Marathon Digital Pays Off Term Loan, Cuts Credit Facilities With Silvergate

Marathon Digital Holdings has announced the repayment of its term loan and the termination of its credit facilities with Silvergate Bank, resulting in a $50 million reduction of debt, according to a statement released on Wednesday.

Hugh Gallagher, CFO of Marathon Digital, highlighted that the crypto market has “significantly changed” since last summer, when Marathon installed those facilities.

Gallagher stated that as a result of these developments, the company has altered its financial strategy by bolstering its balance sheet with increased cash reserves and unrestricted Bitcoin holdings.

Marathon Digital Holdings has repaid its term loan and terminated its credit facilities with Silvergate Bank, reducing Marathon’s debt by $50 million and increasing the Company’s unrestricted bitcoin holdings by 3,132 BTC. Read our full update here: https://t.co/tihTTagfhR

— Marathon Digital Holdings (NASDAQ: MARA) (@MarathonDH) March 8, 2023

He said:

“Our industry has significantly changed since we put these facilities in place last summer, and we have been adapting our financial strategy accordingly.” 

Marathon Digital Joins Silvergate Exodus

The development follows Silvergate Capital Corp.’s announcement that it would cease operations and voluntarily liquidate Silvergate Bank. Other companies, like Paxos and Coinbase, have withdrawn themselves from the bank in recent days.

Marathon stated in its announcement that the move will release the 3,132 Bitcoin units held as collateral for the loan. It was stated that this would remove $50 million in debt and cut annual borrowing expenses by $5 million.

According to CoinGecko, Marathon is the second-largest publicly traded holder of Bitcoin, trailing only software analytics enterprise MicroStrategy.

Previous filing reveals that Marathon obtained the $100 million revolving credit line from Silvergate Bank in October 2021 with the intention of using it to acquire Bitcoin mining equipment and fund its mining activities.

Over the last months, Silvergate-related issues, such as investigations into the company’s association with FTX, were already known. These and other events may have influenced Marathon in the time leading up to the current situation.

Silvergate Shutdown

Silvergate crashed in the midst of regulatory scrutiny and a criminal investigation by the Justice Department’s fraud branch investigating its interactions with defunct crypto heavyweights FTX and Alameda Research.

Silvergate announced in a statement with the Securities and Exchange Commission last week that it would delay the publishing of its annual report and evaluate its ability to “continue as a going concern.”

The bank was founded in the latter 1980s, but accelerated its growth in 2013 when it began to target crypto firms as customers.

At the time, it was difficult for many in the crypto industry to locate regular firms ready to provide them with services.

The bank increased its deposit base to $14.3 billion by the end of 2021 as the market for Bitcoin and other cryptocurrencies expanded.

Last year, a succession of crypto sector bankruptcies resulted in fraud claims against trading platform FTX, with whom Silvergate had a banking arrangement.

During the fourth quarter, Silvergate’s deposits decreased from $8.1 billion to $3.8 billion.

-Featured image from Tiffy Taffy