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This is Judge Jones. The time is 1 30 central. Today is June the 29th, 2023.

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It's the docket for Houston, Texas. On the 1 30 docket, we have the jointly

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administered cases under case number 22-90341, Core Scientific Ink. Folks,

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please don't forget to record your electronic appearance. That's a quick

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trip to the website. A couple of mouse clicks. You can do that at any time

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prior to the conclusion of this afternoon's hearing. First time that you

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speak, if you would please state your name and who you represent. That really

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does help the court reporters in the event that a transcript request is made.

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For those parties who are in the courtroom, if you choose to speak, you

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would please come to the lectern so that everyone can both see you and hear you.

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For those folks who are on go-to meeting, I have activated the hand-raising feature.

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If you haven't already done so, know you're going to be speaking. If you'd give

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me a five-star, I'll get you unmuted. If you change your mind during the hearing,

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you can again hit five-star at any time. Finally, we are recording this afternoon

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using CourtSpeak. We'll get the audio up on the docket shortly after the

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conclusion of the hearing this afternoon. So we've got a couple of people that raised their hands.

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All right. Mr. Schrock, are you starting this off this afternoon? Excuse me.

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I am, Your Honor. Ray Schrock, Wild-Gashel, Counsel for the Debtors. I'll be kicking it off then.

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Good afternoon. First of all, Your Honor, thanks for allowing us to appear electronically.

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It was a very strange thing. I've never had this happen, but we actually couldn't get flights,

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you know, Wednesday or Thursday. You know, it was a bizarre thing that was occurring with,

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you know, cancellation. So we appreciate the accommodation. We get it, you know,

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coordinated with the other parties on the Zoom appearance as well.

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So, Your Honor, I'm going to start off. We did file a demonstrative that we'd like to…

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If it helps you, I've looked at the PowerPoint. I've also read the plan and disclosure statement.

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Okay, perfect. Would you like me to put it up, Your Honor, for others or I'm happy not to?

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No. Are you going to do it yourself?

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No, Your Honor. I was going to ask my colleague, Austin Crabtree, to put it up.

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Of course. I was going to say, yes, I want to see… I want everyone to see

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the PowerPoint. I was just going to be amazed if you were going to ask for control.

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No, no, Your Honor. I wouldn't do that.

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And Mr. Crabtree, you should have control at this point.

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Great. Austin, if you could put up the presentation.

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Okay. He's got control. I just checked again.

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Okay. We have a backup plan just in case if Cliff has to do it. Okay. There we go.

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There we go.

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Perfect. Okay. If you could flip to the next page, please, Austin. Okay. So here's what we're going

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to cover today. It's an update on plan negotiations, a summary of the plan and treatment,

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a liquidity update, as well as next steps, Your Honor. So Austin, please flip one more.

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So overall, I'd say we've had a busy last several weeks since we were last in front of Your Honor.

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We did present on the business plan, have gotten feedback from all the major

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constituent groups. As you know, we had the exclusivity hearing. And following that,

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we did submit the Consensual Plan Framework to the key stakeholder groups. We first met with the

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advisors, and then later we were able to meet with all of the principals as well. And we did

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have those parties restricted at this point. There was a lot of back and forth among the advisors.

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But on June 16th, we did receive some feedback prior to that point. But June 16th, we submitted

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a draft of the plan to the key stakeholder groups, advisors. We filed the plan and disclosure

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statement on the 20th consistent with the goal with the Your Honor headset, and that we appreciate,

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frankly, for just keeping the cases moving. That plan and disclosure statement does reflect

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as you notice, there's two options with regard to the convertible load holders. There's a cram up

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plan, and there's a consensual plan. Why did we file that, I guess, is one consistent or one

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question that people may have. We're going to try really, really hard to get to a consensual

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plan, Your Honor, and I want to emphasize that we did reserve a lot of the information that we

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had time with Judge Lidsbury for later in July in the event that we can't get there. But unless

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somebody else is aware of how to handle when you believe there's equity value at a company and

