Genesis deal sets the stage for DCG’s 90% recovery potential

Genesis deal sets the stage for DCG's 90% recovery potential

In a significant development in the cryptocurrency industry, Digital Currency Group (DCG), a prominent venture capital firm, has reached a preliminary agreement with creditors of its crypto lending subsidiary, Genesis.

As per a recently published court filing on August 29, there’s optimism that unsecured creditors of Genesis could see substantial recoveries, ranging from 70% to 90%, pending approval of the revised plan.The amended plan presents the potential for recoveries ranging from 65% to 90% in-kind, depending on the specific digital asset denomination, as outlined in the filing.

To address its existing obligations to debtors, which include sizable amounts such as $630 million in unsecured loans due in May 2023 and $1.1 billion under an unsecured promissory note due in 2032, DCG intends to enter into new debt facilities and establish a partial repayment agreement. These debts encompass a $328.8 million first-lien facility maturing in two years and an $830 million second-lien facility maturing in seven years. Additionally, DCG is set to make installment payments of $275 million before the plan’s effective date, as specified in the filing.

Genesis, like many other crypto lending firms, was profoundly impacted by the bear market of 2022, culminating in its declaration of bankruptcy in January 2023. At the time of bankruptcy, the company owed over $3.5 billion to its top 50 creditors, including well-known entities like Gemini and VanEck’s New Finance Income Fund.

This development follows Genesis’ suspension of withdrawals in mid-November 2022, citing the unprecedented market turbulence linked to the FTX crypto exchange’s collapse. The company attributed the surge in withdrawals, which surpassed its liquidity, to the “abnormal” circumstances triggered by the FTX incident.

DCG’s agreement with Genesis creditors marks a significant step in addressing the fallout from the turbulent cryptocurrency market, offering hope for substantial recoveries for those involved.

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