Genesis seeks mediation; parent DCG says some creditors reneged on deal

By Sarah Lizee

Olympia, Wash., April 25 – Genesis Global Holdco, LLC has asked the U.S. Bankruptcy Court for the Southern District of New York to appoint a mediator to its Chapter 11 bankruptcy case, according to a motion filed Monday.

Since November, the debtors have engaged in discussions with their creditors, including with two informal groups of lenders of Genesis Global Capital, LLC, representing more than $2 billion in outstanding loans, and Digital Currency Group, Inc. (DCG), Genesis Global Holdco’s corporate parent and its largest borrower.

In February, an agreement in principle was reached between the debtors, DCG, Gemini Trust Co., LLC and some members of the informal groups. A restructuring term sheet was filed with the court on Feb. 10.

Since filing the restructuring term sheet, the debtors have continued their discussions with various stakeholders, including the official committee of unsecured creditors.

While these discussions were initially focused on resolving issues left open in the restructuring term sheet, more recent discussions have made it clear that a mediator is necessary to assist in reaching a resolution of the amount, form, timing and other terms and conditions of DCG’s contribution to the debtors’ reorganization plan, Genesis said on Monday.

As previously reported, under the terms of the agreement, DCG would exchange its existing $1.1 billion note due in 2032 for convertible preferred stock to be issued by Digital Currency Group as part of Genesis’ Chapter 11 plan.

DCG would also refinance its existing 2023 term loans through a new, junior secured term loan in two tranches made payable to creditors in the total value of about $500 million.

As part of the transactions, DCG would also contribute its equity interest in Genesis Global Trading to Genesis Global Holdco, bringing all Genesis entities under the same holding company.

“The debtors believe that mediation of the mediation issues may help clear the most significant roadblock impeding the path toward a consensual Chapter 11 plan and allow the estates to avoid the cost and uncertainty of litigation,” Genesis said in its motion.

DCG’s response

On Tuesday, Digital Currency Group issued a statement on Twitter regarding the discussions.

“More than two months after all parties agreed to a comprehensive settlement that was submitted by Genesis Capital to the bankruptcy court, a group of Genesis Capital’s creditors have reneged and raised all new demands,” Digital Currency said in the tweet.

“While it is difficult to understand the rationale given the limited engagement from Genesis creditors since the February court filing, our understanding is that a subset of creditors have decided to walk away from the prior agreement.”

The parent company said this latest development will prolong the court process.

“DCG remains committed to reaching a fair outcome for all and while we look forward to a constructive mediation process, we will have to weigh any new demands against the concessions we’ve previously made,” DCG stated.

Genesis Global is a New York-based cryptocurrency lender. The company filed bankruptcy on Jan. 19 under Chapter 11 case number 23-10063.

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