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Marathon Digital (MARA) has declared the discontinuance of its credit facilities with Silvergate Bank to drive its debt down by $50 million. Marathon took the step to give a boost to its liquidity by freeing up the collateral of 3,132 BTC kept with the bank. Silvergate Bank initiates its winding down after failing business due to FTX collapse.
After the exodus of Paxos and Coinbase, the troubled Silvergate bank bids adieu to Marathon Digital, a major bitcoin mining company, as Marathon prepays its outstanding loan and puts an end to its credit facility with the bank to increase its liquidity.
Why has the partnership ended?
On 8 March 2023, the second-largest NASDAQ-listed holder of Bitcoin, Marathon Digital, announced the prepayment of its debt and declared the end of its loan facility with Silvergate. The news came a few minutes after Silvergate Capital Corporation, the holding company of Silvergate bank, announced the liquidation and shutdown of the bank “in light of recent industry and regulatory developments.”
Although Mr. Charlie Schumacher, the firm’s Vice President of Corporate Communications, cleared out the air regarding the coincidence of the timing of the two announcements and said that the move towards ending the credit facility with Silvergate was part of the firm’s long-term financial strategy and had nothing to do with the recent hardships being faced by Silvergate due to the FTX fiasco. Marathon had already served a notice period of 30 days regarding the termination, beginning in February.
In the report published on 2 March, Marathon declared that according to its latest operations report, the firm has unrestricted assets worth approximately $410 million which comprised Bitcoin and cash reserves. The recent move would give a major boost to Marathon’s liquidity numbers as the termination of the relationship with Silvergate has resulted in the release of 3,132 Bitcoin kept as collateral with the bank. It would also cut down the company’s yearly borrowing cost by approximately $5 million.
Conclusion
Mr. Hugh Gallagher, Marathon Digital’s CFO, expressed that the “crypto industry has significantly changed” and said that “We have been actively building a more robust balance sheet that features increased levels of cash and unrestricted Bitcoin holdings. Given our current cash position, we determined that it was in the Company’s best interest to prepay our term loan and eliminate both the term loan and RLOC facilities.”
The company’s Chief Financial Officer also suggested in February that Marathon plans to cut down on its debt and increase the liquidity of the firm significantly. The announcement of the termination of the credit facility made the firm’s stock witness a dip of 2.10% after the closing of the stock markets.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
