Molycorp: Oaktree to equitize claims via warrants under amended plan

By Caroline Salls

Pittsburgh, Jan. 6 – Molycorp Inc. said Oaktree Capital Management, LP has agreed to equitize its secured claims and to contribute a portion of its recovery on account of early premium claims in the form of new warrants in settlement of claims and causes of action that have been or may be filed against Oaktree, according to plan documents filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

The warrants can be used to purchase 7.5% of the shares of the reorganized parent company’s common equity at a strike price of $467 million for tranche A warrants or $512.5 million for tranche B warrants.

The warrants will be shared by holders of general unsecured claims who do not opt out of third-party releases if the class votes to accept the plan and the official committee of unsecured creditors, any of its members an informal group of 10% noteholders or the 10% notes indenture trustee objects to the plan.

Under Molycorp’s plan, holders of general unsecured claims at its “downstream debtors” will be paid in full.

Holders of 10% notes claims will receive a share of 64.71% of a Molycorp Downstream intercompany amount and, if the entire company sale trigger occurs, the net remaining portion of the sale proceeds that are allocable to the noteholders following satisfaction of all the DIP facility claims, Oaktree pre-bankruptcy claims and other senior claims.

The 10% noteholders will also receive a share of the Molycorp Minerals assets acquired under a permitted credit bid if it is the successful bid, plus 64.71% of the Molycorp Minerals intercompany amount or 64.71% of the Molycorp Minerals distributable property if the noteholders are not the high bidders.

Holders of subordinated convertible notes claims and Molycorp interests will receive no distribution.

The company said the sale will be completed only if its existing board determines that acceptance of a bid for the Downstream businesses is value maximizing and the total estimated net sale proceeds from the entire company sale is greater than $510 million.

If the Molycorp debtors move forward with the entire company sale option, Oaktree has agreed to contribute a portion of its recovery on account of the early payment premium claims to holders of general unsecured claims against Molycorp Inc.

As previously reported, the plan provides for either a stand-alone reorganization or a sale of Molycorp’s downstream businesses and its Mountain Pass assets.

According to the filing, the deadline for the company to enter a stalking horse bid for the entire company sale is Feb. 19, the qualified bid deadline will be Feb. 26, the auction will be held on March 4, and the combined plan confirmation and sale hearing will be scheduled for March 14.

Molycorp is a Greenwood Village, Colo., producer of materials from rare earth minerals that filed for bankruptcy on June 25, 2015. The Chapter 11 case number is 15-11357.

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