Vauld, a crypto lender headquartered in Singapore, has received an extension from the Singapore court for its creditor protection period, now moved to 28th February. This extension was granted to Vauld as it failed to come up with a revival plan, a person familiar with the matter reported to Bloomberg.
Valud Gets An Extension To Restructure Its Finances
Vauld froze customer funds in July 2022, since it was a part of the long list of crypto lenders who suffered massive damage from last year’s crypto retreat. The source for the article confirmed that Vauld has received two bids from digital asset fund managers, who have offered to take over the token management on the platform.
The article refused to share the identity of the source, as requested by them, but they did provide some additional information. Mainly an update that Vauld’s discussions with fund managers are at an advanced stage.
At the same time, the company has been in a tug of war with another lender that’s attempting to acquire it, Nexo Capital. Vauld, however, wasn’t interested in pursuing any deal with Nexo, as reported by the source.
Notably enough, Nexo was among the first lenders to acquire Vauld several months after the fall of the crypto lender. The deal, however, was put off by Vauld who considered it to be in the disinterest of its creditors.
Last week, as part of an investigation into suspected money laundering and tax crime, Nexo’s office was raided by the local police in Sofia, Bulgaria.
Vauld has been recorded to owe $402 million to creditors as of July 8 last year. Originated from individual deposits from retail investors. Following that, assets worth $46.4 million were frozen by the Indian authorities, a month after Vauld filed for protection.
How Did Vauld Become a Casualty Of The Crypto Crash?
Celsius, a crypto lending platform, announced the suspension of all its withdrawals in June last year, in order to deal with extreme market conditions and “stabilize” liquidity. The native token of the Celsius network plummeted by 70% in just a single hour, and this led to a massive sell-off across the industry that pushed the overall capitalization of the crypto market under a trillion.
This had a direct effect on Vauld’s operation, and the company filed for protection against its assets on July 21. The Singapore court granted the company a three-month protection from creditors, as discussions about Nexo saving the company were brewing.
Defi Payments Ltd, the parent company behind Vauld a moratorium that would last until November 7. This extension was granted “based on an assessment of the firm’s progress in engaging with its creditors.”
Vauld had a net deficit of $81 million as of August 1, as a result of the stablecoin-dominated liabilities turning out to be more than similar categorized assets under management by $121 million.
Since the timeline wasn’t enough for the restructuring, a spokesperson from the lending company informed that “The timeline of the restructuring is anticipated to be at least a further four months, and so Defi Payments will apply to the Court for an extension of the moratorium for continued protection in relation to legal claims against Defi Payments,”.
This request was filed to comply with the regulatory statutory timelines, so creditors could have sufficient time to evaluate the document and prepare a voting process. Almost all creditors, apart from one, were in favor of extending the moratorium.
One thing to remember is that the committee didn’t have any decision-making power in the matter, but was a consultative body that represented the general creditors during the restructuring process.
Vauld Left With Three Cards To Play
Vauld then had three options to deal with the matter; liquidation, acquisition and restructuring.
Liquidation of the company won’t be of the best benefit for the creditors, as it would recover only 38% of their investments at minimum, or 49% if things go well. Plus, funds from the liquidation will take 3 years to be paid to the creditors. So naturally, Vauld didn’t go ahead with this plan.
Another scenario, where creditors are likely to receive 100% of their investments was an acquisition from Nexo Capital. The company, however, hasn’t moved ahead with a deal yet, since the documents provided by Vauld have not been accepted.
Darshan Bathija, CEO of Vauld, commented on the matter saying “Nexo’s feedback is that a gap of $81 million is too high for Nexo. As a result, Nexo is anticipating that the debt tender offer will reduce Vauld’s liabilities to a level acceptable for capital injection,”.
Creditor claims that didn’t participate in the debt tender offer, on the other hand, would be transferred to the Nexo platform as new customer account balances. Withdrawals in this context will have a lockup period of 18 months.
This brings us to restructuring, the revival alternative Vauld has decided to pursue. Under this plan, creditors will be able to put up their assets to be purchased by a company, known as Reverse Dutch Auction.
“The buyback will be subject to a cap of approximately $65 million of available liquid assets for payment to creditors who participated in the debt tender offer,” commented Rose, a representative of Vauld Group’s financial adviser Kroll Advisors.
These bids will be accepted in a particular order, from a higher level of discount up to a ceiling threshold of 50%. Until all available assets have been allocated. Creditors who didn’t sell their assets will find their assets invested with a third-party crypto fund manager. In hopes for a complete recovery.
This restructuring process will last for three years, and a plan for the same is yet to be announced. Creditors will be able to 25% of their assets throughout the period, and all their assets by the end of three years. Updates from Vauld regarding the restructuring are now under anticipation.
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