Digital Currency Group (DCG) has announced an in-principle resolution to address the claims stemming from Genesis’ bankruptcy. This news follows a court filing on Tuesday, underscoring DOG’s proactive efforts to address the aftermath of Genesis’ financial struggles.
The proposed plan holds the potential to yield substantial recoveries ranging from 70% to an impressive 90% in USD equivalent for unsecured creditors. Moreover, on an in-kind basis, recovery percentages of 65% to 90% are projected, contingent on the specific denomination of the involved digital assets. However, it is important to note that these estimated recoveries are subject to market fluctuations and contingent upon the establishment of definitive documentation.
Digital Assets in Focus
Genesis faced a challenging period in the aftermath of FTX’s collapse, which led to the suspension of withdrawals by its lending arm in November of the preceding year. As a consequence, Genesis initiated the process of seeking bankruptcy protection at the outset of 2023. Notably, in a recent communication to shareholders, DCG expressed its proximity to attaining an in-principle agreement to resolve the complexities surrounding this case. It is worth highlighting that DCG holds the distinction of being the parent company of CoinDesk.
To address its prevailing liabilities, DCG has negotiated a novel partial repayment arrangement. This arrangement aims to fulfill DCG’s existing obligations, encompassing approximately $630 million in unsecured loans scheduled for maturity in May 2023, along with a further $1.1 billion owed under an unsecured promissory note with a maturity date in 2032. The proposed repayment strategy delineates a bifurcated approach, involving a $328.8 million repayment tranche due in two years and a $830 million tranche maturing over a period of seven years.
Financial Restructuring
Additional financial provisions have also been outlined in the proposal. DCG is committed to disbursing a sum of $275 million, to be disbursed in four installments subsequent to the partial repayment agreement. This provision accounts for the looming maturities of May 2023, specifically addressing the unsecured loans totaling $630 million.
The backdrop of this development is Genesis Global Holdco, LLC and its subsidiaries’ filing for bankruptcy with the U.S. Bankruptcy Court for the Southern District of New York in January 2023. Revelations within the bankruptcy filings unveiled Genesis’ substantial debts, exceeding $3.5 billion, owed to a roster of top creditors. Notable among these creditors are prominent entities such as cryptocurrency exchange Gemini, trading powerhouse Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund.
This pivotal step taken by DCG to establish an in-principle agreement with Genesis creditors signifies a concerted effort to navigate the complex landscape of crypto-related financial challenges, with the potential for substantial recoveries echoing positively throughout the industry.
