Molycorp Inc. is in talks with a group of senior creditors for a $150 million loan that would see the rare-earths miner through a bankruptcy, according to three people with knowledge of the matter.
The debtor-in-possession loan would be junior to the company’s $400 million first-lien credit line from Oaktree Capital Group LLC, said the people, who asked not to be named because the discussions are private. More than two-thirds of holders of the miner’s $650 million of 10 percent, first-lien bonds maturing in June 2020 have consented to the plan, two of the people said.
Molycorp shares fell 14 percent to 60 cents. The stock traded as high as $79.16 in 2011.
Jim Sims, a spokesman at the Greenwood Village, Colorado-based Molycorp, and Carissa Felger, a spokeswoman for Oaktree Capital at Sard Verbinnen & Co., declined to comment.
Molycorp, which had $1.73 billion of long-term debt on March 31, said that month that it may not be able to continue as a “going concern” if it can’t restructure its obligations, and it hired Miller Buckfire & Co. and Jones Day to evaluate its capital structure.
The group of first-lien bondholders, advised by Houlihan Lokey and Kramer Levin, submitted the plan late April including swapping a portion or all of the notes into equity, the people told Bloomberg then. Molycorp has been focusing on extending the maturity of its $206.5 million of 3.25 percent convertible notes that mature in June 2016. Failure to retire majority of the notes on time would trigger early repayment of the Oaktree borrowings.
The convertibles last traded at a record low 4.75 cents on the dollar May 6, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The first-lien notes ended the following day at 50 cents to yield 29.7 percent.
Molycorp, which has been suffering from depressed rare-earths prices and a slower-than-expected ramp-up in production at its Mountain Pass facility in California, on May 7 reported an 8 percent decrease in revenue to $106 million in the first quarter. The commodities prices dropped 16 percent in the period, averaging $30.97 per kilogram from $36.91 in the fourth quarter. Molycorp reported $134 million in cash at the end of the period.
Production at Mountain Pass rose to 1,479 metric tons, increasing 11 percent from 1,328 metric tons in the fourth quarter of 2014.