vital to preserve cash, lower our financial liabilities, and better position the Company to endure a potentially protracted crypto market slump."
If all the preferred stock is converted, 57.8 million common shares would be issued, increasing the current common float by almost 46%. Stronghold will not pay a dividend to the new preferred shares.
It has saw mining economics deteriorate, similar to other businesses in the space, as a result of a drop in Bitcoin values and a rise in energy prices.
Another Bitcoin miner, Core Scientific, filed for bankruptcy last month and has plans to do the same with the majority of its debt.
Stronghold switched its focus from mining to selling power throughout the summer. The business owns and operates two waste coal plants in Pennsylvania. At the end of 2022, Stronghold had about 6 Bitcoins and $12.4 million in unrestricted cash.
