Molycorp Said to Begin Sale of Non-U.S. Assets in Bankruptcy

  • Miner said to contact potential buyers in Asia and U.S.
  • Assets said to include Chinese, Thai, Canadian facilities

Molycorp Inc., the bankrupt rare-earths miner, has started marketing assets located outside the U.S. as creditors press the company to increase its valuation, according to two people with knowledge of the matter.

The company is distributing pitch books to prospective buyers in Asia and in the U.S., said the people, who asked not to be named because the process is private. A formal sales process may start as early as next week, the people said.

Molycorp is reaching out to a large group of possible buyers including Inner Mongolia Baotou Steel Union Co., Aluminum Corp. of China, China Minmetals Corp., and China Nonferrous Metal Mining Co., said the people. The assets that are on the block include processing facilities in China, Thailand and Canada.

The rare-earths miner, which filed for bankruptcy in June, is gearing up to sell its overseas assets after creditors pushed management to find ways to increase its valuation in bankruptcy. Previously, the company planned to go through a restructuring with creditor Oaktree Capital Group LLC without selling assets. 

Creditor Push

JHL Capital Group LLC, Molycorp’s biggest senior bondholder, said in a Sept. 9 letter to the miner’s board that "rather than exploring all potential paths," Molycorp "seems to be singularly focused on a standalone reorganization plan."

"It is paramount" that Molycorp explores "all options to maximize value" and "JHL urges the board to immediately take the following steps" including "a sale process for all of Molycorp’s assets," the creditor said in the letter.

Molycorp’s $650 million of 10 percent first-lien bonds maturing June 2020, of which the Chicago-based hedge fund owns about 45 percent, have tumbled to 5.63 cents on the dollar from a high of 64 cents in March, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They were trading at 34.5 cents before the company filed for Chapter 11 on June 25.

Plan Changes

The company changed its plan after U.S. Bankruptcy Judge Christopher Sontchi on Oct. 2 rejected a $2.9 million bonus for top managers. Sontchi said the payment would take away any motivation for them to help reorganize or sell Molycorp while in bankruptcy.

“If this case turns into a sale, which I would say is more likely than not,” the requirements for the bonuses would be easy to meet, creditor attorney Luc Despins at Paul Hastings said last week.

The company is advised by Miller Buckfire & Co. and law firm Jones Day.

Jim Sims, a spokesman at Greenwood Village, Colorado-based Molycorp, declined to comment.

Calls to Inner Mongolia Baotou Steel Union, Aluminum Corp. of China and China Minmetals went unanswered on Wednesday while a telephone operator at China Nonferrous Metal Mining said that company’s executives weren’t available. Markets in China are closed from Oct. 1 to Oct. 7 for the Golden Week holiday. 

The facilities for sale have received unsolicited interest from Asian buyers, people with knowledge of the matter said in August. The assets produce and process metals, including neodymium, which is used in making magnets for electric cars and wind turbines.

Molycorp’s U.S. mine at Mountain Pass in California is scheduled to be partially shut down as part of the restructuring.

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