Mirant Files Reorganization, Expects to Emerge from Bankruptcy by Mid-Year
Independent power producer Mirant Corp. filed its bankruptcy reorganization plan last Wednesday in the U.S. Bankruptcy Court for the Northern District of Texas, Fort Worth division with the expectation of emerging from bankruptcy by mid year. The plan calls for more than $5 billion in debt and $1 billion in other claims to be converted into equity.
The Atlanta-based company, which owns 17,000 MW of power generation in the United States, the Caribbean, and the Philippines, said all of its operations would remain intact with Mirant Americas Generation receiving a full recovery. The plan comes about 18 months after Mirant filed for bankruptcy protection in July 2003.
"We believe this plan allows Mirant to emerge as a stronger, more competitive company capable of managed growth and re-listing on a major stock exchange," said CEO Marce Fuller, who announced plans to retire earlier this month. "Importantly, the plan proposes to significantly reduce balance sheet debt, allow Mirant to retain all current U.S. and International assets and operations, and secure adequate financing. Continued service and sufficient credit support for customers would be ensured."
Under the plan, California creditors would receive their global settlement, announced earlier this month, of the 2000-2001 energy crisis issues. Under the $700 million agreement, Mirant would be required to forgive nearly $300 million owed it by three California utilities -- Pacific Gas and Electric Co., Southern California Edison, and San Diego Gas and Electric -- and the California Department of Water Resources.
The restructuring plan also allows for all state, federal and international taxes to be paid in full. Outstanding company notes would be reinstated with interest paid in cash or new Mirant equity. Current equity would be cancelled, but each holder would receive any surplus value after creditors are paid in full, plus the right to a pro rata share of warrants issued by the new company if they vote to accept the plan.
Mirant said the dispute with Pepco over their "back-to-back" agreement, under which Mirant purchased Pepco's generating assets in December 2000, would be resolved by rejecting or recharacterizing the agreement (resulting in the treatment of any obligations as prepetition claims), or by excluding the obligations from the reorganized company.
Mirant also said that there is a possibility that the company will undergo a change in ownership following its emergence from bankruptcy and that the company will be reincorporated overseas. This is "a one-time opportunity to create a more efficient financial structure by reincorporating the new Mirant parent offshore," Mirant said in a statement. "Since half of Mirant's operating income is derived from its non-U.S. assets, the company is exploring this possibility. If this action is taken, the company would pay all required U.S. federal, state and local taxes, as well as foreign taxes. The offshore reincorporation would have no negative effect on Mirant's employees or business operations."
M. Michele Burns, Mirant's chief restructuring officer and CFO, said the company has tried to act as the "honest broker" through this process, "working to find a common ground that is also consistent with the company's requirements for exiting Chapter 11. To that end, the plan reflects a structure both creditors' committees have expressed support for, and strikes what we believe to be a fair compromise for the remaining stakeholders including equity holders.
"Although not agreed to at this time, we anticipate that our proposed plan will serve as a sound platform for the final round of negotiations."
The company expects a hearing on its disclosure statement in U.S. Bankruptcy Court in late April. Following a ruling on the disclosure statement the reorganization plan would be subject to a vote by creditors and security holders.