Seeking Alpha

Molycorp +13% as Oaktree commits for $400M financing arrangement

  • Molycorp (NYSE:MCP) +12.8% premarket on news that Oaktree Capital Management has agreed to provide MCP and certain subsidiaries up to $400M in secured financing through credit facilities and the sale and leaseback of equipment at the company`s Mountain Pass facility.
  • As part of the agreement, MCP will issue Oaktree with share warrants equal to 10% of its stock.
  • The financing news overshadows MCP's Q2 earnings miss; Q2 production volume totaled 1,639 metric tons, up 48% Q/Q.
From other sites
Comments (18)
  • John Kastanes
    , contributor
    Comments (1153) | Send Message
     
    Oaktree obviously sees value in mcp.
    6 Aug 2014, 04:50 PM Reply Like
  • billgatesisevilus
    , contributor
    Comments (202) | Send Message
     
    Err, they are doing a secured facility. How that interacts with the 2020 secureds are remains to be seen. The secured bonds traded up A/H. The facility goes away by the time MCP has to pay off the 2016 converts. The warrants they got are just icing. This will keep MCP alive for a while longer. How much longer remains to be seen. At least their revenues were higher than their cost of production this time, but they are not producing any fcf yet. Better than nothing, but not by a lot.
    6 Aug 2014, 05:27 PM Reply Like
  • Richard0623
    , contributor
    Comments (159) | Send Message
     
    Hopefully this will decrease the bi-weekly frequency of SE articles flooding the MCP feed
    6 Aug 2014, 04:54 PM Reply Like
  • vagabondo
    , contributor
    Comments (10) | Send Message
     
    Kastanes reader reports that Oaktree "sees value" in MCP, at least its equipment. That clean equipment at Mt Pass "is" of value especially if it can be moved to China economically as at some future date, as it might That may come in order for Oakltree to see any return on their risk capital. In the meantime, MCP seems to have dodged the bullet and I wouldn't want to be short for now.
    6 Aug 2014, 05:04 PM Reply Like
  • asles
    , contributor
    Comments (124) | Send Message
     
    Move to China?... Look for MCP the build a Magnet Factory in the U.S.a
    6 Aug 2014, 05:21 PM Reply Like
  • John Kastanes
    , contributor
    Comments (1153) | Send Message
     
    A magnet factory would be a valuable asset. Let us hope it becomes reality.
    6 Aug 2014, 06:32 PM Reply Like
  • asles
    , contributor
    Comments (124) | Send Message
     
    Great Job Ken Moelis! Why weren't the investment banks who took all those capital market fees unable to accomplish this type of transaction. Oaktree are some of the smartest guys in the room. 10% dilution is fair value for equity holders.
    It appears that $MCP has a better balance sheet. @ 2.30 the equity is a great long term option. Long MCP equity and options
    6 Aug 2014, 05:19 PM Reply Like
  • Shock Exchange
    , contributor
    Comments (4114) | Send Message
     
    asles,

     

    You called this one weeks ago. $MCP was mentioned this morning as one of the stocks to watch > http://seekingalpha.co...

     

    SE
    6 Aug 2014, 05:47 PM Reply Like
  • billgatesisevilus
    , contributor
    Comments (202) | Send Message
     
    I presume that this fits your definition of a potentially dilutive event. It is certainly a stepover on the sr. unsecured bonds. I often see this sort of action as companies become more and more desperate heading into the great courtroom in the sky. Nobody wants to be on the same seniority with anyone who is not secured. A Hail Mary for a year and a half. If they can turn around the company to get some fcf, they might even make it. I suppose we will see.
    6 Aug 2014, 07:12 PM Reply Like
  • asles
    , contributor
    Comments (124) | Send Message
     
    Proved my contention that the "OLD" investment banks used MCP a fee source and created a weak capital over burdened capital structure. This structure is more like the old time LBO structure... equity and sr sub debt were always subordinated to Secured Bank Term Loans.

     

    Ken Moelis went to the old play-book... With Oaktree(some of the smartest guys in the room) Equity now has a shot to be a to be 5-10 bagger in 5 years.
    8 Aug 2014, 01:04 PM Reply Like
  • DougRk
    , contributor
    Comments (1622) | Send Message
     
    Secured credit. That says it all.

     

    No beef against MCP. It's more a sad commentary about how hard it is to mine in the U.S. than it is an indictment of MCP itself.
    6 Aug 2014, 07:29 PM Reply Like
  • asles
    , contributor
    Comments (124) | Send Message
     
    So Right!......
    8 Aug 2014, 12:57 PM Reply Like
  • K Street
    , contributor
    Comments (9) | Send Message
     
    At some point, all we want is time. That MCP has negotiated some more of it is encouraging, but its what they do with it that will matter most. Nothing announced this afternoon changes the China dynamic, ongoing soft prices or instills great confidence in leadership. Still, situation seems far less dire than as regularly forecast on this particular site.
    6 Aug 2014, 07:30 PM Reply Like
  • Shock Exchange
    , contributor
    Comments (4114) | Send Message
     
    K Street,

     

    Molycorp had cash burn of nearly $80 million during the quarter. You call that "far less dire than as regularly forecast on this particular site?" SE was forecasting about $69MM this quarter.

     

    SE
    6 Aug 2014, 09:49 PM Reply Like
  • GoGowadof100s
    , contributor
    Comments (128) | Send Message
     
    Wow so proud of molycorp another qtr of losses. The people at Oaktree capital clearly have rocks in their heads. Let the selling of the pieces, i mean restructuring begin. Do they still own wind turbines somewhere?
    7 Aug 2014, 06:13 AM Reply Like
  • asles
    , contributor
    Comments (124) | Send Message
     
    Check old Oaktree ...OAK on the NYSE ... look at there returns in the distressed and High Yield Market .... Wake up and smell the Coffee!
    8 Aug 2014, 01:06 PM Reply Like
  • Faxbot
    , contributor
    Comments (440) | Send Message
     
    So the company gets to stay in business for another year. Still doesn't fix the greater problem of execution.
    7 Aug 2014, 05:46 AM Reply Like
  • NOOB INVESTOR
    , contributor
    Comments (231) | Send Message
     
    If Oaktree gives them a shot, then I'll take a speculative position and give them a shot too.
    23 Aug 2014, 12:57 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs