As expected, Voyager Digital (TSX: VOYG) has been forced to issue a notice of default to Three Arrows Capital following the firms failure to meet repayment deadlines imposed last week. The calling of the loan followed reports that the crypto-focused hedge fund was facing liquidity challenges as a result of the bear market being experienced within the crypto sector.
Voyager’s exposure to Three Arrows, or 3AC as their commonly referred to, amounts to $350 million in USDC, a stablecoin, as well as 15,250 bitcoin, which at $20,000 bitcoin is worth approximately US$305 million. The figures are believed to represent 55.3% of all USDC loaned out by Voyager, as well as 28.3% of all bitcoin loaned, as per the firms latest filings.
What’s more, is that the withdrawal limit reductions imposed last week by Voyager to its clients appears to be for good reason – over the span of four days the company has seen tens of millions of dollars exit its coffers. The firm indicated that as of June 24, it had US$137 million in cash and owned crypto assets on hand. Comparatively, the company last week reported that as of June 20, it had US$152 million in cash and crypto assets on hand, in addition to US$20 million of cash restricted for the purchase of USDC. The latter restricted cash was not mentioned in today’s release.
What’s more, this cash position – excluding the restricted monies reserved for USDC – declined by $15 million despite the company accessing US$75 million under a line of credit made available by Alameda Research last week. The line of credit is for a total of US$200 million in cash and USDC, with a separate 15,000 BTC revolver also having been made available. On a combined basis, this implies up to US$90 million has exited the company over the last several days, with a further US$20 million restricted for USDC also potentially having been consumed.
The default by 3AC is said to not impact the firms loan with Alameda Research, while funds will continue to be accessed as needed to facilitate customer orders and withdrawals. Alameda last week notably surrendered 4.5 million shares of Voyager that it had just acquired, pushing its ownership below insider reporting levels, as of June 22.
“We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands,” commented CEO Stephen Ehrlich.
Lastly, the firm has engaged Moelis & Company as financial advisors. The firm notable refers to itself as experts in both M&A as well as recapitalization and restructuring.
Voyager Digital last traded at $0.625 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.