Molycorp Creditors Said Poised to Engage Blackstone, WeissJodi Xu Klein
A group of Molycorp Inc.’s junior bondholders led by Apollo Global Management LLC is close to hiring Blackstone Group LP and law firm Paul Weiss Rifkind Wharton & Garrison LLP to advise them on restructuring talks with the rare-earths miner, according to two people with knowledge of the matter.
Apollo will lead the discussions with Molycorp, said the people, who asked not to be identified because the negotiations are private. The Leon Black controlled private-equity firm owned about $132.4 million of Molycorp’s $230 million of 3.25 percent convertible debt due June 2016 on Dec. 31, according to data compiled by Bloomberg.
The talks will focus on addressing the maturity of those securities, including the possibility of exchanging them for equity, said the people. Molycorp, whose stock price has plunged by more than 90 percent during the last 12 months as commodity prices fell, has about $1.6 billion in borrowings.
A failure by Molycorp to repay these convertible notes on time will trigger an early repayment of borrowings under a $400 million credit line provided last August by Oaktree Capital Management LP. Molycorp had drawn $250 million from it as of Dec. 31, according to regulatory filings. That debt is currently due in 2019.
Charles Zehren, a Apollo spokesman at Rubenstein Associates Inc., and Peter Rose, a spokesman at Blackstone, declined to comment. Jim Sims, a spokesman at Molycorp, also declined to comment. Lisa Green, a spokeswoman at Paul Weiss, didn’t immediately respond to e-mail messages and phone calls seeking comment.
Molycorp, which hired advisers Miller Buckfire & Co LLC and Jones Day, has reported 12 straight quarterly losses, according to data compiled by Bloomberg. The miner has been plagued by cost overruns and delays in its Mountain Pass facility in California, which boasts the largest rare-earth metals deposit outside of China.
The company said this week the business continued to face challenges due to “depressed demand” for the products and “delayed ramp-up of operations at our Mountain Pass facility.”
Ramping up production at Mountain Pass is crucial for Molycorp to tap the rest of $150 million of Oaktree loans, which require the company to hit two financial targets. One of them is to produce at least 4,000 metric tons a quarter for two consecutive periods by the first quarter of 2016. On Monday, the company reported the production at Mountain Pass for 2014 was 4,769 metric tons.
The convertible notes last traded at 16.75 cents on the dollar on Feb. 24, down from 76 cents on Sept. 10, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The Greenwood Village, Colorado-based company, the biggest rare-earths miner outside China, said in an earnings statement on Monday that it may not be able to continue as a “going concern” if it cannot restructure its debt.