According to the U.S. Bankruptcy Court docket, Molycorp’s ad hoc group of 10% noteholders filed an objection to the Debtors’ motion for orders (a) approving a modified key employee incentive program and (b) authorizing the Debtors to file certain information regarding the modified key employee incentive program under seal.
The ad hoc group asserts, “The Second KEIP Motion complains about a ‘lack of feedback’ from and ‘lack of engagement’ by the three creditor constituencies in this case, including the Ad Hoc 10% Noteholders. That is patently false….Even though the Ad Hoc 10% Noteholders question the competence of the Debtors’ management – as well as the Debtors’ independence and commitment to maximize value for all stakeholders – this proposal offered the potential for dramatically greater remuneration than what the Debtors have proposed. The Debtors, however, informally responded that their executives insisted on metrics that would be easier to influence and meet. Counsel to the Ad Hoc 10% Noteholders said they were amenable to negotiations and invited the Debtors to counter. But the Debtors never reached out again; they filed the Second KEIP Motion instead. These facts neatly encapsulate the dysfunction of this case. The Ad Hoc 10% Noteholders were compelled to communicate their KEIP proposal by letter, having been effectively ignored by the Debtors for several months.”
The objection continues, “Furthermore, in the Second KEIP Motion, the Debtors attempt to point the finger at creditors for failing to make progress on their KEIP or include the Debtors in the process….As for the KEIP itself, the Debtors have again failed to propose actual incentives that align management with creditors. The Debtors purport to be pursuing a sale process. Yet their KEIP metrics are not designed to incentivize insiders to pursue a value maximizing sale.”
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