———-> Daiwa New Issue Credit Color: Molycorp <————
* Owner/operator of world’s largest rare earth deposit outside China.
PF Cash $727mm
PF Debt $1450mm
LTM EBITDA $(15)mm
LTM FCF $(819)mm
Leverage NM
Mkt Cap $1127mm
* Liquidity concerns are back as co announced 1H13 rev & cf much lower than exp due to delays in ramping Ph I prod at Mountain Pass & continued weak pricing for rare earth elements. Expect 6 mth delay in prod ramp & will need add’l cap-ex funding. Co estimates short ~$250mm. Liquidity still looks tight after stk & convert offering. Significant execution & integration risks remain. Converts rank behind $650mm senior secured notes.
* Our assigned spread —>L+1400<— Src: Bloomberg, Co Filings
Molycorp MCP, our HY analyst/desk remains negative….
equity/convert offering due to co announcing that 4Q results below expectations, 1H13 production will be less than expected, and capex programs over budget. $300MM capital raise will just about cover $250MM expected cash shortfall in 2013, but recall co did big capital raise in August to “cover shortfall” and that didn’t happen – things have just gotten worse since then, CEO blown out and co under SEC investigation. We think the company looking to raise equity when the price is close to an all-time low is a not a great sign. We remain negative on name.