Mirant Corp.'s bank debt was quoted higher last week with some market participants attributing the rise to news that the bankrupt power company has filed a motion with the bankruptcy court to reject an out-of-market agreement to purchase power from electricity distribution company Pepco. Mirant is also seeking to renegotiate the terms of two out-of-market agreements to sell power to Pepco. Traders said the '03 was being quoted at 45-46, the '04 at 451/2-47 and the '05 at 68-70, with these prices up about four points from pre-Labor Day ranges. No trades could be determined.
"Under the agreement Mirant now seeks to reject, the company is obligated to purchase power from Pepco at prices that are significantly out-of-line with market prices for power, requiring Mirant to pay substantially more than market rates. Mirant forecasts it would cost the company and its stakeholders hundreds-of-millions of dollars over the duration of this agreement if it were to remain in effect," according to a Mirant statement. "The two power sales agreements that Mirant is seeking to renegotiate with Pepco require Mirant to sell power for substantially less than current market rates. From today through their expiration--one agreement expires in June 2004 and the other in January 2005--these agreements would cost Mirant tens-of-millions," the statement continues.
A distressed buysider commented that the overall market tone is a major factor in the upswing, but that "Mirant is on something of a rally." One trader mentioned that an extension of Mirant's debtor-in-possession talks with GE Capital was also a positive factor, but the buysider dismissed this. A Mirant spokesman said GE has committed to the DIP but there was an extension to last Friday as final negotiations took place.