Molycorp (MCP)
$300m (+45m) sen unsec cb coming tonight from MS/CS. Terms: 5yr, 5-5-6% up 20-25%, s/c yr 3 @130% full pctns. UOP = w/capex repay Neo/Mat 5% 2017. Concurrent $172.5m stk placement and $138m brw facility. Will need O/R otherwise brw won’t be enough (placing w/help free up rate but not to GC). Capital need for ’12 = $300m, PF debt=1.234B, cash = 576m, ltm ebitda = 81m, fcf = -680m, lev = 15x. 10 yr sen sec str8 ~L+990 (CCC+). 3.25% 16 cb ~L+1200. Not model trade (tuf to short 3.25 $px to hedge credit plus tight brw) but we’ll humor notion (GC brw/1400 bps/35 vol). Theo 101.125/103.125/105.125. Tuf to play w/out outright to relieve brw pressure (hard to get close to 100d), placement dscnt will mitigate shorting pressure. Some will play stk bounce potential but AVOID
Owner/operator of world’s largest rare earth deposit outside of China.
PF Cash = $576m
PF Debt = $1,234m
LTM EBITDA = $81m
LTM FCF -$680m
Leverage 15.2x
Market cap = $1.3B
Liquidity concern as recent results disappointed on lower prices & vols. Made acq of Canadian magnet powders biz june, used $600m cash and triggered coc on 5% sub conv, requires up to $230m for put. Expansion of CA fac continued w/300m needed 2h12, up to $75m could be deferred. Prod to ramp to 40,000 mt 2013. If all comes together, EBITDA could ramp next year, but significant execution & integration risks exist.
Our assigned spread 1400