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  • Molycorp's Largest Shareholder Seeks $270M Capital Raise, Dilutive Event Could Happen Any Time Now  [View article]
    Not to mention the numbers don't work. Molymet owns a little over 20% of MCP. Call it $106 million of Molycorp's current $530 million market cap. They currently are limited to 27.5% ownership interest. Say Molycorp had an SPO of $150 million, bringing the total to $680 million market cap. Molymet could own $187 million of that market cap, allowing them to buy only $81 million of stock.

    You can't propose they are preparing to put $270 million into Molycorp, when the current rules would prohibit that. If the rules get changed ... then you can try to connect the bond $270 million to Molycorp. But not now.
    Jul 24, 2014. 11:24 AM | 1 Like Like |Link to Comment
  • Molycorp's Largest Shareholder Seeks $270M Capital Raise, Dilutive Event Could Happen Any Time Now  [View article]
    Echoing poster 6372381. Molymet has a report on their website for their own finances. They made money in Q1-2014 (if you exclude the ownership of 20% of Molycorp's loss, which is paper), and have $132 million cash on hand. They have a LOT of investments in a LOT of companies. It is a possibility that they are raising cash to buy MCP stock, but that is conjecture. They clearly mention their own CapEx plans ... $67 M for "a concentrate cleaning plant is in progress at Molynor". They also just paid off $121 M of bonds, that decreased the cash on hand, and had a cash raise of $100 M over the last year.

    It also looks to me that the bond offering is still not close. I don't read Spanish well, and the prospectus is in Spanish. I can't determine the dates. But if it is imminent, you should know that as a fact. The issuance of a bond by Molymet is not clearly linked to any future investment in Molycorp. They clearly like MCP, owning 20%. Perhaps they plan to open market buy more? Who knows.
    Jul 24, 2014. 10:09 AM | 3 Likes Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    SE, they make money on the investment by various means. One is if the company raises cash to sufficiently be solvent. I think they only make money with MCP solvent, not with an insolvency. I don't see a 2016 insolvency event that works to their advantage. They have put down $35 million ... small enough for them. I don't see an insolvency path that gets them as much as they get if MCP pays the bonds off.

    The best event is of Molycorp is making profits then, and can sell new bonds to pay the old bonds. As a long, I would love it if the profits were so huge the debt could be entirely retired, but if it can't then re-float it.

    I've yet to see how their investment pays off in insolvency. The theory I see is that in 2016, Molycorp has no money and no means to borrow, so then the bondholders get some high value out of the company, without the later maturing debt blocking it. I just don't see the other bonds standing by idly while the 2016 (unsecured) bonds pillage. I'm willing to entertain these guesses, but they should make more sense.
    Jul 9, 2014. 03:11 PM | Likes Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    If they can force an insolvency ... force the company into bankruptcy reorganization ... I see that handing the company to the secured bondholders. Forcing insolvency is simply not a winning strategy.

    If they get to 2016 and Molycorp is treading water, without the cash to re-pay, and not so flush they can re-fi easily ... what then? The options appear too limited IMO. The secured bondholders can still control the outcome. If I was hoding the secured, I would prevent any bad debt agreement. I would force any debt handling insolvency get handled by the bankruptcy courts, where that secured debt is first in line.

    I'm not saying they don't have a plan A, plan B, plan C, etc, with an insolvency event in one. I just don't see that event as a useful event for those bonds.
    Jul 9, 2014. 02:08 PM | Likes Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    I was paraphrasing Jack's statements. If CK has a group ready to pay $1.3 billion for the Neo assets, he can buy in 3 seconds flat. He could buy for a lot less than that. My point was that if Neo was sold for the existing debt, then the debt is paid (by the court), and there is no way to control the company.

    We are all just guessing. Apollo bought some bonds with an investment plan to make money. There are a lot of ways forthat to play out. Maybe they have a pump-and-dump scheme for the bonds cooked up. Throw out the possibility of white knight financing, and then they toss the bonds, at par.

    I would like to know the Apollo plan. But they made no comment. The overwhelming spin is that they plan to force a debt failure and then leverage that. The problems I have with that argument are that they own very little, and they own the unsecured, and the assets in a bankruptcy are very low value ... remember that to get to bankruptcy the business has to be insolvent. Even if Apollo buys ALL of the 2016 bonds, I doubt they can force an insolvency in 2016 that works to their advantage.

    I simply don't know the plan. I think there is a good chance they are planning to flip the bonds after the MCP solvency picture gets better. I'm skeptical of the current spin. It just doesn't seem to add up.
    Jul 9, 2014. 02:03 PM | 1 Like Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    Jack: I also think your bankruptcy proceedings are wrong.

    Call the total debt $1.3 billion.

    1. The bankruptcy court takes control of Molycorp, not the "fund".
    2. The bankruptcy court allows the reverse takeover of Neo.
    #3. Neo is sold for $1.3 billion under bankruptcy court.
    #3a. All the bonds are now paid in cash and have NO FURTHER CLAIM on Molycorp.