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you've got secured creditors that aren't on board, it's really your option. And we are in a unique

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situation where we're coming out of a period of great turmoil for Bitcoin and for this particular

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company. We're going to see how open the capital markets are for this company. PJT is already out

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there putting together capital raise efforts that's in process. But overall, our fundamental

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belief is that there's equity value, and that with the rise in the Bitcoin price, where the company

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has come compared to where it started and will take you through some of that, we think there's

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very little doubt, listen, there is equity value here. We're going to have to find a way, frankly,

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to get all of the constituents to accept some compromises around how are we going to, we want,

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very much like the company be leveraged so it doesn't end up in this situation again if it

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doesn't, you know, if it doesn't have, if the Bitcoin price goes down, there's some other adverse

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event. But fundamentally, we have to get the parties to focus on it and get in a room. So we've

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gotten responses back so far from the equity committee. We've gotten response back from the

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UCC. I'm relatively optimistic that at the end of the day, we're going to have consensus with

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those two groups. The equipment lenders, there is a good dialogue and a back and forth. I think that

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relatively optimistic we could find a solution there as well. The convertible shareholders are

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probably going to be the most challenging party for us to reach consensus with. But I do think,

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you know, we're being very creative in terms of what we're thinking about. I know that, you know,

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I have great respect for my friend Mr. Hanson and I know that he's reasonable to end of the day.

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And if there's any way to try and bridge the gap either through, you know, tool up mechanisms,

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the company just doesn't want, obviously, to leave all the value and have people recover more than 100

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cents. I think, you know, Mr. Hanson's perspective, I'm sure he'll give you, but, you know, they have

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a different view of value and they don't want to, you know, be left with something less than 100

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cents, if we believe those equity. So that's where the rub is. You know, I would prefer not to have

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the novel valuation, you know, Bitcoin mining company trial, if we can avoid it. But if we have

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to, we're prepared to go down that road. We are, but we're working really hard to get, you know,

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consensus where we can. And I think that at the end of the day, I don't want to just run the mediation

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and just have, you know, judges say, listen, here we are. I really like to try and narrow the

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differences, at least, before we get in a room with them. But I think getting the parties,

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frankly, in person and getting people focused, you know, at the end of next month, that's going

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to be what really, you know, if there's a way to turn the corner and get people to consensus,

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that's what's going to do it. But we've been busy or we are going to be prepared to file

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the motion to approve the disclosure statement by the middle of this month, because we want to keep

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the timing that we've set, which is to still try and emerge by the middle of, you know, by the end

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of September, certainly. But we're not disillusioned in that we think that we know we still have work

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to do with these parties. The good news is the company's doing well. Let me ask Mr.

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Sperling. No, I was just again, because I want to be helpful to the process. Would it be helpful

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to give you a hearing date for the disclosure statement? Yes, it would, Your Honor. What were

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you thinking? You know, Ms. Berkovich, you want to help me out there with, you know, I know we were

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planning for a mid-July filing and we did have a hold on just a second. So I asked a bad question.

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Ms. Berkovich, what was Mr. Schrock thinking? Your Honor, if we can get to, you know, a fairly

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good plan and be up by mid-July, I think the first week in August is the week that they're doing

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again, July 31st, would be a good week for the disclosure statement hearing. Do you want the

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disclosure statement hearing on July 31st? I think that's a little too early. I think if we could get,

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Your Honor, like around August 3rd or certainly the week following, that would be sufficient.

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And let me ask, again, disclosure statement hearings don't typically

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generate that many sparks. I am happy to do it later that week. I have a Laredo docket on

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Thursday the 3rd, so we could do it by video on the 3rd if that would work for everybody.

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I could also do it on the 7th if that is preferable. I will just go ahead and say, Your Honor,

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just give it where we are at the moment to avoid everybody else piping in and suggesting the 7th.

