UPDATE: S&P Cuts L-T Rating on Molycorp (MCP) to 'Selective Default'

(Updated - November 26, 2014 11:42 AM EST)

Standard & Poor's Ratings Services said it lowered its long-term corporate credit rating on U.S.-based Molycorp Inc. (NYSE: MCP) to 'SD' (selective default) from 'CCC'.

At the same time, we lowered our issue rating on Molycorp's $414 million convertible notes due 2017 and $172.5 million convertible notes due 2018 to 'D' (default) from 'CCC-'. The recovery rating on these notes is unchanged at '5', indicating our expectation of modest (10%-30%) recovery prospects in the event of a payment default. We also removed the corporate credit rating and issue rating from CreditWatch with positive implications, where we had placed them on Sept. 4, 2014.

Our 'CCC' rating on the company's $650 senior secured debt remains on CreditWatch with positive implications. The company's 3.25% convertible debt due 2016 is unrated.

"The downgrades reflect Molycorp's agreement with a holder of its notes to exchange $38 million of its convertible notes for $16 million of common stock," said Standard & Poor's credit analyst Cheryl Richer. "Under our criteria, we view the exchange of the subordinated notes as distressed and tantamount to a default. This is because we believe there has not been adequate compensation for the investor's involved in this swap."

We expect to reassess our corporate credit rating and debt ratings on Molycorp within a few weeks.

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