Case CSS Doc 1034 Filed 01/07/16 Page 1 of 7

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1 Case CSS Doc 1034 Filed 01/07/16 Page 1 of 7 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re: Chapter 11 MOLYCORP, INC., et al.,' Case No (CSS) Debtors x (Jointly Administered) Re: Docket Nos. 793, %NOTEHOLDERS' OBJECTION TO THE DEBTORS' REVISED BIDDING PROCEDURES The ad hoc group of holders of the 10% senior secured notes (the "Ad Hoc 10% Noteholders") issued by Molycorp, Inc. hereby submits this objection to the revised bidding procedures (the "Revised Bidding Procedures") [Dkt. No. 1008] filed on January 6, In support of the objection, the Ad Hoc 10%Noteholders respectfully state as follows:z OBJECTION 1. At the beginning of the case, the Court made clear that it would not give Oaktree kudos for modifying unreasonable terms in its proposed DIP facility, since those terms never should have been sought in the first place. See July 2, 2015 Hr. Tr. at 151:20-151:22 (stating that Oaktree was "not getting credit for most of what [they] gave up because [they] shouldn't have asked for it in the first place"). In its objection to the Debtors' original bidding ~ The Debtors (and their taxpayer identification numbers, where applicable) are the following: Molycorp, Inc. (1797); Industrial Minerals, LLC; Magnequench, Inc. (1833); Magnequench International, Inc. (7801); Magnequench Limited; Molycorp Advanced Water Technologies, LLC (1628); MCP Callco ULC; MCP Canada Holdings ULC; MCP Canada Limited Partnership; MCP Exchangeco Inc.; Molycorp Chemicals &Oxides, Inc. (8647); Molycorp Luxembourg Holdings S.a r.l.; Molycorp Metals &Alloys, Inc. (9242); Molycorp Minerals Canada ULC; Molycorp Minerals, LLC (4170); Molycorp Rare Metals Holdings, Inc. (4615); Molycorp Rare Metals (Utah), Inc. (7445); Neo International Corp.; PP IV Mountain Pass, Inc. (1205); PP IV Mountain Pass II, tnc. (5361); RCF IV Speedwagon Inc. (0845). Molycorp's United States headquarters is located at 5619 DTC Parkway, Suite 1000, Greenwood Village, Colorado Terms used but no defined herein shall have the meaning ascribed to such terms in the 10% Noteholders' Objection to Debtors' Motion to Approve Bzdding Procedures [Dkt. No. 973]. KL

2 Case CSS Doc 1034 Filed 01/07/16 Page 2 of 7 procedures, the Ad Hoc 10% Noteholders predicted that the Debtors and Oaktree would attempt that same bait and switch again, i.e., that substantial revisions to the bidding procedures, the Oaktree Plan, and the Disclosure Statement would be unveiled immediately before the upcoming hearing after the other parties had been forced to spend time and resources objecting to terms that the Debtors and Oaktree knew to be unreasonable and that the Debtors and Oaktree would cite those modifications as evidence of their diligence and good faith, and the unreasonableness of everyone else. That has now come to pass, and it should not be accepted. 2. But aside from abusive tactics, the Revised Bidding Procedures should be denied for two primary reasons: 3. Credit Biddir:~ at Morcntain Pass. First, the Debtors and Oaktree have once again imposed limitations on credit bidding against "Shared Collateral" at Mountain Pass Debtors that irrationally enhance Oaktree's rights under the prepetition credit documents and alleviate the corresponding burdens. have explained: 4. As both the Indenture Trustee for the 10% Notes and the Collateral Agent The Final Cash Collateral Order confirms that the Collateral Agency Agreement continues to govern the respective rights of the 10% Noteholders and Oaktree in the shared collateral. Final DIP Order at 14 [Dkt. No.278]. Under the Collateral Agency Agreement, the Collateral Agent holds a single lien that secures the 10% Notes and Oaktree's claims against the Mountain Pass Debtors. Under the Collateral Agency Agreement, the Indenture Trustee for the 10% Notes has the right to direct the exercise of remedies by the Collateral Agent, which includes the ability to control credit bidding. There is no basis in Collateral Agency Agreement (or any other document) to exclude Oaktree's claims from credit bidding by the Collateral Agent. Oaktree's secured claim against Mountain Pass Debtors is capped at $300 million and the 10%Notes' claim is at least $687 million. That means that KL

3 Case CSS Doc 1034 Filed 01/07/16 Page 3 of 7 even if Oaktree's claims for makewhole premiums and original issue discount were allowed in full, Oaktree's pro rata interest in the Pari Passu Collateral would be 30%. Accordingly, the Collateral Agency Agreement plainly allows the 10% Noteholders to control the application of Oaktree's secured debt in a credit bid for 'the Shared Collateral, and Oaktree is entitled to, at most, 30% of the Molycorp Minerals Assets that are acquired through a successful credit bid. 5. Neither Oaktree nor the Debtors have ever disputed this result, and there is nothing remarkable about it. For example, a typical indenture (like the 10%Notes Indenture) gives a specific constituency the right to control remedies, including credit bidding, subject to the minority investors' right to a pro rata interest in whatever is recovered. The only wrinkle here is that, because Oaktree's claims are cross-collateralized, Oaktree's rights against the Neo Debtors would be reduced based on its recovery from a successful credit bid against the Mountain Pass Debtors. 6. The Revised Bidding Procedures purport to refashion that bargain in several respects all, unsurprisingly, to the benefit of Oaktree and the detriment of the 10% Notes. 7. First, credit bidding by the Collateral Agent would be capped at the amount of principle and interest owed to the 10% Noteholders (instead of the full combined amount of the claims held by the 10% Noteholders and Oaktree) baldly stripping the 10% Noteholders' right to control remedies with respect to the single lien, including through application of Oaktree's claim. See Revised Bidding Procedures, Art. IX. 8. Second, Oaktree would receive 35% of the assets obtained through a winning bid, which blatantly inflates Oaktree's pro rata share by at least 5% (and far more if the Committee's objection to Oaktree's claims for make-whole premiums and original issue discount KL

