Molycorp Asset Auction a Flop, Company to go Largely into Hands of Senior Creditor

Mar. 20, 2016

No acceptable bids

Despite allegedly receiving a host pre-auction interest, bankrupt U.S. rare earth miner Molycorp’s asset auction last month did not attract any acceptable bids, triggering the pursuit of a chapter 11 plan that will turn over ownership of most of the company to senior creditor Oaktree Capital Group.

Bidders reluctant to take ownership of Mountain Pass mine

Molycorp’s junior bondholders bid to acquire the company’s USD $1.7 billion Mountain Pass processing facility in the U.S. but were rejected for what the company felt were too many conditions accompanying the offer.

A major point of contention is bondholder’s reluctance to take ownership of the adjacent Mountain Pass mine due to uncertainties about closure costs and possible environmental liabilities.

Foreign entity said to be eyeing Mountain Pass mine and processing operations

At the end of March Molycorp was granted court approval to exit bankruptcy through a restructuring plan that transfers an optimized and thinned-out version of the company to Oaktree. Unsecured bondholders will own a minority stake in the new business.

Additionally, bondholders won approval to buy mineral rights and intellectual property associated with the Mountain Pass mine and processing facility but will forego ownership of the mine itself. Bondholders claim to be in discussions with a foreign entity about a possible purchase of Molycorp’s Mountain Pass mine and processing operations.

The bondholder’s discussions with the interested buyer are aimed at ironing out a deal that complies with U.S. laws regarding foreign ownership of critical infrastructure, or assets concerning national security. As such, any possible deal with a foreign entity would be likely to emerge as a joint venture with a U.S.-registered party.

 

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