Next Week in Bankruptcy

GT Advanced Technologies Inc., a New Hampshire-based sapphire crystal manufacturer and former supplier to Apple Inc., on Thursday will ask a judge for final court approval of a bankruptcy-exit plan that pays most of its creditors a small fraction of what they are owed.

Under the proposed plan, big lenders and creditors, including Citigroup Financial Products Inc. and Caspian Capital LP, would infuse $80 million to fund GT’s emergence from bankruptcy, court papers set filed in U.S. Bankruptcy Court in Manchester, N.H., show. Current shareholders would go empty-handed, as the company’s equity would be used to extinguish its debts.

Bondholders owed about $436 million will get some stock in the reorganized company and could increase their recovery through post-bankruptcy litigation. But GT estimates the stock will be worth less than a penny for each dollar of bond debt, according to court papers.  Unsecured creditors of the parent company getting recovery estimated at less than 2 1/2 cents on the dollar on debts that may top $250 million.

GT Advanced took on more than $400 million in loans from Apple to gear up to become a supplier of sapphire screen material for the technology giant’s smartphones. But the year-long venture ended with Apple rejecting most of the material for reasons that were disputed.  Jilted by Apple, GT filed for chapter 11 bankruptcy protection in October 2014, surprising shareholders that were counting on success in the smartphone supply deal.

In Richmond, Va. Thursday, Alpha Natural Resources Inc.’s proposed sale process will go up for court approval.

If approved, Alpha would enter the process with a $500 million leading bid from its lenders, which covers mining operations in Wyoming, Pennsylvania–including the natural gas Marcellus Shale business–West Virginia and Virginia, as well as Alpha’s interest in a coal export terminal in Newport News, Va.

But the proposed rules governing the auction have drawn some two dozen bankruptcy-court filings from creditors raising various concerns with the proposal or objecting outright.

The U.S. government fears Alpha Natural Resources Inc.’s proposal to sell its “crown jewel assets” to its lenders won’t provide for cleaning up pollution at Alpha’s mines, posing a “serious threat to public health and safety.

The lenders’ so-called credit bid–that is, not hard cash but rather a pledge to forgive $500 million in debt they are owed–puts Alpha at risk of becoming unable to comply with its obligations to reclaim the land and treat the water at its mines, the government said.

Alpha’s retirees and the Pension Benefit Guaranty Corp., the federal government’s insurer of private pensions, have also objected to the sale.

Alpha says the lenders’ bid is “central” to its ability to wrap up its chapter 11 case amid continued market turmoil. In addition to the sale, Alpha is preparing a chapter 11 plan to distribute any sale proceeds to creditors and address any assets that go unsold. The company sought chapter 11 protection on Aug. 3.

And next Friday, rare-earths miner Molycorp Inc. will hold its bankruptcy auction at a Manhattan law firm’s offices.

Molycorp has been taking bids for its assets, and the winning offer will determine whether it chooses to complete the sale or to reorganize under a chapter 11 plan already on file.

Whether Molycorp ends up being sold or ends up reorganizing, senior lender Oaktree Capital Management stands to walk away with 92.5% of the value, up to $513.8 million. The rest of the value, either in the form of equity or sale proceeds, will go to Molycorp’s junior creditors, settlement papers say.

Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Del., approved the auction last month.

Molycorp’s chapter 11 proceeding has been marked by accusations that Oaktree, a latecomer to the capital structure of the distressed business, had taken too strong a hand in steering the bankruptcy process.

But junior and senior creditors recently reached a deal that will speed the end of the bankruptcy and give Oaktree most of the value in the embattled rare-earths company. The settlement provides for an end to the quarrels, and either a stand-alone reorganization, or a sale of the entire company.

The deal averts prolonged litigation between junior creditors and Oaktree over loans to Molycorp, which was driven to file for chapter 11 protection in June 2015, after prices for its products plunged.

Bondholders aren’t on board with the new deal and could challenge it as unfair when Molycorp’s chapter 11 plan comes up for confirmation in March.

Molycorp filed for chapter 11 in June.

-Peg Brickley and Jacqueline Palank contributed to this article.

Write to Tom Corrigan at [email protected]