Molycorp and Bondholders Reaches Settlement Deal in Bankruptcy

by San Antonio Attorney

Molycorp and its bondholders have reached a settlement that can alleviate the problems of the company’s Chapter 11 bankruptcy plan.

The bondholders were recognized as the winning bidders on the mineral rights of Molycorp’s mining facility located in Mountain Pass, California.  They are the sole company in the United States that produces materials used for consumer electronics.

Neo businesses, otherwise known as the rare-earth processing operation, will serve as the company framework for Molycorp after its bankruptcy filing.  The processing units have fared better in the commodity price rather than mining operations.

Due to Chinese Trade Policy of monopolizing supply, the prices for rare earths have been dwindling.  The expense of obtaining rare elements in earth is getting higher than what the present market can pay.

The bondholders request for the approval of sale of the mineral rights, intellectual property and asset-related operations.  This was done at the confirmation hearing in the United States Bankruptcy Court in Delaware.

The bondholders will pay $1 million for the rights in Mountain Pass, and it will be in the form of an offer to halt the portion of the $687 million debt.  Molycorp tried to spurn the offer, the only offer Mountain Pass has ever received during the auction.

The settlement among Molycorp, Oaktree and creditors resulted in the payment of $5 million worth of expenses that the bondholders incurred throughout the botched bankruptcy negotiation.

Another measure taken was a provision used to protect the costs from dissolving into the Chapter 11 or Chapter 7 bankruptcy.  Filing for Chapter 7 liquidation will tie up the loose end of the companies that will not benefit from a Chapter 11 bankruptcy.

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