Atlanta-based power and natural gas trader Mirant Corp. lost its months-long effort to stay out of bankruptcy last Monday, filing voluntary petitions seeking Chapter 11 protection in a Texas court. The company also filed an application in Canada last Tuesday seeking creditor protection for its Canadian subsidiaries.

The bankruptcy filing put Mirant’s debt at $11.4 billion, assets at $20.6 billion and total cash at $1.17 billion. The company said $348 million was legally restricted and could not be used immediately, and $89 million was held for operating, working capital or other purposes at subsidiaries. Mirant said it also secured a commitment, subject to the court’s approval, for $500 million in debtor-in-possession financing to provide additional working capital.

The Chapter 11 filing, which came as Mirant was due to pay back a $1.13 billion bank loan and conclude a major bond exchange offer, covers Mirant Corp., Mirant Americas Generation LLC and substantially all of the companies’ wholly-owned subsidiaries in the United States. Mirant’s operations in the Philippines and the Caribbean were not included.

Trading in Mirant shares was halted at the opening bell last Tuesday, and the stock subsequently was delisted. Mirant was ranked the 11th largest bankruptcy based on total assets by the research firm BankruptcyData.com

Mirant filed the Chapter 11 petitions in the U.S. Bankruptcy Court for the Northern District of Texas in Forth Worth, TX. “We have some assets in Texas, and we felt it was a jurisdiction to receive a fair hearing,” said Mirant spokesman James Peters. The application covering the company’s Canadian subsidiaries was filed in the Court of Queen’s Bench of Alberta Judicial District of Calgary.

The Texas court issued an order that allows Mirant to honor any and all obligations under its existing and future power and gas trading and marketing contracts, according to the company. The protection, however, applies only to contract parties that do not terminate their contracts because of Mirant’s Chapter 11 filing.

“Mirant’s worldwide operations are continuing without interruption and our vendors will be paid in full for all goods furnished and services provided after the filing date,” said Mirant President and CEO Marce Fuller. In an unusual move last week, U.S. Bankruptcy Court Judge D. Michael Lynn also allowed Mirant to pay some vendors for debt incurred prior to the petition filing, Peters confirmed.

The energy company had been in negotiations for several months with its bank lenders and bondholders to restructure a significant portion of its debt and refinance its existing credit facilities to avert bankruptcy.

“Although we received broad support from the company’s creditors on our restructuring plan, failure to obtain the timely support of our key lenders created substantial uncertainty in the marketplace about the outcome of these discussions. This, in turn, put a strain on our liquidity and threatened the feasibility of our business plan,” said Fuller. Opposition mostly came from lenders Citigroup and Credit Suisse First Boston, although Credit Suisse later softened its position, according to the Wall Street Journal.

“Add to this, uncertainty about the time of the recovery in power prices and a slow economic recovery in the U.S., and it became clear that a comprehensive financial reorganization was the best approach for our stakeholders,” she noted. “While the decision to file for Chapter 11 was very difficult, we believe this process will allow us to emerge…as a stronger, more viable and more competitive company positioned for long-term success.”

Mirant last week said it had not developed a reorganization plan yet, and would not predict how long it may be in bankruptcy. As a result, it noted the treatment of existing creditor and stockholder interests in the company was uncertain at this time.

Mirant’s board of directors last week hired Robert N. Dangremond, a principal with AlixPartners LLC, as the company’s chief restructuring officer. He will be Mirant’s point-man in the restructuring process and will help develop the company’s Chapter 11 plan of reorganization.

Along with its Chapter 11 filing, Mirant said it was terminating its offers to exchange its 2.5% convertible debentures due 2021 and its 7.4% senior notes due 2004. Mirant Americas Generation also was terminating its offer to exchange its 7.625% senior notes due 2006.

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