Buys them some time...
First, will be interesting to see if we learn what the performance requirements are to win the rest... and, of course, whether or not they perform well enough to win it.
Second, I note the media take on it is that this is a good thing because holders were worried about the risk of having to issue more shares. Reality is that increasing the debt, now, given their circumstances, is a vastly greater survival risk for holders than dilution...
Third, I don't expect the time this buys to matter that much. It won't buy enough time to insulate them from the timelines that matter in the market... which are still being driven by the Chinese... and the time it buys won't do anything to rationalize what is a wholly incohernt plan. They own a large number of businesses, each of which they vastly over-paid to buy, each not being remotely close to being integrated... making it nearly impossible to parse the risks inherent in needing to "fix" each of those independent businesses they're responsible for guiding to the mythical profits which their acquistions were based upon...
Fourth, the crux of the matter, is that the entire plan here was, from the start, geared to a market fiction in pricing... rather than based on rationalizing production based on cost. They hugely over-capitalized the business, wrecklessly mis-spent all that "free" money the market was throwing at them buying inflated assets during a bubble... and, now, the "set point" on their finances is completely out of whack with any reasonable set of expectations in value or performance. They'll NEVER be able to get there... because the "there" they've planned on attaining and have designed into the capital structure as a requirement for survival... is a place that doesn't exist....
Finally, for the rest of the market... three things:
First, tapping into debt now that is pre-secured through more than a risk in future attachments, but in the current transfer in ownership of core assets, in the form of sale and lease back of equipment... means a couple of things. For the company and shareholers, it means they've already begun selling off the core productive assets of the business... essentially, the banks already own them now, only leaving the polite but highly improbable fiction that shareholders might still "win" playing this stock by holding shares. The deal done gives the patient "time"... and provides some comfort with the terminally addictive morphine drip of debt, which will limit the painful thrashing that would occur otherwise... but, it won't alter the course at all, or the trajectory by much. MCP is still going to be dying, more gently now than it might have before this, but, it will be transferring its assets to others well prior to the need for probate... in that process which we see today has already begun
Second, the right way to play this... if it ever becomes possible, which I judge is pretty unlikely... is to wait until the bank finally takes them down and refloats the company on a corrected basis with a reasonable valuation for the given in the wasted excess in the prior capitalization. They should have "marked it to market" long ago in a post-bubble reset, giving themselves a chance to survive and meet future performance expectations on a realistic basis. Existing holders would have been better off taking that huge haircut... to reset the value, the expectations, and the share prices, based on realistic terms in cost of production and future market potential, versus sustaining impossible expectations in demand growth, product production volumes and product pricing and profitability.
Third, the only really good news apparent in the deal, is that for the rest of the companies out there... it means that the method applied hasn't sucked all the potential energy out of the market space by draining all the willing equity capital out of the market. MCP, with impossible plans that are still wildly disconnected from market reality, no longer drives the space... leaving a bit of oxygen in the room for others with better management, better focus, and a better rationalized concept. The morphine drip of debt limiting the thrashing in the process of rationalizing MCP is also good for others... who now won't have to deal with the market risks highlighted by MCP imploding dramatically... to attain rationalization. For holders... this deal buys time in which you can sell MCP... and transfer the value you can still extract to opportunities in the space that are far better rationalized.
Finally, two parting shots:
First, kicking the can down the road gently for now means the focus in the market will be shifting back to the market fundamentals controlling not only MCP's fate, but, the fate of other competitors in the space... without MCP's still not fully rationalized performance risks proving an obstacle to others. It will likely take another 3 to 5 years for the balancing in Chinese accounts to occur... for the WTO results to settle... for the environmental impacts in China to begin being addressed... and for the market to begin feeling its way toward a more realistic projection of future demand for specific elements... which China needs and doesn't have nearly enough of to meet its own demand. MCP most likely won't survive that long based only on the current moves... but, their fate in dealing with any future difficulties is pre-determined, already, by the steps they've taken now.
Second, a treatment that applies a slow morphine drip rather than risking a larger and potentially immediately lethal dose... doesn't alter the reality in larger context that MCP is a troubled company, and a troubled stock, in a troubled market. Pretty much every other stock in the space is already being dragged along the rocky bottom of the post-bubble market... while MCP hasn't yet been close to fully rationalized in a way that corrects prior excesses. A difficult couple of days, weeks and months in the broader markets... isn't going to help MCP or others in the space, but, it might be capable of producing some screaming exploration and development stage deals in better (heavy) REE plays than MCP... while MCP will be playing less and less of a relevant role, and won't be occupying the space in a way that matters to others.
MCP is dead. Focus instead on Heavy REE exploration... on specific elements... and on emerging producers with better balanced commodity risks and revolutionary technologies that operate to obviate the market issues that dominated the bubble phase...
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