    4. The rest of Molycorp is owned by the shareholders, as the law requires, and the bankruptcy judge enforces. The bonds have no claims beyond the cash. And since you see value there ...
    Jul 9, 2014. 11:26 AM | Likes Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    [i] JP Morgans Gambardella downgraded Molycorp. Molycorp's CC was a depressing exercise in avoiding any promise of profitability. The only conclusion from continued losses is to raise further cash to burn or to fail. And it is important to clarify the semantics ... JPM didn't say: "necessary to raise cash in May" ... they said in May: "necessary to raise cash".

    [ii] We all know that. Continued losing money leads to business failure. The open question is whether they will continue to lose money. If they do though, it leads to the question: why you want to acquire Molycorp at all?

    [iii] That is the same as point [ii]. If they lose money they fail. If they lose money at a certain rate, they fail at a certain time. Hardly deserving a separate bullet point.

    [iv] Apollo isn't lending money knowing Molycorp can't pay it back. You THINK you know what Apollo thinks, but you don't. You need to step back and say that: I don't know if Apollo is thinking the same as me or if they are thinking the same as Votingmachine.

    I see your example as obvious, but not at all a valid analogy. I can also say, if someone lends you $1 million and asks for a pencil as collateral, that is a de facto gift. This situation is not at all what your metaphor implies. Merely by saying the example, you imply that this must be a takeover. But really, THERE IS NO COLLATERAL. These are unsecured bonds ... look at them. There was no change in the terms of the bonds, they just were sold in the market, and at a higher price than you like.
    Jul 9, 2014. 11:21 AM | 1 Like Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    [i] My thesis that the converts were worthless has been proven out. Apollo doesn't look at the converts as bonds. They believe they just bought the equity.

    Thy bought the bonds, at a MUCH higher price than you said. That is not the same thing at all. You can postulate they bought as a vehicle to gain ownership of Molycorp, but that is still an investment, They bought at 65-cents on the dollar, and expect to make money.

    Apollo bought to make money is my theory. They make out best if Molycorp pays the interest and then pays the bonds. I don't see a bankruptcy scenario that works for them ... not unless they buy a MUCH larger stake.
    Jul 9, 2014. 11:07 AM | 2 Likes Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    Jack: This story is completely wrong. Apollo bought a trivial amount of the outstanding bond debt. 22% of the $236 million bond series ... call it $51 million par value. Of the total debt, there is $650 million secured, in the primary position, about half the total debt, and in a controlling position in bankruptcy. Where the idea comes from that the secondary has great leverage is baffling. There is another $650 million of unsecured bond debt.

    So the total "control" by Apollo is under 8% of the unsecured debt half, which is behind the other half. In a bankruptcy, they would simply be in a position to lose money.

    Apollo group is not looking to buy a controlling interest in the unsecured debt, which would require buying another $280 million (par) of the unsecured side. I don't see this small investment in bonds as anything other than the normal investment strategy of Apollo, which is to buy high yield, accepting the risk involved. Where hey have acquired control, it was because they took poor risks, and ended up controlling something (a hotel chain was one IIRC), which they generally took a bath on.

    Apollo bought bonds and has made no comment on that buy. The rest is wild speculation and ignores the fact.
    Jul 9, 2014. 09:47 AM | 3 Likes Like |Link to Comment
  • Apollo's Leon Black Seeks Backdoor Takeover Of Molycorp  [View article]
    Apollo is a yield investment company. I don't know who is selling this fable, but Apollo chases high bond yields. I don't know of any case where Apollo tried to gain control of a company. In the instances they did, it was strictly because they made a bad investment.

    If Apollo owns 22% of the $236 total bonds at a current 18% yield, they have bought about $51 million (par value) at a discount, paying about $35 million. They will get about $1.65 million interest per year thru 2016 (4.7% APR), and then get $51 million as the bonds are paid. The stock conversion option on this series is at a lower share price, so when the stock goes up, they offer additional gains.

    In the event of bankruptcy, Apollo has $51 million of claims, out of a total $1300-plus million in bond claims. So they have VERY little chance of gaining control. This story is a long investment , plain and simple. If they were seeking to buy a controlling interest in the $650 million of secured debt, then YES, then you could argue they were angling for control in failure.
    Jul 9, 2014. 09:27 AM | 4 Likes Like |Link to Comment
  • Molycorp: The Case For Being Cautiously Optimistic  [View article]
    John: An additional thought occurred to me on your blog.

    Why are you eliminating the $60 million in China? That seems artificial. They should be able to either use that to cover Chinese operations (which saves the US cash reserves) or to just repatriate it ... there should not be taxes as they have reported losses and have a huge loss they are carrying for tax purposes.

