DCG’s huge debt
U.S. cryptocurrency exchange Gemini has decided to consider whether to offer a debt repayment suspension period to U.S. conglomerate Digital Currency Group (DCG) to avoid default. Announced.
Gemini lends 12.5 billion yen ($900 million) of funds deposited by users as part of the yield service “Gemini Earn” to Genesis Capital, a DCG subsidiary that operates a lending business.
Regarding consideration, Gemini pointed out that it will be important whether the DCG is willing to sincerely participate in discussions on restructuring plans and debt restructuring and reach consensus. If the DCG does not actively participate in the negotiations and it is difficult to reach an agreement, the other parties may propose their own plans and seek countermeasures, he said.
Concrete countermeasures may include formulating restructuring plans, setting grace periods, and renegotiating loan terms.
Gemini also manages 150 billion yen ($1.1 billion) in Genesis, a total of 232,000 funds deposited by customers through the Earn program, but withdrawals are currently frozen. It added that it will also file a lawsuit against Genesis Capital on May 22 to seek the return of these cryptocurrencies.
After Genesis Capital filed for bankruptcy protection in January of this year, its creditors and DCG are in ongoing talks. DCG owed Genesis Capital about ¥87 billion ($630 million), which was due to be repaid around May 11.
As of January, DCG’s debt breakdown for Genesis was “approximately 60 billion yen (approximately 450 million dollars) and 4,550 BTC (equivalent to 10 billion yen at that time)”. It is a structure in which the debt also expands as the value of BTC rises. DCG said it will use these funds to buy back its shares, invest in cryptocurrencies and buy GBTC on the public market in 2022.
connection:Digital Currency Group and Genesis could break up on debt repayment plans
DCG announced on May 9 that it has entered into discussions with capital providers that will provide growth capital to refinance outstanding internal debt with Genesis. It is said that a 30-day mediation period has been set up from May 1, and in effect, the deadline for debt repayment has been extended. This measure is seen as an attempt by DCG to secure funds to improve its financial position and clear its debt to Genesis.
Gemini’s move may signal a cautious stance toward discussions with DCG and DCG’s restructuring plans. In early May, Gemini noted that DCG faced default risk if the $630 million debt to Genesis bankruptcy assets was not properly serviced.
If DCG’s restructuring and fundraising do not proceed as planned, it could face a forced sale of DCG’s GBTC and other assets. It could also have a material financial impact on Gemini and other creditors.
connection:DCG and Genesis Agree with Creditor Group on Debt Consolidation
What is DCG
A major cryptocurrency conglomerate. It has 6 subsidiaries and invests in over 200 blockchain-related startups and over 50 cryptocurrency funds and projects. Major subsidiaries include investment company Grayscale, bitcoin mining company Foundry, Genesis Global Capital, and cryptocurrency media CoinDesk.