UPDATE: S&P downgrades Molycorp (MCP) from B to CCC+
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(Updated - August 13, 2012 2:41 PM EDT)
S&P downgrades Molycorp (NYSE: MCP) from B to CCC+ and placed the ratings on CreditWatch with developing implications.
"The downgrade and CreditWatch listing reflects our view that weaker market conditions, spending to complete the Mountain Pass project and the potential need to fund the convertible notes are likely to stress the company's liquidity in the near term," said Standard & Poor's credit analyst Marie A. Shmaruk. With the recent drop in the company's share price, the convertible notes are now out of the money and, in our view, holders are more likely to put the notes back to the company rather than convert them as we had originally anticipated. At June 30, 2012 the company had $370 million of cash. Capital spending to complete Mountain Pass is estimated to be $289 million, some of which could be deferred. Moreover, if all the convertible bonds are put back to the company, it would have to redeem the entire $230 million plus accrued interest. With lower than expected operating performance, we do not expect the company to generate sufficient cash from operations during the remainder of 2012 to fund the shortfall, and we believe that it will have to seek funding alternatives or slow its capital spending.
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S&P downgrades Molycorp (NYSE: MCP) from B to CCC+ and placed the ratings on CreditWatch with developing implications.
"The downgrade and CreditWatch listing reflects our view that weaker market conditions, spending to complete the Mountain Pass project and the potential need to fund the convertible notes are likely to stress the company's liquidity in the near term," said Standard & Poor's credit analyst Marie A. Shmaruk. With the recent drop in the company's share price, the convertible notes are now out of the money and, in our view, holders are more likely to put the notes back to the company rather than convert them as we had originally anticipated. At June 30, 2012 the company had $370 million of cash. Capital spending to complete Mountain Pass is estimated to be $289 million, some of which could be deferred. Moreover, if all the convertible bonds are put back to the company, it would have to redeem the entire $230 million plus accrued interest. With lower than expected operating performance, we do not expect the company to generate sufficient cash from operations during the remainder of 2012 to fund the shortfall, and we believe that it will have to seek funding alternatives or slow its capital spending.
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