Allrise Capital dumped by US Bank, scrambling to find new bank to provide risk guarantee to PUD5/4/2023 Clarification: According to recently released public documents, the reason why the PUD is requiring Bitmain/Allrise is to obtain a new letter of credit from a different bank is that US Bank's credit rating is no longer high enough. A letter from the PUD to Cascade Digital Mining explaining this is attached below. Beijing Bitmain's and Allrise Capital's bitcoin mining business in Usk, WA, took another financial blow this week as US Bank cancelled the letter or credit the bank had provided to our PUD. The letter, known as a performance guarantee, protects the citizen-owners of our PUD should Cascade Digital Mining, the LLC joint venture between Bitmain and Allrise Capital, default on its monthly payments. The letter was valued between $14 and $16 million dollars. US Bank's cancellation of credit extended to Allrise was made public at last Tuesday's PUD Commissioner's meeting. Our PUD is allowing Allrise some time to find a new, reputable creditor willing to financially backstop Allrise. Providing a performance guarantee letter is similar to co-signing on a loan. US Bank's actions appear to reflect an assessment that Allrise is too risky even for the banking giant. The action follows the collapse of Allrise's bank, Silicon Valley Bank, as part of chain of failures of the leading crypto-servicing banks in the US, followed by Allrise defaulting on its March payment to our PUD. See our previous reporting here: UPDATE: FDIC BAILS OUT SVB DEPOSITORS; ANOTHER CRYPTO BANK COLLAPSES - PROTECT PEND OREILLE And here: Cascade Digital Mining defaults on payment; PUD issues Letter of Default - PROTECT PEND OREILLE Last summer our PUD wisely rejected a performance guarantee from the now-failed Silcon Valley Bank and demanded Allrise obtain a letter of credit guaranteeing payments from a more reputable bank. Ultimately, US Bank agreed to provide the performance guaranteeing letter of credit, which has now been rescinded. Our PUD requires the performance guarantee because Allrise is engaged in a highly risky business and has an unsatisfactory credit history and inadequate finances to cover the value of their power contract with our PUD. The performance guarantee reflects improved risk management practices learned from the bankruptcy of the Ponderay Newsprint Company bankruptcy in 2020. At that time, our PUD did not have adequate risk protection in place, leaving its citizen-owners on the hook for $22 million of the $32 million in financial damages to our PUD from that bankruptcy. They even already employ the former PNC mills bankruptcy attorneys. And the Allrise/Bitmain facility with its myriad of LLCs, including corporations domiciled in the Cayman Islands, was built from the ground up for bankruptcy. While our PUD has granted Allrise time to find a new guarantor, the timing will surely have negative impact on Allrise's/Bitmain's current negotiations for new power contract to take effect in October. Allrise may also struggle to find a suitable bank given their history and the government's recent warnings to banks about the risks from crypto customers. 
2 Comments
Robert W Schutte
5/4/2023 05:23:11 pm
No letter of credit is a huge risk for PUD. At this time PUD is basically providing unsecured financing. At a maximum, a letter of credit must be provided in 30 days or less.
Kent Allen
5/4/2023 05:52:14 pm
According to the video recording of the Tuesday, May 2nd PUD Commissioners’ Meeting, US Bank did not cancel the Letter of Credit. Leave a Reply. |
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