American court hearing recordings and interviews - Season 3. Episode 10. October 10, 2023. In re Core Scientific, Inc et al chapter 11 bankruptcy case number 22-90341, audio of hearing held in bankruptcy proceedings pending before the U.S. Bankruptcy Court for the Southern District of Texas #crypto

Episode Date: October 11, 2023

publicly available hearing audio

All right. Good afternoon, everyone. This is Judge Jones. The time is 1 o'clock central. Today is October the 10th, 2023. This is the docket for Houston, Texas. On the one o'clock docket, we have the jointly administered cases under case number 22-90341, core scientific ink. Everyone, please don't forget to record your electronic appearance. Such a quick trip to the website, doesn't matter whether you're in the courtroom or on go-to meeting. Following the electronic link is the way that we note your official appearance this afternoon. For those of you who are in the courtroom, and Mr. Carlson, you're already there, but I'm going to say it anyway. If you do rise to speak, please make sure you come to the lectern so that you can both be seen and be heard.

With respect to those folks who are on the go-to-meeting, have activated the hand-raising feature. If you know you're going to be speaking, if you give me a five-star on your telephone, I'll get you unmuted, and we can do that at any time if you change your mind. First time that you do speak, if you would, please state your name and who you represent. It really does help the court reporter do what is a very difficult job these days. And finally, we are recording this afternoon using court speak. We'll have the audio up on the docket shortly after the conclusion of the hearing. Mr. Carlson, I have taken a look at the declaration of Mr. Brose at 1316.

I've seen the revised order at 1315. Not that that should in any way change your presentation. I just want you to know that I'd read them. Great, thank you, Your Honor. And if Carlson and Wau-Ga-Ochon-Bath, the debtors, and going with me in the courtroom here, Christine Calabrese, Eppelina Burbridge, and Austin Crabtree. Ms. Calabrese, will be handling the hearing today.

All right, thank you. Calabrese, good afternoon. Good afternoon, Your Honor. Christine Calabresean, Manjee, is on behalf of the debtors. On debtor's motion for authority to enter into the Cottonwood II agreements, Your Honor, blocketed at 1260. So, Your Honor, from the debtors, I have Michael Broes, joining remotely. He is the declarant for the debtors on the motion, as you just referenced.

I'd like to, you know, please move Mr. Brose's declaration into evidence, documented as Exhibit 8 to the witness and exhibit list at 1317-8. All right. Thank you. Any objection to the admission of Mr. Brose's declaration found on the witness and exhibit list at 1317-8? Also, just to confirm, it is the same declaration that's found at 1316 correct that's right right that's the one I read and I just want to make sure didn't read something different all right any objections five star on your phone if you wish to be heard and haven't already done so all right it's admitted anyone wish to cross-examine mr. bros all right thank you mr. bros yes ma'am and your honor if it's okay with the court may

mr. bros be excused for the remainder of the proceeding absolutely Mr. Rose, you're free to go as you deem appropriate. So, Your Honor, I have a presentation prepared for the court. It's docketed at 1320. Right. And who would you like to have control? So, Your Honor, I think in this circumstance where there are no objections filed, rather than walk through the presentation slide by slide,

there are just a few select presentations I'd like to draw the court's attention to. And since I'm stuck here really with Mr. Crabtree and Mr. Carlson, as my options for remote handling. I think, Your Honor, I'm going to just go with hard copies if that works for the court. So what I'll do is, hold on, let me see if I can do this. Alternatively, Your Honor, Mr. Crabtree could be prepared to pull it off if that's helpful. No, I can do it.

