Mt Kellett seeks equity stake in rare earths miner Lynas
Oct 24 2016 at 11:45 PM
Updated Oct 24 2016 at 11:52 PM
Former rare earths market darling Lynas Corp is deep in talks with its largest bondholder about a potential debt-to-equity conversion for which it will seek shareholder approval in November.
US-based hedge fund Mt Kellett Capital Management is understood to be considering converting its debt into Lynas equity at about 10¢ per share, which would deliver it a substantial stake in the $190 million miner.
Mt Kellett has been involved in Lynas since January 2012, when it gave Lynas $US225 million to fund the first phase of its Malaysian plant.
In return, Mt Kellett received $US225 million of Lynas convertible bonds, and hold the biggest position in Lynas' debt pile.
The slated deal comes as Lynas progresses talks with Mt Kellett and the other 9 convertible bond holders, including Fortress Investment Group, about amending the terms of the bond facility and extending the maturity.
The maturity date was extended last year to September 2018, from an original maturity of July 2016.
Lynas is also working on extending the debt runway for its Japan Australia Rare Earths (JARE) loan facility, the bulk of which matures in June 2018.
Any deal would require approval from Lynas shareholders at the annual general meeting on November 30 but could help shore up the company's balance sheet after a sustained lull in the prices for rare earths.
Lynas said in its full year results last month it had just been breaking even in the low price environment and would "require either amendments to the terms of its loan facilities or alternative sources of funding."
Lynas' market capitalisation swelled to over $4 billion during the 2011 rare earths bubble but a collapse in prices and problems with the company's processing plant saw its share price tank.
Sources said Lynas' successful operational turnaround, orchestrated by chief executive Amanda Lacaze who moved to Lynas from Telstra in 2014, had helped secure the ongoing cooperation of the company's lenders.