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I'll suggest the 7th just in the event that we don't have consent. Great. Has anyone got a

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scheduling conflict for the 7th that can't be managed? All right. Then why don't we do this,

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Mr. Strzok? I'll go ahead and schedule a hearing on the disclosure statement that is filed as it may

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be subsequently amended for August the 7th, 2023 at, you want late in the day or early in the morning?

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Or lunchtime? Lunchtime would be great, Your Honor. You know, shortly after lunch.

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Then if I did it at noon my time, that would be 1 o'clock for the folks on the East Coast, would that work?

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That's fine for me. All right. Then go ahead and notice it for August the 7th at noon Central.

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Will do, Your Honor. And thank you very much. So I'm probably going to have some comments at the end

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of the status conference, Your Honor, but I wanted to hand election absent. Any more questions over to Ms. Berkovich?

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All right. Thank you. Ms. Berkovich, good afternoon. Good afternoon, Your Honor.

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Brittany Berkovich from Wild Gotthold for the debtor. Moving on to slide six. I know, Your Honor,

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I read the plan and disclosure statement, so we don't need to delve into detail here, but really

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the theory of our plan is to provide a plan that hopefully gets the consensus with everyone,

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but provides a non-consensual task to emerge it if we can't reach consensus, particularly with the

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secured note holders. You know, we need a way out of Chapter 11. There's two classes of note holders,

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the April notes and the August notes, as we call them. They have slightly different rights.

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We classify them separately. And for each of those classes, if they accept the plan, they get their

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treatment 50% in equity and 50% in a new note, you know, total full pay for them. But either of those

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classes rejects the plan, the plan provides for a standard cram up note for the full value of the

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claim. The default treatment for everyone else or an entrance simply reflects the priorities

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that the Bankruptcy Code tells us, provides a waterfall of value. Their claims are on top.

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They get paid on full. Every secured creditor gets the present value in their secured claims,

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and they get to keep their collateral. We have many different classes of security creditors here.

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We all need convertible note holders. We have our mining and payment lenders. We have our non-mining

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and payment lenders. We have credit and mechanics claim holders. And we have mortgage claims. So all

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of them get their Bankruptcy Code and native treatment. Then unsecured creditors receive a 100%

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recovery in the form of new equity. And only after all non-priority creditors, or I should say,

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all non-subordinated creditors are paid in full, the residual value flows to equity holders.

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And if there are any subordinated creditors, as Mr. Schrock said, we do expect there to be value.

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And so equity does get a recovery here. In addition, as Mr. Schrock said, we try to be

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creative here. And we understand that creditors may have different interests in terms of what

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type of consideration they receive. So some of the classes have options to choose different

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treatments. There's a default treatment mandated by the Bankruptcy Code. But there's also options

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to let maybe a different form of consideration for slightly lesser claims and the like. We really

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are trying to please as many people as possible here, while still satisfying the Bankruptcy Code

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requirements. I appreciate the approach. It was an enjoyable read.

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The next couple slides get into very much detail about the plan treatment. Your Honor,

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about the plan, I'm sure that everyone was called and about the plan. I don't know that we need to

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get into each one, but I'm happy to give those a corporate like. I think that you've given everybody,

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if people want to know more, again, the documents are there. We're early on in the process. If you

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want to go through it, I'm happy for you to do that for folks, but I don't need it.

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Okay. No, I don't think it's necessary. Again, we've been having lots of conversations with

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all of the major stakeholders. We've also had smaller creditors reach out to us and we're

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taking all calls. I just wanted to ask a question about the plan to steal, freeze, and call.

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Mr. Schrock, me, Mr. Carlson, who's on the line too, we're happy to talk to you.

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And again, for those folks who are on the video, if you want a copy of the PowerPoint,

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it can be found at docket entry number 1009. Sorry for the interruption.

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No, we can also email it. Next we go to slide 10. There are different ways of showing that the

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business is doing well, as Mr. Schrock said. Here we show just really the company's cash position.