Just let me find it. So it's at the back of 1320, right? Yeah, it's at the back of 1320 behind the notice. Okay. Starting at page 5. So let's do this and then what I will do is I will share my screen. Okay, everybody can see the PowerPoint, and if you would just direct me to the page,

I will be glad to turn it there. Sure, Your Honor. So we're going to start at slide seven of the PowerPoint. Thank you, Your Honor. And we're only going to two slides, so this shouldn't be too much of the runaround. But look, the top line, Your Honor, is that the debtors are seeking authority to enter into and perform under the Cottonwood 2 agreements,

which concern an existing and operational data center facility that the debtors operate out in Reeves County. So if we take a look at slide 7, you could see at the bottom right-hand corner of the slide. This is the Cottonwood 1 property. This is an existing facility that the debtors own and currently operate. They host over 12,000 miners at this facility and made a significant investment in developing and building out this facility. You'll also notice, Your Honor, at the upper left-hand corner, there's a TNMP electrical power station. And it's from that TNMP station that the debtors need to run a transition line to get energy from that TNMP's. from that TNMP substation to the Cottonwood substation,

which is in the bottom hand right corner on the Cottonwood One property. And on this demonstrative, you can see that the transmission line is noted in red. And that transmission line runs over attractive land that is owned by landlord. So debtors approached landlord for an easement over that land, and landlord was willing to enter into an easing agreement

subject to the debtor is also leasing the cottonwood two property, which you see in the middle of this demonstrative here. Yes, ma'am. And in addition to the lease of the Cottonwood 2 property to make that property usable, the debtors need a distribution easement, which is that line running in green, which would take electricity, energy from the Cottonwood 2 property, from the Cottonwood 1 property and Substation to Cottonwood 2. And then this little blue access easement, which gives the debtors ingress and egress to the Cottonwood 2 property. Sure. So as a bundle, Your Honor, just to recap all of that, we have four operative agreements bundled into the Cottonwood Agreements. It's the least agreement for the Cottonwood 2 property.

The easement needed to run from the TNMP substation to the Cottonwood substation, which we call the transmission easement, the easement to run from the Cottonwood 1 property to Cottonwood 2 property, which we call the distribution easement in the motion. And then that access easement, which was that little blue line, granting ingress and egress to the property. So, Your Honor, if I could direct you to slide 11 of the deck. And I should say briefly before moving on, with respect to the Cottonwood Two property,

having that extra property gives the debtors the optionality to expand its already existing mining operations onto that additional nearby tract of land. So you can see from slide 11, these are the terms of the agreement. They have uniform terms across all four. It's a 99 year lease term. term. It's consideration of $1 million for the 99 year lease for all four agreements and the

easements. And if you go to the next slide, Your Honor, slide 12, you'll see that if the debtors are not given approval by the court to enter into these agreements by October 16th, the landlord may elect to remove the debtor's option or, you know, terminate its end of of the bargain. So, Your Honor, our view is that entering into these agreements as a sound exercise of the debtor's business judgment and Mr. Brose's declaration supports that. These agreements will allow the debtors to continue energizing the data center facility located on Cottonwood One, which is where, as I said, the debtors currently host over 12,000

minors and made a substantial investment in developing that property. The debtors also have permission to energize up to 234 megawatts across the Cottonwood facility from Urquot and TNMP. In addition to energizing Cottonwood 1, the Cottonwood 2 agreements would also provide debtors with the optionality, as I said, of expanding their operations to the Cottonwood 2 property. And in this circumstance, the $1 million consideration under the Cottonwood 2 agreements is reasonable and for a really extended lien lease and easement agreement term. Your Honor, I tried to keep it brief for you. I'm happy to address any questions. that the court may have. Thank you, and I appreciated the visual.

It helped a ton. Anyone else wish to be heard? All right, I had the opportunity to read through the motion. This is just a state business judgment question. I have no reason to do anything other than to conclude that this is just good business sense. Consideration seems rational to me, and the optionality makes perfect sense in terms of future opportunities. I there are no other or there are no other outstanding objections or anyone having another opinion I will grant the motion I have taken a look at the revised form

border which is 1315 dash one slow this afternoon I'll sit here and wait until it pops it up on the screen for me anything else we need to talk about today that's all for my honor right terrific anyone else have anything that need to raise All right, and we'll be adjourned. Thank you everyone, and we're adjourned until 2 o'clock.