Molycorp Inc. laid out the financial facts that it says justify allowing it to exit Chapter 11 bankruptcy in trimmed-down form as opposed to being pushed into a liquidation.
The Greenwood Village-based 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 of debt. 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. To win confirmation, Molycorp must demonstrate its 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 of 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 will 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.
and bankrupted the company. Once the Chinese government lifted restrictions, prices fell for rare earths, elements used in small amounts in consumer electronics.
Molycorp filed for , looking for a way to survive the pricing shift. Its , 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.
