With five business days before the offer expires, nearly 66% of Mirant’s bondholders last week said they plan to support the company’s exchange offers and related pre-packaged plan of reorganization — an indication that the company may achieve a successful out-of-court restructuring. Mirant has until midnight July 14 to obtain support from at least 85% of its bondholders to avoid bankruptcy (see NGI, June 23).

CEO Marce Fuller said, “this amount of support from our bondholders is a crucial component of our effort” to avoid filing for Chapter 11 protection. “We are increasingly optimistic that we will reach the 85% minimum acceptance required from our bondholders.”

Mirant was advised of the support by its ad hoc committee, which represents holders of the company’s 2.5% convertible senior debentures due in 2021 and its 7.4% senior notes due 2004.

In the June 30 amended exchange offers, Mirant is offering to exchange for each $1,000 principal amount of bonds $1,000 principal amount of new senior secured notes due in 2008; warrants to acquire 22.47 shares of the company’s common stock, and $5 in cash. Assuming 100% acceptance of the exchange offers, the warrants would represent, in aggregate, 4% of the company’s stock on a fully diluted basis. These warrants would be priced six months after the closing of the exchange offers at 120% of the 30-day average closing price of Mirant’s common stock on the New York Stock Exchange.

Mirant also announced last week that subsidiary Mirant Americas Generation LLC (MAG) is offering $1,000 of the principal amount of new secured debt with an interest rate of 8.25% in exchange for each $1,000 principal amount of the $500 million face amount of its outstanding 7.625% senior notes due 2006. In lieu of warrants to acquire Mirant common stock, the company will make an additional $10 cash payment per $1,000 principal amount. Securities laws prevent MAG from offering Mirant warrants.

Mirant also disclosed the terms it is offering its bank lenders to restructure approximately $3.1 billion of bank debt. The revised proposal includes up to $1.1 billion of first lien capacity ahead of the lien proposed to be shared by banks and bondholders on substantially all of the company’s unencumbered assets. In addition to securing $300 million of bank debt owed by Mirant’s subsidiary MAG, that first lien capacity will be available to support letters of credit as well as new financing, which will improve the company’s liquidity.

Although Mirant has received informal indications that the revised terms may be acceptable to certain individual banks, the company noted that neither the bank agents, nor any committee representing the banks, have agreed to any terms.

“We plan to continue discussions with our banks…, and we remain hopeful we will be able to reach a consensual out-of-court restructuring,” said Fuller.

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