September 20, 2022 – The Debtors notified the Court that they have delayed a sale hearing (at which approval of their Disclosure Statement would also have been considered) from September 29th until October 19th. 

The delay presumably relates to what is now a protracted auction beginning on September 13th and in respect of which the Debtors have made no public comment (the Debtors were required to notify the Court promptly that the auction had been cancelled if no qualified bids had been received by a September 6th bid deadline). 

The Debtors had earlier extended auction/sale deadlines by two to three weeks (with the sale hearing delayed from September 8th until September 29th) because "existing and potentially new bidders have requested additional time to perform diligence and make the best bid they can." 

The WSJ (amongst others) is reporting that the Debtors are considering a pair of substantially similar bids from crypto exchanges FTX and Binance with "the current bid from Binance…about $50 million, slightly higher than the competing bid from FTX" without naming sources. The lengthy delay is more than one would normally expect in respect of a concluded auction where a Board simply needed more time to consider the relative value of competing offers and (along with the reference to Binance's "current" bid) suggests that the auction is ongoing.

Bidding Procedures

On August 22nd, the Debtors notified the Court of revised bidding procedures [Docket No. 328] that postponed the sale hearing to September 29, 2022 from September 8th, as "existing and potentially new bidders have requested additional time to perform diligence and make the best bid they can."

Under the newly proposed timeline, the Debtors' Plan confirmation hearing will be pushed back two weeks to November 15, 2022.

According to the revised bidding procedures notice, "[O]n August 5, 2022, the Court entered the Order (I) Approving the Bidding Procedures and Related Dates and Deadlines, (II) Scheduling Hearings and Objection Deadlines with Respect to the Debtors’ Sale, Disclosure Statement, and Plan Confirmation, and (III) Granting Related Relief [Docket No. 248] (the 'Bidding Procedures Order'). The approved bidding procedures (the “Bidding Procedures”) were attached as Exhibit 1 to the Bidding Procedures Order….

Since the entry of the Bidding Procedures Order, existing and potentially new bidders have requested additional time to perform diligence and make the best bid they can. The Debtors recognize the need to progress these cases swiftly but cannot do so at the expense of maximizing value. Accordingly, a modest amount of additional time is necessary to ensure value is maximized."

The Debtors' original August 5th bidding procedures motion [Docket No. 126] provides: “…before the Petition Date, the Debtors faced a short-term ‘run on the bank’ due to the downturn in the cryptocurrency market and the 3AC default and subsequent liquidation. The Debtors commenced these chapter 11 cases to avail themselves of the benefits afforded under chapter 11, including a breathing spell to focus on ensuring a bright path forward that maximizes the value of their enterprise and for the benefit of all stakeholders.

Before the commencement of these chapter 11 cases, the Debtors and their proposed investment banker, Moelis & Company LLC (‘Moelis’), initiated a comprehensive marketing process to solicit interest in two general deal structures: (a) a Sale of the Debtors’ entire business; and (b) a capital infusion whereby a third party (individually or as part of a consortium) would provide the requisite funds necessary (a ‘Financing,’ and together with a Sale, a ‘Transaction’) to allow the Debtors to weather the current volatility and dislocation in the cryptocurrency industry.

This process, which is described in detail in the Declaration of Jared Dermont Regarding the Debtors’ Marketing Process and in Support of the Debtors’ Chapter 11 Petitions and First Day Motions [Docket No. 16], included an initial outreach to over 60 potential financial and strategic partners globally (‘Potential Counterparties’) — a process that has now continued in earnest post-petition with outreach to 83 Potential Counterparties in the aggregate. These Potential Counterparties are made up of domestic and international strategic cryptocurrency related businesses and private equity and other investment firms that currently have crypto-related investments and/or historical experience investing in the cryptocurrency industry.

By July 21, 2022, over 37 of the Potential Counterparties have entered into confidentiality agreements with the Debtors. Parties who executed a confidentiality agreement received a copy of the Debtors’ investor presentation and access to a virtual data room containing thousands of pages of information regarding the Debtors’ business operations finances, and material contracts. In addition, parties that signed confidentiality agreements were offered the opportunity to participate in telephone conferences with the Debtors’ management team as well as to request additional due diligence information.

