Argo Will Avoid Bankruptcy With $100M Bailout from Novogratz’s Galaxy

Bitcoin miner Argo Blockchain (ARBK) will avoid filing for bankruptcy protection, after it agreed to sell its Helios mining facility in Dickens Country, Texas, to Galaxy Digital (GLXY) for $65 million.

The miner will also get a new $35 million loan from Mike Novogratz’s crypto-focused financial services firm, which will be secured by Argo's mining equipment, according to a statement sent to CoinDesk.

"Over the last few months, we have been looking for a way to continue mining through the bear market, reduce our debt load, and maintain access to the unique power grid in Texas," Argo's CEO Peter Wall told CoinDesk. "This deal with Galaxy achieves all of these goals, and it lets us live to fight another day," he added.

The transaction will help Argo bolster its balance sheet and avoid bankruptcy after it found itself in a precarious situation when a deal for $27 million in funding fell through in October. Earlier this month, the miner said that it was in advanced negotiations to sell some of its assets and carry out an equipment financing transaction to avoid filing for Chapter 11 bankruptcy.

The deal was structured to boost Argo's balance sheet and capital structure, Chris Ferraro, president and chief investment officer at Galaxy, told CoinDesk. When the miner kicked off its process, "we were in a position to solve the problem completely for Argo, while accelerating the expansion of our own mining capabilities,” he added.

The crypto miner, whose shares trade on the London Stock Exchange (ARB) and Nasdaq (ARBK), said on Tuesday that it requested a 24-hour suspension of U.S. trading. The London Stock Exchange was already closed due to a U.K. bank holiday.

Argo is among several miners that are struggling to stay afloat as rising energy prices increase costs, while stubbornly low bitcoin prices slash revenues. This month, Core Scientific (CORZ), one of the largest miners by computing power, filed for bankruptcy, while Compute North, another major firm in the space, filed for Chapter 11 bankruptcy protection in late September. Bitcoin miner Greenidge also said that it reached a debt restructuring deal with its lender NYDIG, although chances of bankruptcy still loom for the company.

One of the largest miners

Helios, which was Argo's largest mining facility, has up to 180 megawatts (MW) worth of power capacity and will become Galaxy's flagship mining operation. The facility started operations in May under Argo, with a plan to reach 800 megawatts (MW) of energy consumption and 20 exahash/second (EH/s) of computing power. If expanded to its full capacity, it could make Galaxy one of the largest bitcoin miners.

"Quality infrastructure and access to low-cost energy are the cornerstones of a successful mining operation, making the acquisition of Helios an incredible milestone for the growth of Galaxy’s mining business," said Amanda Fabiano, Head of Mining at Galaxy, in the statement.

Additionally, Argo will enter into a two-year hosting agreement with Galaxy, securing a place for Argo’s computers to keep mining at the Helios facility, according to the statement.

Bear market opportunity

The brutal crypto winter, exacerbated by crypto exchange FTX's implosion, has not only caused pain for the industry but also created opportunities for some investors to acquire some crypto assets at a much cheaper valuations.

The transaction will be the second such deal within a month for Galaxy. On Dec. 13, Galaxy bought crypto self-custody platform GK8 from bankrupt crypto lender Celsius at a price that is "materially less" than what Celsius paid for it a year ago.

Helios will be the second planned bitcoin mining facility that Galaxy will own and operate as the firm said it is actively working on multiple longer-term solutions to diversify and reduce counterparty risk for its mining unit. Galaxy recently started construction on its first proprietary mining site in Texas, which is expected to be fully operational by January 2023, according to its third quarter earnings report.

“Galaxy is aspiring to be one of the most trusted nodes of the decentralized future,” Ferraro said in the statement. “The acquisition of Helios represents a new stage over our two-year journey in bitcoin mining that increases our operating scale and breadth of solutions, creating sustainable value for the biggest decentralized digital asset network and shareholders alike,” he added.