| WILMINGTON, Del.
WILMINGTON, Del. Rare earths producer Molycorp reached agreements with its junior creditors on Friday that clear the way for the bankrupt company to accept bids for the company and to ask creditors to vote on a plan to exit bankruptcy.
Molycorp, the only U.S. producer and processor of the rare earth elements that are used in cell phones and military equipment, has been battling its bondholders who have alleged it is doing the bidding of its lender, Oaktree Capital Management.
Lawyers for Greenwood Village, Colorado-based Molycorp told a U.S. Bankruptcy judge it would allow advisers for the official committee of unsecured creditors and a group of bondholders to join calls and meetings about potential bids.
Molycorp has said in filings with the U.S. Bankruptcy Court in Wilmington, Delaware, it had received 20 potential bids. On Tuesday, Bloomberg reported that potential buyers from China and Australia submitted nonbinding bids of more than $700 million for Molycorp's processing operations. The company has estimated the operations were worth less than $450 million.
Bids for the company's bonds have jumped this week from less than 5 cents on the dollar to more than 12 cents as the prospects for repayment have improved for bondholders.
An auction is scheduled for March 4.
The auction would include the company's closed mine in Mountain Pass, California, which was once one of the world's main sources for rare earths.
If bids fall short of a certain threshold, Molycorp has proposed exiting bankruptcy through a reorganization plan, excluding the Mountain Pass mine, under the control of Oaktree. U.S. Bankruptcy Judge Christopher Sontchi on Friday cleared the way for Molycorp to begin seeking creditors' votes for its reorganization by approving the so-called disclosure statement, which describes the plan.
Molycorp and Oaktree still face struggles with junior creditors, who convinced Sontchi on Friday to strike a provision in the reorganization plan that would deny payments to objecting creditors.
Luc Despins, a lawyer for the creditors committee, said he plans to sue Molycorp's directors and officers over the company's agreements with Oaktree. The committee also plans to press claims against Oaktree, including for unjust enrichment, at a confirmation trial beginning March 28.
Molycorp filed for bankruptcy in June with more than $1.7 billion in debt after prices for rare earths fell when China lifted export restrictions.
The case is In re Molycorp Inc et al, in the U.S. Bankruptcy Court, District of Delaware, No. 15-11357.
(Editing by Matthew Lewis)