4 Case CSS Doc 1034 Filed 01/07/16 Page 4 of 7 are sustained). See id., Art. IX. Moreover, it defies logic as to why Oaktree should be entitled to any share of Mountain Pass if the 10% Noteholders are not utilizing Oaktree's claims to credit bid. 9. Third,.any credit bid must contain cash sufficient to allow confirmation of the Oaktree Plan in other words, the Ad Hoc 10% Noteholders would need to bail out the Debtors for causing administrative insolvency at Molycorp Minerals. See id., Art. VIII.D (discussing the requirements for a qualified bid). That is an improper condition on the inherent rights of secured creditors. 10. Finally, credit bidding by the Collateral Agent is "not to exceed any other Qualified Bid for the Molycorp Mineral Assets by more than $1,000,000." Aside from the fact that Oaktree is now creating rights for itself out of whole cloth (as there is nothing in the Prepetition Collateral Agency Agreement that could even remotely be viewed as creating any such limitation on the 10%Noteholders' right to credit bid), this would also mean that no credit bidding can occur unless and until the Debtors receive a competing cash bid for the same assets and deem it "Qualified," which may make it impossible for the 10% Noteholders to credit bid at all. See id., Art. IX. 1l. The Disclosure Statement states that these concessions are part of the "9019 Settlement" between the Debtors and Oaktree. But the evidence suggests that the Debtors never bothered to understand the Collateral Agency Agreement before agreeing to give away the 10% Noteholders' rights and enhance Oaktree's. Neither any of the responses fielded by the Debtors or Oaktree or the Disclosure Statement provide any explanation whatsoever of the relevant issues, nor any justification for what the Debtors have agreed to do, and no further clarification has been provided informally. KL

5 Case CSS Doc 1034 Filed 01/07/16 Page 5 of Of course, the actual explanation is clear. Oaktree seeks to diminish the likelihood that a credit bid by the Collateral Agent will prevail, because Oaktree would rather maximize its claims against Neo than receive pro rata interests in Mountain Pass. Therefore, Oaktree sought to suppress credit bidding against Mountain Pass, and the Debtors were all too willing to agree. 13. Cotasr~ltatiort a~td Co-Mana~enzent. Second, the Revised Bidding Procedures inappropriately limit the Ad Hoc 10%Noteholders' consultation rights. Specifically, the Ad Hoc 10% Noteholders would only be a "Consultation Party" with respect to "Qualified Bids) on the Assets that are the subject to the liens of the 10% Noteholders." See Revised Bidding Procedures, Art. I.C. This language appears designed to limit the 10% Noteholders' rights with respect to transactions involving Neo, despite their liens on intercompany claims owed by the Neo Debtors and the pledge of 65% of the equity of certain Neo holding companies. Oaktree's consultation rights regarding Neo are not revoked with respect to bids that do not directly sell Oaktree's collateral (which is limited to equity), and the 10% Noteholders' consultation rights should not be contingent on specific bid structures either. This is especially true given the Debtors' practice of dealing exclusively with Oaktree, and their well-documented inability to resist Oaktree's self-interest. 14. Indeed, the Debtors and Oaktree have now both stated publicly that they believe Neo is worth less than Oaktree's disputed claim amount. The Revised Bid Procedures seek to set up a dangerous dynamic where the parties that have publicly downplayed Neo's value are controlling the auction process for Neo and excluding the one party, the 10% Noteholders, who stand to most benefit if Oaktree and the Debtors are proven wrong on value. KL

6 Case CSS Doc 1034 Filed 01/07/16 Page 6 of As a result, additional oversight of the sale process is warranted. The Ad Hoc 10% Noteholders therefore propose that PJT Partners (financial advisor for the Committee) or Houlihan Lokey (financial advisor for the 10% Notes) co-manage the sale process with Miller Buckfire. The Ad Hoc 10% Noteholders would release Houlihan Lokey of its representation of the 10%Notes in order to facilitate this result. [Signature page follows] KL2 2936GS7.2-6-

7 Case CSS Doc 1034 Filed 01/07/16 Page 7 of 7 CONCLUSION WHEREFORE, the Ad Hoc 10% Noteholders request that the Court grant this objection and reject the Revised Bidding Procedures unless modified in accordance herewith. Dated: January 7, 2016 PACHULSKI STANG ZIEHL &JONES LLP /s/laura Davis Jones Laura Davis Jones (Bar No. 2436) James E. O'Neill (Bar No. 4042) Colin R. Robinson (Bar No. 5524) 919 N. Market Street, 17t" Floor P.O. Box 8705 Wilmington, DE (Courier 19801) Telephone: (302) Facsimile: (302) lj ones@pszj law.com j o'neill@pszj law.com crobinson@pszj law. com KRAMER LEVIN NAFTALIS & FRANKEL LLP Thomas Moers Mayer Gregory Horowitz Joshua K. Brody Andrew M. Dove Kramer Levin Naftalis &Frankel LLP 1177 Avenue of the Americas New York, New York Telephone: (212) Facsimile: (212) tmayer@kramerlevin.com ghorowitz@kramerlevin. com j brody@kramerlevin.com adove@kramerlevin. com Counsel to the Ad Hoc 10% Noteholders KL