Bitfarms Ltd., a global Bitcoin self-mining company, said today it is working to modify and reduce indebtedness at one of its wholly-owned corporate subsidiaries.

Jeff Lucas, Chief Financial Officer of Bitfarms, stated:

“During 2022, Bitfarms began taking proactive actions to increase financial flexibility and to reduce indebtedness and capital expenditure obligations. Considering today’s challenging market conditions, we are seeking to modify our Washington state debt facility to achieve terms that are better aligned with the market outlook and our business strategy.”

On February 18, 2022, Bitfarms’ Backbone Mining Solutions, Inc. (BMS) entered into a $32 million equipment financing facility with BlockFi Lending LLC.

BMS owns and operates the assets of Bitfarms’ 20-megawatt active crypto mining facility in the State of Washington. The loan is secured by certain assets of BMS, including its miners and certain Bitcoin produced by those miners and is recourse only against BMS. The current market value of the assets securing the loan is estimated by BMS to be approximately $5 million, while the outstanding principal and interest is approximately $20 million.

As a result, the Company determined that it would be advisable to seek more favorable terms from BlockFi and potentially take other steps to reduce the BMS obligations. The Company has taken certain actions, and may in the future take other actions, including not making installment payments, that constitute defaults under the loan agreement and entitle BlockFi to exercise various rights and remedies against BMS and in respect of the collateral.

Neither a restructuring on more beneficial loan terms nor a reduction in BMS’s indebtedness is assured. BlockFi’s exercise of its rights and remedies against BMS and its collateral could result in additional charges to the Company and potentially even the cessation of operations at the State of Washington facilities.

As of December 31, 2022, Bitfarms and its subsidiaries had cash and unencumbered crypto assets with a value of approximately $36 million, which the Company believes provides sufficient liquidity to support ongoing operations for the foreseeable future and to make future payments under its various other loan agreements. Bitfarms and its subsidiaries have approximately $47 million of outstanding indebtedness, including approximately $20 million indebtedness under the BlockFi loan.