Molycorp Said to Push Ahead With Plan as Creditor Talks Failby
Molycorp Inc. is moving forward with a restructuring plan that some creditors said would benefit its senior lender, Oaktree Capital Management LLC, after a mediation aimed at devising a new plan failed, according to people with knowledge of the matter.
The parties couldn’t agree to terms on how to handle a sale of assets, said the people, who asked not to be named because the talks were private. As a result, the company’s existing restructuring plan remains in effect.
Creditors of the bankrupt rare-earths miner had been engaged in negotiations over the past two weeks after some lenders accused Molycorp of running a “specious sale process” that benefited Oaktree.
The contending creditor groups, which included JHL Capital Group LLC, the largest holder of the company’s senior bonds, maintained that the process gave Oaktree veto power and made it impossible to persuade potential buyers to join an auction. The challenging creditors asked for a 10 percent stake in Molycorp’s assets outside the U.S. and 10 percent in warrants, but Oaktree countered with 5 percent in equity and 15 percent in warrants at various prices, said the people.
The mediation’s collapse means the contending creditors now must try to devise a new sales process if they seek to challenge the current plan as the bidding continues.
Ana Chapman, president of JHL Capital, which leads one of the creditors groups, and Alyssa Linn, a spokeswoman for Oaktree at Sard Verbinnen & Co., and Jim Sims, a spokesman at Molycorp, declined to comment.
Under the current agreement that was submitted on Nov. 3, Oaktree must be paid $514 million for an alternate plan to go forward. That amount includes a $113 million fee for paying down the debt early. The committee representing Molycorp’s unsecured lenders said in a Nov. 6 court filing that the arrangement enables Oaktree to “drive away other potential bidders.”
The first-round bids were due on Dec. 11 and Molycorp attracted little interest from potential buyers for the entire company, which includes assets outside the U.S. combined with the idled Mountain Pass mine in California, people said last week.
Molycorp’s $650 million of 10 percent first-lien notes maturing June 2020, whose holders are among the creditors questioning the sale process, last traded at 5.25 cents on the dollar on Oct. 22, dropping 90 percent in value this year, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Molycorp shares closed at 31 cents Tuesday, dropping 96 percent in value this year.
The miner filed for bankruptcy in June following a collapse in prices for rare earths, which are chemical elements used in technology such as smartphones, electric cars and wind turbines.
The case is In re Molycorp Inc., 15-bk-11357, U.S. Bankruptcy Court, District of Delaware (Wilmington).