Mirant Corp.'s bank debt was volatile in the secondary market last week with rumors suggesting that the company lowered its projections for the next year. The company is also believed to have drawn down on the letters of credit against its '04 revolver, sending that paper into the 561/2-581/2 range. The drawdown caused the '05 bank debt holders to worry that the letters of credit against their paper could be drawn as well. One of the principal assumptions in investing in the '05 paper was that the letters of credit would not be drawn, explained one buysider. That loan dipped as low as the 69-71 context last week, according to traders.
Although Mirant bank debt is pari passu with the company's bonds, the '04 and '05 revolvers have net-backs from unfunded letters of credit and usually trade at a premium to the company's other unsecured debt. Comparably, the company's '03 revolver traded in the 551/2-571/2 range last week. A Mirant spokesman could not comment on the letters of credit draw down. But he noted that the company has shared its new business plan with its creditor and equity committees, but the plan and its contents are private.