Rare-Earth Producer Molycorp. and North American Subsidiaries File Chapter 11

Morris James LLP

On June 25, 2015, Molycorp, Inc., the U.S. producer of rare earths, and its North American subsidiaries filed for chapter 11 bankruptcy protection.  A copy of the bankruptcy petition is attached here.   Debtors offer the declaration of Michael F. Doolan in support of their requested first day motions, a copy of which is attached here

Before the petition date, creditors holding more than 70 percent of the debtors' senior debt agreed to provide $225 million in financing, subject to Court approval.  A proposed restructuring support agreement plans to discharge more than $700 million in unsecured notes and for holders of $650 million in 10% senior secured notes to swap the debt for a majority stake in the reorganized company.  

At the first day hearing, however, the debtors failed to gain approval from U.S. Bankruptcy Judge Christopher S. Sontchi for $44 million in debtor-in-possession financing after objection by an affiliate of Oaktree Capital Management argued that the company's insolvency would deepen. Oaktree loaned debtors about $250 million in September 2014.

Debtors will return to bankruptcy court on Wednesday, July 1 at 10:00 a.m. following discussions with creditors on how to structure debtor-in-possession financing.  The case is Molycorp Inc., case no. 15-11357-CSS.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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