MP Materials Announces Exchanges of a Portion of its 0.25% Green Convertible Senior Notes due 2026, Representing a Net Reduction of $25 Million of Outstanding Indebtedness

Rhea-AI Summary

MP Materials (NYSE: MP) announced private exchange agreements for its convertible notes on December 9, 2024. The company will exchange $131.6 million of 0.25% green convertible senior notes due 2026 for $106.6 million of 3.00% convertible senior notes due 2030, resulting in a $25 million reduction in outstanding debt. After the exchange, expected to settle around December 16, 2024, the 2026 notes outstanding will be $78.4 million, and 2030 notes will total $854.1 million. J. Wood Capital Advisors plans to purchase approximately 750,000 shares of MP's common stock concurrently with the exchanges and has agreed to a 30-day holding period.

Positive

• Net reduction of $25 million in outstanding debt
• Successful debt restructuring extending maturity from 2026 to 2030

Negative

• Higher interest rate on new notes (3.00% vs 0.25%)
• Potential stock price volatility due to hedging activities by note holders

Insights

Financial Analyst

MP Materials' debt restructuring shows strategic financial management, reducing total debt by $25 million while extending maturity through 2030. The exchange of $131.6 million of 0.25% notes due 2026 for $106.6 million of 3.00% notes due 2030 improves the company's debt profile, though at a higher interest rate. This move provides greater financial flexibility and reduces near-term refinancing pressure. The transaction's structure, including JWCA's planned purchase of 750,000 shares with a 30-day lock-up, appears designed to minimize potential market disruption from hedging activities. However, the higher interest rate on the 2030 notes will increase annual interest expenses by approximately $2.9 million, a reasonable trade-off for the extended maturity and reduced principal.

Market Research Analyst

The debt exchange's market implications warrant attention, particularly regarding potential stock price volatility. The complex transaction structure involves multiple moving parts: note holders potentially unwinding 2026 positions and establishing new 2030 hedges, while JWCA's strategic 750,000 share purchase provides some price support. After the exchange, MP Materials will have $78.4 million in 2026 notes and $854.1 million in 2030 notes outstanding. The company's proactive approach to liability management, reducing debt while market conditions are favorable, demonstrates sound financial stewardship. However, investors should monitor potential short-term stock price fluctuations as market participants adjust their positions.

LAS VEGAS--(BUSINESS WIRE)-- MP Materials Corp. (NYSE: MP) (“MP Materials” or the “Company”) today announced that on December 9, 2024, it entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with a limited number of holders of its 0.25% green convertible senior notes due 2026 (the “2026 Convertible Notes”). Pursuant to the Exchange Agreements, the Company will exchange approximately $131.6 million aggregate principal amount of the 2026 Convertible Notes for approximately $106.6 million aggregate principal amount of the Company’s 3.00% convertible senior notes due 2030 (the “2030 Convertible Notes”). The newly issued 2030 Convertible Notes will be part of the same series as the Company’s existing 2030 Convertible Notes. The exchanges are expected to settle on or about December 16, 2024, subject to customary closing conditions.

Upon completion of the exchanges, the aggregate principal amount of the 2026 Convertible Notes outstanding will be approximately $78.4 million, and the aggregate principal amount of the 2030 Convertible Notes outstanding will be approximately $854.1 million, representing a net reduction of $25 million of outstanding indebtedness.

The Company expects that some or all of the holders of the 2026 Convertible Notes that are exchanged by the Company may purchase shares of the Company’s common stock in open market transactions or enter into or unwind various derivatives with respect to the Company’s common stock to unwind hedge positions that they have with respect to their investments in the 2026 Convertible Notes. The Company also expects that some or all holders of the newly issued 2030 Convertible Notes may sell shares of the Company’s common stock in open market transactions or enter into various derivatives with respect to the Company’s common stock to hedge their investments in the 2030 Convertible Notes. These transactions may cause or avoid an increase or decrease in the market price of the Company’s common stock, the effect of which may be material.

In connection with the exchanges, the Company has been advised that J. Wood Capital Advisors LLC (“JWCA”), the Company’s financial advisor with respect to the exchanges, intends to purchase approximately 750,000 shares of the Company’s common stock concurrently with the exchanges in privately negotiated transactions from certain purchasers of the 2030 Convertible Notes through a financial intermediary at a discount to the last reported sale price of the Company’s common stock on December 9, 2024. JWCA has also agreed not to sell such shares of common stock for 30 days. Such concurrent purchases by JWCA of the Company’s common stock could increase (or reduce the size of any decrease in) the market price of the Company’s common stock or the 2030 Convertible Notes.

The exchanges and any common stock issuable upon conversion of the 2030 Convertible Notes have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or any other securities laws, and the 2030 Convertible Notes and any such common stock cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the 2026 Convertible Notes, the 2030 Convertible Notes or any common stock issuable upon conversion of the 2030 Convertible Notes, nor will there be any sale of the 2030 Convertible Notes or any such common stock, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.

About MP Materials

MP Materials (NYSE: MP) produces specialty materials that are vital inputs for electrification and other advanced technologies. MP’s Mountain Pass facility is America’s only scaled rare earth production source. The Company is currently expanding its manufacturing operations downstream to provide a full supply chain solution from materials to magnetics.

Forward-Looking Statements

Certain statements included in this press release that are not historical facts are forward-looking statements under Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of the words such as “estimate,” “plan,” “shall,” “may,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” or similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, expectations regarding the exchanges. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of our management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of MP Materials. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, those discussed in MP Materials’ Annual Report on Form 10-K filed on February 28, 2024 under the heading “Risk Factors,” MP Materials’ subsequent Quarterly Reports on Form 10-Q and other documents filed by MP Materials with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that MP Materials does not presently know or that MP Materials currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect MP Materials’ expectations, plans or forecasts of future events and views as of the date of this press release. MP Materials anticipates that subsequent events and developments will cause MP Materials’ assessments to change. However, while MP Materials may elect to update these forward-looking statements at some point in the future, MP Materials specifically disclaims any obligation to do so, unless required by applicable law. These forward-looking statements should not be relied upon as representing MP Materials’ assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241209869131/en/

Investors:

Martin Sheehan

IR@mpmaterials.com

Media:

Matt Sloustcher

media@mpmaterials.com

Source: MP Materials

FAQ

What is the size of MP Materials' debt exchange announced on December 9, 2024?

MP Materials will exchange $131.6 million of 2026 notes for $106.6 million of 2030 notes, resulting in a $25 million reduction in outstanding debt.

What are the interest rates for MP Materials' exchanged convertible notes?

The 2026 green convertible notes have a 0.25% interest rate, while the 2030 convertible notes carry a 3.00% interest rate.

How many MP Materials shares will J. Wood Capital Advisors purchase in connection with the exchange?

J. Wood Capital Advisors plans to purchase approximately 750,000 shares of MP Materials' common stock concurrently with the exchanges.