Mirant's loans shot up 10 points after the energy company reached an agreement with creditors and shareholders on the terms of its emergence from bankruptcy. Its '03 and '04 revolvers were trading at par, while its '05 revolver was up 3 points and trading at 94. Around $100 million of bank loans traded on news of the agreement and hedge funds were the biggest buyers, according to one trader.
Investors were not expecting the company's creditors and stockholders to agree so soon. "Nobody knew they would come out so quickly," the trader said. Mirant filed its reorganization plan in March this year, but the plan was stalled because shareholders disagreed with the firm and its creditors on the value of the company. The firm reached an agreement with three of the statutory committees representing creditors and stockholders Mirant Creditors' Committee, the Mirant Americas Generation (MAG) Creditors' Committee and the Mirant Equityholders' Committee and Pheonix Partners, which represents the holders of the Mirant Trust I subordinated trust preferred securities. A committee of Mirant bondholders also supported the arrangement. A Mirant spokesman did not comment by press time.
Under the plan, Mirant Americas Generation's (MAG) debt will be repaid in full, while MAG's $1.7 billion of long-term debt will be reinstated. The company will repay MAG's $1.5 billion of short-term debt and other obligations with common stock in the reorganized parent company for 10% of the amount owed. Shareholders will receive 3.75% of new common shares in the reorganized company, with warrants to buy a further 10% of the common stock.
Mirant plans to raise $1.35 billion in capital to repay the debtholders when it exits Chapter 11. But it also reserves the right to issue new notes directly to the creditors for this portion of their claims. Also, $6.5 billion of unsecured debt and obligations at Mirant's parent company will be exchanged for 96% of the remaining common stock. Mirant's subordinated trust preferred securities will receive 3.5% of the common stock with rights to buy 5% of the new common stock.
