Molycorp announces global settlement reached with committee, Oaktree

By Caroline Salls

Pittsburgh, Feb. 22 – Molycorp, Inc. reached a global settlement with the official committee of unsecured creditors and Oaktree Capital Management, LP, according to a notice filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

Molycorp said it authorized the committee to prosecute claims and causes of action on behalf of the company’s estates against Oaktree and Molycorp’s officers and directors. A lawsuit was filed by the committee on Jan. 20.

Following the filing of the adversary proceeding, Molycorp, the committee and Oaktree participated in mediation regarding the claims alleged in the complaint and other issues related to the company’s sale process and Chapter 11 plan.

The committee also participated in mediation with National Union Fire Insurance Co. of Pittsburgh, Pa., regarding the claims filed against the directors and officers.

The company said details of the implementation of the settlement will be discussed at a status conference scheduled for Feb. 23, and the parties are working to incorporate the settlement terms into a revised plan to be filed with the court.

Standalone plan terms

Under the proposed settlement, if a standalone plan is confirmed for Molycorp’s case:

• Holders of class 5A claims, including 10% noteholder deficiency claims, will receive 7.5% and Oaktree will receive 92.5% of the reorganized parent company’s common equity in exchange for a full release from all claims and causes of action granted to Oaktree, its affiliates and their respective representatives;

• Upon emergence, the reorganized Molycorp debtors will have no Oaktree-related debt, and no preferred equity will be outstanding;

• For all purposes, the value of the equity will be calculated using the company’s midpoint equity value of $417 million;

• Oaktree will not receive a distribution in excess of 100% of its allowed claims in the amount of $513.8 million;

• Class 5A creditors also will receive $2 million, which will be used to fund a cash-out program for specified trade creditors and will be in addition to other cash payments made to holders of claims in classes 5D and 5E under the current version of the plan;

• No litigation trust will be created, as the revised plan will include a full and final release from all claims, avoidance actions and causes of action. All claims and causes of action not released under the revised plan will vest in the reorganized company; provided, however, that Molycorp will seek to surcharge the collateral of the 10% notes to defend against any claim or objection to confirmation of the revised plan asserting that any subclass in class five is not entitled to its proposed distribution;

• Any and all claims filed by Oaktree against the Molycorp debtors will be allowed in the amount of $513.8 million; and

• The company, Oaktree and the committee will support a revised plan that allows claims related to the company’s 3.25% convertible senior notes due 2016 in the amount of $210.05 million, claims related to the 6% convertible senior notes due 2017 in the amount of $390.26 million and claims related to the 5.5% convertible senior notes due 2018 in the amount of $152.22 million.

Sale plan terms

Meanwhile, if Molycorp completes an entire company sale:

• Class 5A creditors will receive 7.5% and Oaktree will receive 92.5% of the net sale proceeds and cash on hand until Oaktree has received $513.8 million after the payment in full in cash of administrative claims, priority claims, general unsecured claims against the downstream debtors and a wind-down budget reserve;

• Molycorp, Oaktree and the committee will support a revised plan under which all remaining value in the estates after Oaktree has been paid will be distributed to the class 5A creditors;

• After payment to Oaktree, a portion of the proceeds distributed to class 5A may be used to fund a cash-out program for specified trade creditors;

• No litigation trust will be created;

• Any and all claims asserted by Oaktree against the debtors will be allowed in the amount of $513.8 million;

• Molycorp, Oaktree and the committee will support a revised plan that allows the convertible senior note claims in the same amounts as under the standalone plan;

• Any increase in the amount of an entire company sale trigger will be subject to the committee’s consent, except for increases reflecting additional sums becoming due as a result of an extension of the maturity date of the company’s debtor-in-possession facility and any accrual of interest or lease payments on Oaktree’s pre-bankruptcy debt; and

• In settlement of the claims asserted in the adversary proceeding against the company’s current and former officers and directors, National Union Fire will pay $3 million to the estate of the parent company for the sole benefit of class 5A creditors.

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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