Molycorp Asks to Seal Data in Bankruptcy Ballot Materials
December 01 2015 - 10:50AM
Dow Jones News
Embattled rare-earths company Molycorp Inc. wants to keep
elements of its chapter 11 plan secret, including financial
projections and valuation analyses prepared by its advisers.
The request to seal information "temporarily" covers voting
materials prepared for creditors entitled to cast ballots on
Molycorp's plan to emerge from bankruptcy.
Molycorp filed for chapter 11 bankruptcy protection in June, its
prospects diminished by a change in Chinese trade policy that sent
rare-earths prices plunging. Rare earths are elements used in small
amounts in consumer electronics.
On Dec. 8, Molycorp is scheduled to ask a bankruptcy judge to
approve voting materials on a chapter 11 plan that provides for a
variety of possible outcomes of its restructuring. However,
Molycorp says it can't disclose fundamental financial information
until after the judge signs off on the voting materials.
The company says the secrecy is necessary to protect Molycorp's
financial information from the prying eyes of entities that have
been invited to submit bids on the company. Preliminary bids are
due after the hearing on the disclosure statement, a report that
sets out for creditors the information they need to decide how to
cast their ballots on a chapter 11 plan.
A spokesman for Molycorp declined to discuss the sealing motion,
which has been set for hearing the same day as the disclosure
statement, the report that is sent to creditors being asked to vote
on a chapter 11 plan. The question for the judge to weigh in
approving a disclosure statement is whether creditors have been
provided sufficient financial information to make a decision.
Molycorp's creditors won't get to test the plan's financial data
until after the voting materials are already approved, if the
company's sealing motion is approved.
Information Molycorp has asked to keep secret in its chapter 11
plan materials includes standard material shown to creditors when
their votes are solicited, such as projections, the value of
businesses and what the assets would be worth in a liquidation.
Court papers say creditors will get to see the information by
the time they're actually asked to vote on the chapter 11 plan.
Creditors have criticized Molycorp's sale process, raising
questions about timing and the information being provided. Molycorp
has countered with assurances that bidders will get complete,
accurate information about the businesses going up for sale.
Lawyers have said the company's rare-earths-processing business is
valuable, but the California mining facility is being mothballed
and may be offered for sale separately.
Bankruptcy-marketing processes routinely involve disclosure of
detailed financial information to prospective bidders. In a Nov. 11
court filing, Molycorp said it had provided "most" of the 25
entities that had indicated interest in the company "a
comprehensive confidential information memorandum regarding the
Debtors' businesses."
In court papers, bondholders said their financial adviser had
identified "multiple problems" with the company's business plan,
and said "management was unable to justify the new projections in
basic terms." Bondholders said they were concerned the problems
they identified would harm the sales process.
In broad outline, Molycorp is pursuing what's called a
"dual-track" bankruptcy-exit proposal. If it gets a good enough
price, it will sell the company. If not, it will reorganize. The
decision to sell the whole company, or just part, will be made
after Molycorp tests the market for offers.
Ironshore Indemnity, Inc., Lexon Insurance Co. and Bond
Safeguard Insurance Co., which have issued millions of dollars
worth of bonds for Molycorp's California operation, objected to the
sale procedures, warning the process "dooms this case to an
environmental quagmire."
Judge Christopher Sontchi has ordered Molycorp and senior lender
Oaktree Capital Group (OAK) into mediation with unhappy creditors
who allege the company has already handed control of its fate to
Oaktree. Oaktree and Molycorp deny the allegations, but bondholders
and unsecured creditors sought to open the bankruptcy proceeding up
to competing chapter 11 plans.
Write to Peg Brickley at peg.brickley@wsj.com
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(END) Dow Jones Newswires
December 01, 2015 10:35 ET (15:35 GMT)
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