Digital Currency Group (DCG) has taken a significant step towards resolution with the creditors of its crypto lending subsidiary, Genesis. This development was confirmed through a court filing on August 29. If the amended plan receives approval, it has the potential to yield an estimated 70% to 90% recovery for unsecured creditors.
Agreement in Principle with Path to Recovery
In a statement issued, DCG expressed satisfaction in reaching an “agreement in principle” with Genesis and the Unsecured Creditors Committee. This agreement further serves as the foundation for comprehensively addressing the claims within the Genesis Chapter 11 Cases. It will ultimately offer a promising path to substantial creditor recovery.
Also, the agreement in principle is slated to be meticulously documented and subsequently presented to the bankruptcy court for ultimate approval. This step will also coincide with the confirmation of a chapter 11 plan.
Additionally, the revised plan carries the potential for recoveries ranging from 65% to 90% on an in-kind basis. The outcome’s variability is influenced by the specific denomination of the digital assets involved. This is as outlined in the aforementioned court filing.
Debt Settlement and Repayment Strategy
Furthermore, to honor its existing obligations towards debtors, which encompass $630 million in unsecured loans due by May 2023 and $1.1 billion under an unsecured promissory note scheduled for repayment by 2032, DCG has formulated a comprehensive strategy. Part of this strategy involves entering into new debt facilities, coupled with a partial repayment agreement.
The specific financial structures include a $328.8 million first-lien facility with a maturity period of two years, and a $830 million second-lien facility with a maturity period of seven years. Furthermore, under the partial repayment agreement, DCG will distribute $275 million in installments prior to the plan’s effective date.
Genesis and the Turbulent Market
The story of Genesis is reflective of the broader turbulence witnessed in the crypto lending space during the intense bear market of 2022. The company initiated its bankruptcy filing in January 2023, as it grappled with the impact of owing more than $3.5 billion to its top 50 creditors. Among these creditors were well-known entities like Gemini and VanEck’s New Finance Income Fund.
Unprecedented Market Turmoil
As events unfolded, Genesis suspended withdrawal activities in mid-November 2022, attributing the move to the extraordinary market upheaval stemming from the FTX crypto exchange’s collapse. This development led to an unanticipated surge in withdrawal requests, surpassing the company’s liquidity capacity.
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