Commodities & Metals

Molycorp Playing Russian Roulette Over Interest Payment

Molycorp Mountain Pass Mine
Source: Molycorp Inc.
Molycorp Inc. (NYSE: MCP) has faced a rough and rocky road over the past four years. Financially speaking, the company is stuck in a deep hole and it seems to be getting pressure from all sides.

The company announced that it will skip a payment of $32.5 million on its 10% Senior Secured Notes due 2020. In fact it is taking advantage of a 30-day grace period that is provided for in an indenture governing the notes.

The company noted that this will not trigger any cross-default provisions in other outstanding debt prior to the end of the grace period and it should not affect current operations.

As previously mentioned, Molycorp has retained financial and legal advisors to assist with the restructuring of its debt. The company plans to use this grace period for the evaluation of different options related to its debt restructuring.

Skipping a payment is generally bad news regardless of the situation, and it appears that shares acted accordingly. Many investors might suggest that this is just another step on the long road down to zero. It’s worth mentioning that this was a $70 stock in 2011, then a $7 stock in 2013, and now less than a $0.70 stock in 2015. If we look ahead another two years, where is this stock going to be?

Molycorp is still facing the issue of being delisted by the NYSE. If this stock doesn’t pick up any forward momentum it will get left in the dust.

In terms of Molycorp’s short interest it declined to 59.5 million shares for its most recent settlement date, May 15. The previous level was a relative high at 61.4 million shares. The highest level in the last 52-weeks was 69.8 million shares in late September 2014.

Shares of Molycorp were down about 19% at $0.43 on Monday afternoon. The stock has a consensus analyst price target of $1.85 and a 52-week trading range of $0.28 to $2.98.

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