Oaktree Capital takes control of Molycorp successor

The Los Angeles-based distressed debt shop turned its pre-bankruptcy debt into 92.5 percent of the reorganised business’ equity.

Molycorp has emerged from bankruptcy under the control of an Oaktree Capital Management affiliate after the distressed debt giant turned pre-bankruptcy debt of the rare earth metals producer into a majority equity stake.

The Los Angeles-based financial firm, co-chaired by Howard Marks (pictured) and Bruce Karsh, officially owns almost all new shares after Molycorp filed a notice with the Wilmington, Delaware, bankruptcy court on 31 August alerting the judge and interested parties the restructuring took effect.

Under the reorganisation plan, Oaktree holds 92.5 percent of the new equity in the reorganised entity, which emerged as Neo Materials. The financial behemoth took the helm after Oaktree, Molycorp and a group of unsecured creditors struck a deal averting a lawsuit the creditors filed against both Oaktree and Molycorp senior management. The lawsuit, filed in January, challenged a $400 million prepetition loan Oaktree made to Molycorp.

The unsecured creditors group sought monetary damages for multiple counts and disallowance of any claims related to the $400 million loan, which would have left Oaktree emptied-handed for the financing it provided Molycorp. Allegations included breach of fiduciary duty and unjust enrichment.

Brook Hinchman, an Oaktree senior vice president, said in a statement: “Neo Performance Materials is emerging with a strong balance sheet and excellent liquidity profile that, coupled with the continued leadership of the experienced management team of the business, positions it extremely well to execute on the go-forward business plan and serve the needs of its customers.”