Report: Apollo snapping up Molycorp bonds to gain edge in case of default

• Apollo Global Management (APO -3%) is adding to its holdings of Molycorp (MCP -8.2%) bonds, positioning the investment firm to control MCP in case it seeks to restructure its $1.5B of debt, Bloomberg reports.
• APO bought $8.5M of MCP’s $230M of 3.25% convertible notes due 2016 in the March quarter and has since added to that amount, according to the report; as of March 31, APO held at least 22% of that class of securities.
• APO is betting holders of the convertible notes won’t receive a full recovery in a default, putting those lenders in control of a restructuring and in line to take over the company’s equity, the report says.
• The attempt at a backdoor takeover puts added pressure on MCP to find a solution to its cash burn or risk being taken over by APO and other bond holders, raising the potential for a dilutive event within weeks.