Molycorp’s unsecured creditors call for Oaktree investigation

Lenders to the bankrupt mining company are asking the bankruptcy court to investigate Oaktree Capital Management, alleging it saddled Molycorp with debt and caused its demise.  

Unsecured creditors of mining company Molycorp are asking the US bankruptcy court to investigate Oaktree Capital Management’s investments in the company, according to legal documents.

Filings submitted to the US Bankruptcy Court in Wilmington, Delaware, allege that Oaktree loaded the company with debt, on terms it could not meet, thereby driving it to bankruptcy.

A special committee has been set up by the unsecured creditors to look into the issues. “The Oaktree transactions transferred hundreds of millions of dollars’ worth of value to Oaktree and saddled many of the Molycorp Entities with insurmountable debt obligations,” said the court filings.

Oaktree originally made a $260 million loan to the company in September 2014, $110 million of which was available immediately with the rest dependent on conditions that Molycorp never met. After the company filed for Chapter 11 bankruptcy in June, Oaktree also provided it with debtor-in-possession financing worth $130 million. 

The filing also calls into question some of Oaktree’s trading history and says that the Los Angeles-based alternative investment firm may have traded Molycorp securities based on material non-public information.

A hearing is scheduled for 19 October.

A spokeswoman for Oaktree had not replied to a request for comment by the time of publication.

Colorado-based Molycorp mines for rare-earths materials used in computers and other tech products. The company filed for bankruptcy protection on 25 June to deal with a $1.7 billion debt pile.

It is publicly-traded on the New York Stock Exchange and its largest shareholder, the Chilean Molibdenos y Metales SA, plans to bid for some or all of the company’s assets in bankruptcy, according to Bloomberg.