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And this slide is an update from something we showed the court previously that really

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shows that we are doing well as compared to our initial forecast in December. Not only that, but

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we've updated the budget periodically and we've exceeded all of our budgets from a cash position.

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So throughout September, even though the expected case duration has been extended by four months,

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our projected engine liquidity is forecast to be $48 million greater than our initial budget,

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when excluding the impact of dip draws and payments. And we used to report that we have not

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had to draw on the dip any further in support of the role of the workplace in dip in early February.

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So we've actually been repaying the dip in the last few months because of the excess cash.

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And Mr. Eric?

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So here to me.

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Yeah.

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No, my apologies. I was just going to say the improvements, or the improvement that has occurred,

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is it solely due to rise in price of the commodity or have there been structural changes that the

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expense structure is now much better? Or both?

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It's primarily as a result of increased, you know, resistance to self-binding through the factors we

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discussed last time that impact how much we get from our mining of the bitcoin, as well as,

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very importantly, the decrease in empowered enforcement. We've had favorable energy pricing

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since the beginning of the case, as well as obviously always good management of the company,

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but there haven't been many structural changes to the business. There have been a few. We mentioned

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some in our disclosure statement, some changes in the way we contract, for example, with our

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existing customers. But overall, there have been a few factors.

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Thank you.

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And let's go to the next step to sum up our presentation on page 12. Again, we're going to

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continue with our daily conversations with all of our major stakeholders and minor stakeholders.

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If necessary, we'll go to mediations for the remaining dispute. We hope not to get there.

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We've got a date there. You know, having a date, just like your honor gave us a date to file a plan

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that was very helpful. And having those couple nights around the clock to get the plan on file,

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and I think having a date for mediation will cause people to work hard to try to get to the date

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before then. Then you will file or disclose your statement and be back before your honor on August

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7th for approval. That brings us to confirmation, you know, early to mid-September with a full exit

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by the end of the third quarter. Thank you.

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That concludes my presentation unless your honor has any further questions.

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I don't, but thank you.

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Other parties want to talk to you or have the honor, so we're happy to turn over the podium.

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No, of course. Thank you. I just didn't know if there were, if there was anything else the debtors

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wanted to address. Let me ask, let's see, somebody raise their hands. Mr. Wilkie.

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Oh, had you hit five star on your phone or do you have me double safety?

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It's become my standard. Can you hear me now? I can, thank you.

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I always wanted to make sure. Okay, Brett Miller.

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He's been long dead, but I'm here in his place today. Brett Miller, Wilkie Farr and Gallagher.

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I'm not quite sure why I automatically popped up as Wilkie in the box, but for the official

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committee of unsecured creditors, we've been working with the debtors regarding negotiations,

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regarding the business plan. We provided comments to the plan. Some of our comments made it into

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the file draft. Others remain on an open list. And we absolutely agree with the comments that

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creditors should be paid in full. I mean, I support Mr. Schrock and Ms. Bergen, which completely

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that it's a hundred cent case, but the devil's in the details and getting there is going to be

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interesting regarding valuation, regarding currency. We did make a counter proposal regarding

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the proposed no fit in the draft plan, which, you know, we're happy to sit down further and

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work out the details on that one. But the community does see the value here.

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Your honor is correct. The Bitcoin pricing itself and as Ms. Berkowitz said,

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the other factors make this a real solid case for a hundred cents creditors and

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something left over for equity. I'll let Mr. Hansen speak for his clients, but we also have to

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open up the dialogue with them and as well as with the equity committee and the equipment lenders.

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So the creditors committee is open for business and speaking with everyone and hope to facilitate

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getting a deal done as quickly as possible. I really appreciate the comments. I, because

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everyone's going to have to figure out how to manage uncertainty in this because it can just move

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really far, really quick. And so I appreciate everybody being flexible and creative and trying

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to figure out how to deal with that uncertainty. But thank you. Mr. Autry, you raised your hands.

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Thank you. Your honor, I was just demonstrating my technical, lack of technical skills. I apologize.