Intent on moving expeditiously through the chapter 11 process and to generate positive momentum, the Debtors filed the Joint Plan of Reorganization of Voyager Digital Holdings, Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 17] on the first day of these cases. To ensure the Debtors are maximizing value, the standalone Plan complements the Debtors’ ongoing marketing efforts by setting a floor against which potential Transactions will be measured.

In furtherance of this goal, the Debtors seek to establish formal Bidding Procedures to set the guidelines for a potential Transaction. The Transaction will either be consummated through: (a) a Plan; or (b) a Sale of all or substantially all of the Debtors’ Assets. The Debtors believe that the Bidding Procedures will best facilitate a potential Auction, thereby garnering the best recovery available for all stakeholders. The Bidding Procedures provide for substantial flexibility with respect to the structure of any Transaction and allow the Debtors to select a Stalking Horse Bidder and provide Bid Protections on the terms described in the Bidding Procedures if the Debtors believe, in an exercise of their business judgement, that doing so will generate the best Transaction for their estates….

Approval of the Bidding Procedures at the second day hearing in these chapter 11 cases, along with the proposed Sale Schedule, will provide the Debtors with the most optionality to move expeditiously through these chapter 11 cases should one of the many interested purchasers come forward with a viable indication of interest. To maximize the competitiveness of any bidding process, the Debtors also seek authority to (a) select one or more bidders to act as a stalking horse bidder (each, a ‘Stalking Horse Bidder’), and (b) in connection with any Stalking Horse Bidder and related agreement, provide customary bid protections in an amount no greater than three percent of the purchase price contemplated by any stalking horse agreement with a Stalking Horse Bidder (the ‘Bid Protections’) to the extent the Debtors determine that provision of such Bid Protections would be an actual and necessary cost of preserving the value of the Debtors’ estates”.

Revised Key Sale Dates

• Bid deadline: September 6, 2022
• Auction (if necessary): September 13, 2022
• Sale objection deadline: September 22, 2022 (this date has not yet been amended, but presumably will be)
• Sale hearing: October 19, 2022 (was September 29, 2022)

Prepetition Sale Efforts

The Debtors' "robust" prepetition marketing efforts generated liitle interest in either of the Debtors' proposed dual paths (ie a sale or "capital raise") with investment banker Moelis' efforts generating a single (ultimately unacceptable) proposal from the 60 parties (22 NDAs) they contacted. The Ehrlich Declaration (defined below) does, however, suggest that there were "indications" of interest in respect of an in-court sale process. Ehrlich provides: "In late June 2022, the Company, with the assistance of Moelis, commenced a comprehensive, dual-track marketing process to solicit investor appetite in either (a) a sale of the Debtors’ entire business to either a financial sponsor or a strategic company in the cryptocurrency industry and (b) a capital raise whereby a third party (individually or as part of a consortium) would provide a capital infusion into the Debtors’ business enterprise. I understand that Moelis reached out to 60 potential financial and strategic partners across the globe, including domestic and international strategic cryptocurrency-related businesses and private equity and other investment firms that currently have cryptocurrency-related investments and/or historical experience investing in the cryptocurrency industry. Ultimately, I understand that 22 parties entered into confidentiality agreements with the Debtors.

I understand that the marketing process yielded one proposal for an out-of-court financing. The Company determined that the proposal was not actionable, however, as the conditions precedent to the proposal and the pro forma capital structure contemplated thereunder were not achievable. I understand that no other counterparty was willing to participate in an out-of-court transaction on the timeline required. However, I understand that several parties indicated interest in participating in a potential in-court transaction. Accordingly, Voyager and its advisors continued to discuss potential transactions and provide diligence to third parties on potential in-court and out-of-court restructuring transactions.”

About the Debtors

According to the Debtors: “Voyager Digital Ltd. is a fast-growing, publicly traded cryptocurrency platform in the United States founded in 2018 to bring choice, transparency, and cost efficiency to the marketplace. Voyager offers a secure way to trade over 100 different crypto assets using its easy-to-use mobile application, and earn rewards up to 12 percent annually on more than 40 cryptocurrencies. Through its subsidiary Coinify ApS, Voyager provides crypto payment solutions for both consumers and merchants around the globe.”

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