Molycorp Lays Out Financial Estimates
December 28 2015 - 6:50PM
Dow Jones News
Molycorp Inc. laid out the financial facts that it says
justifies allowing it to exit chapter 11 bankruptcy in trimmed-down
form as opposed to being pushed into a liquidation.
The rare-earths company says it would be valued at $252 million
at most in a liquidation scenario, far from enough to cover more
than $2 billion in debts. Oaktree Capital Group, a major lender,
would collect, at most, about half of what it is owed if Molycorp's
bid to exit bankruptcy whole fails, according to estimates in new
bankruptcy-court documents.
The estimates are to be included with voting materials to be
sent to creditors asked to vote on the distressed company's fate.
Set for court review in January, the voting materials set out
Molycorp's case for confirmation of its chapter 11 plan. January
will see a test of the adequacy of the information the company has
provided to creditors. To win confirmation, Molycorp must
demonstrate its chapter 11 reorganization plan will be better for
creditors than liquidating the company.
Reorganized, Molycorp's financial advisers estimate the
surviving businesses will be valued at about $417 million and will
produce profits, according to papers filed Thursday. They estimate
that if Molycorp is sold for scrap in a distressed scenario, well
more than $1 billion in debts will go unpaid.
Molycorp's chapter 11 plan, and Oaktree's role in producing it,
are points of contention in proceedings in the U.S. Bankruptcy
Court in Wilmington, Del. The lender arrived when Molycorp ran into
trouble in 2014. Oaktree stepped in front of other lenders and
negotiated a favorable position in the capital structure that has
allowed it significant leverage in saying what is set to become of
the company.
U.S. Trustee Andrew Vara has objected to Molycorp's chapter 11
plan on the basis the company has ceded too much power to Oaktree
when it comes to weighing options, including a sale in lieu of a
reorganization. Creditors are threatening to sue to test the
strength of Oaktree's claims on Molycorp assets.
A change in Chinese trade policy upended Molycorp's business and
sent the company to bankruptcy. Once the Chinese government lifted
restrictions, prices fell for rare earths, elements used in small
amounts in consumer electronics.
Molycorp filed for chapter 11 in June, looking for a way to
survive the pricing shift. Its U.S. mining operation in California
was idled, while creditors focused their attention on the
relatively healthy "Neo" business line, which continued to operate
outside bankruptcy. The Neo businesses process rare earths, and are
based largely in Asia. Molycorp's financial analyses confirm what
creditors have said, that the processing business is the company's
hope for a future.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
December 28, 2015 18:35 ET (23:35 GMT)
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