Mirant Corp. bank debt continued to come under pressure as the company's restructuring plan became the subject of creditor wrangling. A $5 million piece of the $1.125 billion revolver maturing in July was believed to have traded in the 62 range and the paper was quoted as low as 57-62 in the street last week. Two weeks ago, it traded in the high 60s to 70 range. One trader believed that debt holders have more to gain by approving Mirant's widespread restructuring plan, which ultimately extends the company's debt obligations in exchange for extra collateral.
Mirant's restructuring plan includes the reworking of its corporate credit facilities--a $1.125 billion revolver maturing in July, a $450 million revolver maturing in April 2004, and a $1.125 billion revolver maturing in July 2005--as well as its $250 million, five-year revolver and a $50 million, five-year revolver at its subsidiary Mirant Americas Generation (MAG). Mirant is also looking to exchange $750 million of 2.5% convertible debentures and $200 million of its 7.4% senior notes for new senior notes, trading each $1,000 of the convertibles and senior notes for $1,000 new senior note exposure. Moreover, the company is also offering to exchange the $1,000 of new secured debt in exchange for each $1,000 of MAG's $500 million, 75/8% senior notes due 2006.
Bondholders with approximately $300 million of MAG's outstanding $2.5 billion in bonds are pursuing a lawsuit in response to the exchange offer. The bondholders claim that Mirant's offer of first priority liens on the assets of certain direct and indirect U.S. subsidiaries to all the new restructured debt robs them of their rights to the assets at MAG. The company believes that the bondholder suit is without merit and will be dismissed, a Mirant spokesman noted. He said the company is still in negotiations with its banks, but he declined to elaborate. The company needs 100% approval from its banks for the restructuring ahead of the July maturity.