    Just a thought ... you subtract that $60 million without really giving any justification.
    Jun 18, 2014. 07:49 PM | Likes Like |Link to Comment
  • Molycorp: Recent Insider Sales A Bearish Indicator  [View article]
    Again? Look at the names behind the investment companies ... the filing may be for a set of large stockholder corporations, but the PEOPLE behind those shell companies are insiders.

    It is fine to say that these transactions required a 13D filing, for a large shareholder, rather than a filing for an insider sale. If that is what the SEC requires, they are going to make the appropriate filings. But you have naive expectation that a 13D filing is incompatible with insiders selling. These are definitely insider sales.

    I suppose it might surprise you to see "Resource Capital Fund IV L.P. (“RCF IV”), a Cayman Islands exempted limited partnership, whose address is 1400 Sixteenth Street, Suite 200, Denver, Colorado 80202" ... "The members of RCA IV are Messrs. Ryan T. Bennett, Ross R. Bhappu, Russ Cranswick, James McClements and Henderson G. Tuten and Ms. Sherri

    The 3 companies in this filing are just shells. You might even think the US mailing address means they file US taxes rather than Cayman Island taxes. My guess is that these millionaires and billionaires are well advised by lawyers and know exactly what they are doing.
    Jun 18, 2014. 12:52 PM | 3 Likes Like |Link to Comment
  • Molycorp: Recent Insider Sales A Bearish Indicator  [View article]
    You also should look at the names of the sellers, not the companies. You will find several members of the board, as well as Ross Bhappu, former chariman of the board.

    I don't know about you, but generally when board members have shell companies owning stock that appointed them to the board ... I count the shell companies as insiders. These are IN FACT insiders. You can point to the filing and point to the different Caymen Island RCF4 or RCF5 or Assoc4 shell companies, but the shares are also pointing to people behind those shell companies. Those people turn out to be insiders.

    Go look at the company names in the 13D. Then go read the original filing on these shares. Look at the names. Then look at Molycorp's current and past board of directors. Then try to say again with a straight face that they aren't insiders.
    Jun 18, 2014. 12:17 PM | 1 Like Like |Link to Comment
  • Molycorp: The Case For Being Cautiously Optimistic  [View article]
    Partly my fault, partly the site. Any site that has a working preview, I look and I can see what to take out. In a 2 inch window, I just can't see it, even if I scroll. I prefer MB's with a preview button ... then I correct mistakes and cut the repetition.
    Jun 18, 2014. 08:23 AM | Likes Like |Link to Comment
  • Molycorp: The Case For Being Cautiously Optimistic  [View article]
    I recognize Molycorp likes to claim the entire Mt Pass history. But the history they claim also has the actual founding of the new company, and details the acquisition of the old company. I'm not denying the history ... but it is misleading to actually track the company further into the past than:
    2008 Privately held Molycorp Minerals, LLC, acquires the Mountain Pass facility from Chevron Mining on September 30, 2008, as a foundation to build an integrated rare earth products and technology company.

    Mt Pass ore body is unchanged. But I've followed a lot of mining companies as they explore a new ore body, and develop a mine plan, and execute it. Molycorp is following that path, except the ore body was already explored, and they operated a legacy facility.

    I am willing to accept that you don't count it as a new mine, but rather as an upgrade to an existing mine. And I accept that you consider my (start up) designation "word games".

    This tracks back to what was a minor inaccuracy on your part. Using the present tense to say the blogger was wrong, when the blogger used the future tense. Molycorp is NOT the low cost producer. Molycorp plans TO BE the low cost producer.

    If you had said you expected that plan to fail, I would have understood you better. I am now clear on what you say. These aren't word games ... words have meanings and I think it is important to not mislead. One person can say, "they WILL be", and another can say "they ARE not" without any contradiction. I was pointing out that this blog says:
    " MCP is positioned to emerge as a low-cost producer"
    and you responded with:
    "MolyCorp is not a low cost producer"
    That actually was what the blog sort of was about, not a rebuttal. Your actual rebuttal was when you said:
    "high operating costs imposed by US regulations and the poor ore grade"
    "Molycorp's history of poor implementation of their upgrades and new processes do not provide a reason to be optimistic."

    Those address the bloggers premise, that there is a path with possible progress. I disagree with your conclusion, but at least they are a rational argument. Rich ore is always better than poor ore. Unregulated is always easier than regulated. Molycorp DOES have a bad record on delivering new facility progress. It requires that I assert that I expect better results to disagree with you. Those are cogent arguments.

    I'm not trying to play "word games". I like the plan the company has for dropping costs. No one can guarantee they hit it. But like this blog says, they are at a point in time where they have the opportunity to show the results of the construction of the last 3 years, and the results of starting up that new facility. If they hit the marks, the picture for the future changes. If they don't then they are a failure.
    Jun 17, 2014. 07:19 PM | Likes Like |Link to Comment