Molycorp files second amended plan; committee opposes claim releases

By Caroline Salls

Pittsburgh, Jan. 14 – Molycorp Inc. filed a second amended plan of reorganization and related disclosure statement Thursday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, 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.

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 $513.6 million for tranche B warrants, up from $512.5 million under the first amended plan.

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.

The second amended plan eliminates a previous condition to issuance of the warrants that prohibited the company’s official committee of unsecured creditors, any of its members in an informal group of 10% noteholders or the 10% notes indenture trustee from objecting to the plan.

In addition, the second amended plan specifies that the company will be unable to proceed with its proposed stand-alone reorganization if the court disallows any portion of Oaktree’s claims.

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 an 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.

Sale conditions

The company said a sale will be completed only if its existing board determines that acceptance of a bid for all assets is value maximizing and the total estimated net sale proceeds from the entire company sale is greater than $520.8 million, up from $510 million under the previous version of the plan.

However, if Oaktree submits a credit bid for the Downstream businesses, Molycorp’s creditors committee must consent in order for the company to reduce the amount of the entire company sale trigger, according to the second amended disclosure statement.

If the entire company sale trigger occurs and the general unsecured creditor class votes to accept the plan, instead of the new warrants, Oaktree has agreed to make a cash payment to those creditors who do not opt out of third-party releases in an amount equal to 7.5% of the entire company net sale proceeds distributable to Oaktree in excess of $467 million and an additional 7.5% of the net proceeds distributed to Oaktree in excess of $513.6 million and until Oaktree receives its full distribution amount.

Committee statement

Molycorp’s official committee of unsecured creditors said in the second amended plan that it believes the plan is not in the best interest of the company and its stakeholders because it releases claims against Oaktree and some officers and directors that the committee asserts may be valuable.

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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