Mirant Corp.'s bank debt is being quoted higher this week with some market participants attributing the rise to the 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 is being quoted at 45-46, the '04 at 45 1/2-47 and the '05 at 68-70, with these prices up about four points from last week. One trader also mentioned that an extension of Mirant' debtor-in-possession talks with GE Capital was also a positive factor. 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 if 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 Mirant spokesman did not return calls for further comment by press time.
One trader on the public side said he believes the rise is due more to an increasingly positive market tone. "People are back from vacation," he said. Traders and investors were in agreement that the market generally was higher. AMG Data Services reported a record $3.3 billion inflow for U.S. junk bond mutual funds in the week ended Aug. 27. "Cable, wireless, rural are all higher," said one trader. He noted Nextel Communications is trading above par at 100 3/8 to 5/8.