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Molycorp, Inc Common Stock Message Board

  • cb_cb480 cb_cb480 Apr 24, 2013 5:34 PM Flag



    Great job in beating back his fictional fraud claims on SA !!!

    Here are the flaws in your argument:
    1. The debt places a limit of $150 million or 5.5% of assets.
    No. The debt had that covenant removed.
    2. The asset value is exactly at the limit.
    Not really, the asset value should also include the money from the sale of stock. I think the stock placement and debt placement were near simultaneous, but the fact is that as soon as the stock sold, the assets increased by $258 million. Of course the exact assets at the time of the debt placement are not in the 2012 annual report.
    3. The write-down was calculated to allow the debt placement (based on the 5.5%).
    No. The write down was done according to GAAP and was independently audited.

    Sentiment: Strong Buy

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    • Thanks. I think I have to add another flaw:
      3. The write-down was calculated to allow the debt placement (based on the 5.5%).
      Nope. I believe the debt covenants define the assets for calculating the 5.5% as the assets AT THE LAST FINANCIAL REPORT, which was the Q3-2012 report, not the pending report with write-downs. The write downs then are irrelevant.

      This of course means my comment #2 is irrelevant. But either the assets are at the Q3 number or they are an at-the-moment total which includes the stock sale. Either way creates an excess asset value.

      I have not read the original debt covenants for the $650 million placed with Wells Fargo for buying Neo. I've looked at the new covenant in the exchanged debt. I think there are a lot of flaws in the blog, and quite probably some in my responses. I'm biased but I think the facts don't back the argument that the write-downs were deliberately shaded (under-reported) to manage the asset value to satisfy the debt covenants.

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