Lifton weighs in on Molycorp – Requiem for a Lightweight
Molycorp has been punching out of its class almost from the beginning.
Molycorp is not gone. It is its equity investors who are gone to the cleaners. This wipe-out of the equity has been expected-even desired-for some time, since the company’s fate has been entirely in the hands of its debt-holders for at least two years.
So, now let the “restructuring” begin. Debtor-in-possession financing has been “secured,” but the Bankruptcy Court(s) with jurisdiction will now have to approve a restructuring plan. This will entail the court’s soliciting testimony from among others angry shareholders who will want either the company’s assets sold and anything left over after the senior debt holders are satisfied to be distributed to the equity holders, or, at the very least, the current management dismissed and replaced.
I’m sure that the idea of the (any) restructuring “experts” retained is now to pare down the company’s operations; sell “non-core assets; “ operate at a break-even instead of the previous bloat; and relist the company’s shares as soon as possible on a big board so as to run up the price and cash out their debtor-in-possession “investments.”
I’m certain also that the above campaign will be accompanies by a rehash of how critical rare earths are to the nation’s defense and a rehash of the need for self-sufficiency for the USA in these “strategic” materials, etc….
My advice has not been sought, but I will give it anyway:
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If a court accepts a plan it must contain the following conditions:
- Put Project Phoenix (“PP”) into profitable/break even operation within 6 months or close it down;
- If PP is closed down then continue to operate the mine only at the level demanded by the market and the capacity and needs of the three overseas separation facilities (The two Neo ones in China and the one in Estonia) and if the mine (and PP) cannot be operated competitively by January 2016 shut them both down.
- Operate the former Neo Materials as an independent profit-center buying feedstocks from wherever it can competitively
- Sell off all non-core assets such as those now agglomerated as Molycorp Metals.
- Sell Boulder Wind
Some of the above has, I believe, already was begun before today’s filing.
I am waiting for Molycorp’s equivalent of Carl Denham (of King Kong fame) to say (in my paraphrase of “Twas beauty killed the beast.”) “Twas the market killed the beast.” But, in fact, it was the rigidity of planning, a type of incompetence, that killed this beast. I really hope the court appoints a new generation of managers instead of employing Dr. Frankenstein’s procedures to try to resurrect this beast
Jack Lifton is the Sr. Editor for InvestorIntel Corp. and is the CEO for Jack Lifton, LLC. He is also a consultant, author, and lecturer ... <Read more about Jack Lifton>