Crypto lender Genesis is in the midst of figuring out ways to avoid bankruptcy. Towards the end of last month, the creditors of the firm were working with restructuring lawyers from law firms like Proskauer Rose and Kirkland & Ellis. to steer away from insolvency.
Read More: Here’s how Genesis is trying to avoid bankruptcy
The lender’s parent company, the Digital Currency Group [DCG] is reportedly attempting to raise capital to save Genesis’ sinking ship. A recent Financial Times report revealed that this is being done “in part” to stave off the immediate repayment of a loan to Todd Boehly’s investment house.
$350 Million Payout On Cards?
It is worth noting that Todd Boehly led a debt raise for DCG via his investment company Eldridge Industries in November 2021. The same encompassed a $600 million loan from a group of investors including Eldridge.
The FT report outlined,
“… people with direct knowledge of DCG’s finances have said that if this wholly owned subsidiary were to fail, $350mn still outstanding from this loan would immediately fall due. The senior secured term loan ranks higher than other debt and has certain preference rights, meaning it would have to be repaid first in any situation, one of the people said.“
DCG was established in 2015 by billionaire investor Barry Silbert. Prominent asset management company Grayscale is one of its subsidiaries.
Silbert reportedly told investors that $350 million of the Eldridge loan was outstanding after Genesis halted its operations last month. FT outlined that DCG has $1.6 billion in debts due to Genesis.
However, its loan from Eldridge—made alongside investors including Californian asset manager Capital Group, private equity firm Francisco Partners and investment manager Davidson Kempner Capital Management—bear preferential terms.
DCG clarified that its relationship with Eldridge “is entirely separate from Genesis’ restructuring strategy. Furthermore, it said that the same “has no bearing on any outcome at Genesis.” According to FT’s unnamed sources, however, Eldridge is of the opinion that Genesis’s suspension of withdrawals means it cannot repay debts and therefore is in default.
Nonetheless, the media outlet’s sources added that the investment group was keen to avoid losing its investment. Thus, it is working with DCG to help it raise capital and pay Genesis’s investors, clients, and customers.
Crypto Lender Genesis’ Backstory
Owing to FTX’s collapse, Genesis’ $2.8 billion crypto lending arm halted withdrawals in mid-November. Afterward, the lender sought a $1 billion emergency loan and warned that it would go bankrupt without funding support.
Amidst all this, it was revealed that the platform was impacted by the downfall of Three Arrows Capital. Court documents showed that 3AC owed Genesis a loan debt of $2.36 billion. On its part, 3AC breached two lending agreements that were signed back in January 2019 and 2020.
Around that time, Binance revealed that it was setting up a recovery fund to aid projects during a liquidity crisis. As a result, the broke lender approached Binance and asked it for a helping hand. The exchange, however, turned down the request fearing that some of Genesis’s business could create a conflict of interest down the line.