Mirant Corp.'s '03 and '04 revolvers traded actively around 74-74 1/2 after a bullish research report was published by Conn.-based broker Libertas Partners. The '05 traded around the 79 1/2-81 1/2 range. Meanwhile, Mirant Americas Generation Inc.'s bank debt traded at 107 1/4-108 1/4.
"Some investors in MAGI read our report and realized that the distribution to Corp., according to the plan of reorganization, would be based on full recovery amounts," said Derek Jerina, senior analyst at Libertas. "When they realized their recoveries would be slightly greater than they originally anticipated at the expense of the trade claims they bought more of the Corp. bank debt. This drove the price up."
"The MAGI bank debt will receive new debt and equity, which is to have a value equal to its full recovery amount, which is par, plus pre-petition accrued, plus post-petition accrued," Jerina explained. The expectation is that the accrued rate will be the default interest rate, which is 200 basis points higher than the regular interest rate, he added.
Other market participants did not put as much emphasis on the report though and attributed the hike to positive expectations around the company's final reorganization.
The value of the claim changes depending on whether the claims are treated on a pre-petition or a post-petition basis. "When you move from using the claim as of the filing date to the claim at emergence, different pieces of paper do better from other pieces of paper. That's the key to the whole report," Jerina explained. The accrued claim of the 2 1/2% bonds at filing would be 100.2% going up to 105.2%, after emergence--assuming a June 30 emergence date. But, the claim of the 7.9% bonds would be 104% at filing going to 121% at emergence.
Before the report, the '03 and '04 revolvers were quoted at 71 3/4-72 3/4. The '05 was quoted at 77 1/2-78 3/4. The MAGI was quoted at 107-107 3/4. Mirant extended its period of exclusivity three times before filing its plan of reorganization a month ago (LMW, 1/24). Regardless of the plan, there are some creditor issues that remain to be solved. A Mirant spokesman did not return calls.