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No, you should have said I was just testing in case I had something important to say. I would have,

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I would have, I would have enjoyed that. Anyone else have comments they want to make? Mr. Hansen

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or Mr. Lohan, I'll come back to you. Mr. Hansen. Yes, go ahead, please. Good afternoon.

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Good afternoon, your honor. Can you hear me okay? Loud and clear. Thank you for checking.

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Thanks. Chris Hansen with Paul Hastings on behalf of the committee of convertible

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note holders, your honor. Your honor, I just say that we want to echo the debtor's sentiments.

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We want nothing more than an agreeable deal where we all come back to you and present a plan that

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everybody's on board with, what most people are on board with, and we can proceed to confirmation.

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The problem that we're having is we're struggling a little bit. The valuation, the business plan,

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the valuation that flows in the business plan that's in the plan of realization that was filed

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has equity in the money. And if you look at the plan, right, it's equity in the money.

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Right? It basically sets up a everybody can sense to it, and if you don't, we'll cram you down.

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And on the cram down side, especially when you think about what the debtor purports as a solvent

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entity cramming down, effectively having 1129B compliant debt from a convertible note perspective

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is one very interesting aspect. Another angle that is interesting is that the plan contemplates

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raising new capital in order to at least partially pay debt to this. So in the context of that, it

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really raises some interesting questions around the business plan value, and the business plan

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itself is really only applicable in the consensual sense. If there's a cram down here, and those

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debt service costs rise dramatically across the capital structure, there kind of needs to be a

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business plan. And so that's something that we need to evaluate too. And as I said, Your Honor,

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one of the struggles that we're having in terms of responding to the debtor, and again, just trying

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to be really open with you, Your Honor, is that we're struggling because it's not as easy as saying,

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oh, well, why don't we just adjust a little bit here or there on our treatment. As you can tell,

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there are an awful lot of secured classes of creditors around this capital structure.

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As Mr. Miller just pointed out, the debtor is saying, hey, we're going to pay everybody in full,

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and it just doesn't appear that that's possible. And so we're struggling a little bit with how

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we're going to respond because we're trying in our own head to think, well, if we pull level A,

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does that basically make the entirety of the process move? And how does that look? So it's

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been a little bit difficult for us to get there. We also obviously don't want to wind up in bankruptcy

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again anytime soon if we're taking back material not to debt based upon the volatile currency,

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which is probably the most important thing here. We all know how power goes up and down pretty

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regularly. We've got a curve and we can look out there and we can actually plan for it as opposed

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to Bitcoin, which seems to be a little bit difficult to guess where it's going. So we just want to

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make sure the court understands that. We understand the judges are ahead of time at the end of the

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month. That's fine. We're always happy to go talk to judges. If we need to, we'll see if we can work

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out on our own between here and then. But if we don't get there, then obviously we know, Your

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Honor, it's always open to giving everybody their day in court. We'll go through the evidence and

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the legal issues and then we'll agree on stuff. I just wanted to give you a little bit of a feel

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for where we are, Your Honor. Got it. No, thank you. And again, it all gets back, I think. I think

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we're just saying the same thing. You don't know how to manage the uncertainty. There are a couple

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of things that pop into my head. And again, I'm not a party. I'm not an advocate. I'm not a lawyer.

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And so I'm going to keep those thoughts to myself. The only reason I bring that up is that we all know

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who made me what I am. That's why so many people hate him. And it might be worth having a conversation

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with Isger sooner rather than later, because my guess is we'll probably tell you pretty close to

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the same thing. But again, you guys do what you want to do. Again, I agree with everything you said

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and I'll just wait to see what happens. Thank you, Your Honor. Mr. Lohan, I think you raised

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your hand. Did you opt to pull it back? No, Your Honor, I just took down. But I appreciate

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just one second of your time. Again, for the record, Brian Lowen, our own boarder on behalf

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of Fairing is one of the equipment lenders. And we agree with Mr. Schrock and Ms. Berkowitz that

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this company needs to lay out a bankruptcy. And we appreciate that the plan that filed is definitely

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the means to push this case forward. Now, we disagree with our treatment that was proposed

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under the plan. But like Mr. Miller, we have sent the debtors a counterproposal and we appreciate

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that the debtors have been constructive in their engagement. And we hope that the debtors and the

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court understand that we tried to work together, the equipment lenders as a group, and we did ban

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together six equipment lenders to create the counterproposal to try to streamline the discussion.

