Molycorp 10% noteholders ask court to enforce order or convert cases

By Caroline Salls

Pittsburgh, March 8 – An informal group of holders of Molycorp, Inc.’s 10% senior secured notes asked the U.S. Bankruptcy Court for the District of Delaware to either order the company to comply with an asset sale procedures order or convert the Chapter 11 cases of the Molycorp Minerals debtors to Chapter 7 for liquidation, according to a motion filed Tuesday.

The noteholder group said the only bid for the Molycorp Minerals debtor assets was a credit bid submitted at the direction of the 10% noteholders, and “accordingly, the only credible path forward for Molycorp Minerals is to finalize the transfer of the 10% noteholders’ collateral pursuant to this credit bid.”

However, the noteholders said the debtors refuse to finalize the transfer of the collateral.

“Instead, in what amounts to a bait and switch, the debtors have now decided that certain property owned by Molycorp Minerals – and that indisputably secures the 10% notes – is actually not for sale, and will instead be transferred to the “neo debtors” for unknown (or no) consideration,” the noteholders said in Tuesday’s motion.

“Moreover, the debtors have refused to deem the secured creditor bid a ‘qualified bid,’ even with respect to collateral that the debtors are not attempting to pull off the auction block.

“This conduct by the debtors not only amounts to a grave reversal from what has been contemplated by the parties for months; it also constitutes a willful violation of the bidding procedures order and the terms of debtors’ own proposed Chapter 11 plan.

The noteholders said their right to direct a credit bid for the collateral held by Molycorp Minerals is an express feature of the sale process, based on an order that was the product of negotiation and mediation.

“At no point during those negotiations was it ever suggested that valuable collateral would not be available for sale or credit bidding, nor that such collateral would somehow be transferred to other debtors,” the noteholders said.

“The debtors’ motive for this post-hoc reversal is obvious. With the auction process having failed, the debtors’ plan now calls for Neo to be handed over to Oaktree, which has every incentive to enhance the value of Neo by raiding Molycorp Minerals.”

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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