Debtors at bankrupt crypto lender Celsius Network have submitted a sale plan to the US Bankruptcy Court for the Southern District of New York.
The plan is part of Celsius’ overall restructuring plan for its retail platform and mining business and has the support of the Official Committee of Unsecured Creditors (UCC).
At the heart of the Plan is an agreement in principle with NovaWulf Digital Management (“NovaWulf”), a digital asset investment firm, making them a sponsor of the Plan.
Debtors chose NovaWulf as it “offers the best method to allocate debtors’ liquid crypto assets and maximize the value of debtors’ illiquid assets through a new venture led by experienced asset managers,” it said in the submission.
The plan is the product of the court-approved debtors’ sale process that Celsius Network’s attorneys outlined in January 2023. They had said that the bankrupt crypto lender plans to reinvent itself as a new, publicly traded “recovery corporation” in order to exit bankruptcy proceedings.
The “comprehensive” sales process involved debt counselors contacting over 130 parties and signing non-disclosure agreements with 40 potential bidders. This has been reduced to six bids for the retail platform and three bids for the mining operations.
The next step will be to enter into a binding agreement to name NovaWulf as the winning bidder.
Under the plan, NovaWulf will make a direct cash contribution of between $45 million and $55 million to NewCo, a term used to describe a corporate spin-off, before being assigned a final name.
NewCo will be a regulatory, reportable entity, 100% owned by Earn creditors, each of whom will receive a substantial distribution of liquid cryptos, with a “favor class” of creditors recovering 70% of their funds. No Celsius founder will have a stake in NewCo and the majority of the NewCo board will be appointed by the UCC.
The plan specifically provides $50 million for NewCo’s mining operations, among other mining-related features.
US bankruptcy law typically gives a company four months to exclusively determine how it will conduct its business. An offer by Celsius to further extend this period was rejected by creditors and the US government.
UPDATE (February 15, 08:13 UTC): Adds additional details and background.