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Hopefully, we don't need to. But of course, we're always happy to participate in plan mediation.

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We certainly appreciate Judge Isgar's time and guidance in the process.

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I'm just trying to keep him busy when he has idle time. He's a pain to deal with. So no, it's...

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I'm thinking you guys.

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He's going to get bored. He had his last big confirmation hearing yesterday, he told us. So

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he's going to need some stuff to pull up this summer.

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See, what you heard, you got on video. I get the other 23 hours a day in person. So no, he's again...

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Quite frankly, for this, I encourage that conversation sooner rather than later,

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because I'm going to guess that he'll probably tell you something close to what I would say,

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and then none of you will like it, and then you'll go tweak it, and then you'll find common ground. So

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I encourage that sooner rather than later, in all seriousness. I do think that he would be really

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helpful. But again, you folks, as I say before, you're the best there are. So I trust your

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judgment. You do what you think is right for your constituents. Anyone else want to weigh in on any of this?

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All right. So Mr. Schroeder... Mr. Meyer.

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Apologies, Your Honor. David Meyer, Vincent Elkins on behalf of the Equity Committee. Just a few brief

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comments. I think no one can dispute here that all the market trends are working in the debtor's favor.

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And I think Mr. Schrock, Ms. Berkovich today... Mr. Schrock and Ms. Berkovich have highlighted that well.

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But we too, we believe this is a solvent debtor case. We believe that equity holders should

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receive significant and meaningful recoveries. If anything, Your Honor, our client has the

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need to have the why is the company here type attitude in the first instance. But we are, we are.

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And we too would welcome a conversation with Judge Isgerich if it comes to that,

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and would eagerly participate in mediations, except we're not able to reach a constructive

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resolution in the upcoming weeks. But I echo Mr. Schrock's comments that we're here and we'll

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continue to work with the company and all its stakeholders. Thank you. I expect nothing less,

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because you are who you are. Mr. Schrock, let me ask you. I've given you

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hearing date for a disclosure statement. Is there anything else that you believe that I can do to

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help move the process forward? I don't think so at this time, Your Honor. I think setting the date,

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you know, for filing the plan, giving us a disclosure statement hearing is really what we needed.

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I will say that we take to heart, you know, your comments around getting judges involved.

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If we need to get them involved sooner, we won't wait. We do have some ideas about how to bridge

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the gap. I do want to note that, you know, the senior management team, I think, will have with

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us in court the next time we're together. So if we need to talk a little bit more about the business,

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you know, questions around the business, how it's performing, what are some of the issues that we're

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dealing with, we're going to be prepared to do that. I do think also that the fact that this company,

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you know, we do intend this company, it's going to be a public company when we emerge.

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And so when you have that kind of public market that will be there for the company post-emergence,

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it does provide, I think, compared to at least for the private company, it provides a basis upon

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which you can start to see how can I solve for value? Are people going to be right? Are they

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going to be people wrong? You know, you can think of true love mechanisms and the like, and especially

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if people think that, if the value is there, you know, the proof will be in the pudding. So we're

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very cognizant of that. And at the same time, you know, we're trying to do the right thing by

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everybody here. So we really appreciate the time and we're going to continue working hard.

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I got it. Thank you. Anyone else have any requests or any comments they want to make?

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All right. Then everyone, please have a wonderful and safe holiday. Don't fly. Joking. Sort of.

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But anyway, please have a wonderful holiday and I'll see everybody soon. Thank you. We'll be

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adjourned until 2 30. Thanks, Ron. Thank you.