Molycorp, Inc., which filed for Chapter 11 bankruptcy protection in June, on November 3 filed a joint plan of reorganization with the U.S. Bankruptcy Court for the District of Delaware. That plan, which was filed with its affiliated debtors, proposes an emergence from Chapter 11 through either a stand-alone reorganization that would substantially de-lever its balance sheet or a sale of substantially all of its assets.
Molycorp is the only U.S. miner and producer of rare-earth elements, 15 elements used as niche ingredients in magnets, batteries, catalytic converters and other high-tech products. At one time, the mine its corporate predecessor operated in a remote section of San Bernardino County was the world’s leading producer of lanthanides – rare earth elements. But the mine was closed down in the 1990s because of environmental concerns and during its hiatus, the Chinese leapt into the breach and became the owners and operators of mines producing in excess of 80 percent of the world’s rare earth elements.
Molycorp was a newly created company that took over the assets of the company formerly known as Molycorp that was owned by Unocal. It represented a daring effort by an American company to reassert American primacy in the provision of materials crucial to hi tech development and production.
Molycorp struggled, however, and for three straight years before its Chapter 11 filing, suffered quarterly losses.
The exit plan represents a major milestone in Molycorp’s bankruptcy process and, if approved, would position the company to successfully emerge from Chapter 11. The plan is supported by the company’s largest pre-petition secured creditor and its post-petition lender, investment funds managed by Oaktree Capital Management, L.P. and its affiliates.
The plan envisions a dual-track process pursuant to which the company’s assets are being actively marketed for sale, either as a whole or through the separate sale of its business units. The company’s four business units are chemicals & oxides, magnetic materials & alloys, rare metals, and resources, which consists primarily of its assets at the Mountain Pass Mine, located on the south flank of the Clark Mountain Range, just north of the unincorporated community of Mountain Pass in San Bernardino County’s extreme northeast corner. The company will pursue a plan process to sell its assets if the bid or bids received exceed certain value thresholds set forth in the plan. If the bids do not exceed the threshold values, the company will be reorganized with Oaktree as its shareholder around its chemicals & oxides, magnetic materials & alloys, and rare metals business units, and its assets at Mountain Pass will be sold.
The company has begun reaching out to a broad range of prospective buyers. The first round of non-binding indications of interest are due by December 1, 2015. Interested parties should contact Alexander Tracy of Miller Buckfire at Alexander.tracy@millerbuckfire.com.
“If approved, the plan would help to significantly reduce our $1.9 billion of debt and cut our interest expense, putting us on a more solid financial and operational footing going forward,” said Geoff Bedford, Molycorp president and chief executive officer.
Molycorp and its North American subsidiaries, together with certain of its non-operating subsidiaries outside of North America, filed voluntary petitions under Chapter 11 of the Bankruptcy Code with the court on June 25, 2015. The company’s operations outside of North America, with the exception of non-operating companies in Luxembourg and Barbados, were excluded from the filings. Molycorp Rare Metals (Oklahoma), LLC, with operations in Quapaw, Oklahoma, also was excluded from the filings as it is not 100% owned by the company.
Molycorp is being advised by the investment banking firm of Miller Buckfire & Co. and is receiving financial advice from AlixPartners, LLP. Jones Day and Young, Conaway, Stargatt & Taylor LLP have acted as legal counsel to the Company in this process.