Mirant Files Bankruptcy Reorganization Plan

Two working days after announcing its $750 million settlement with California entities, Mirant filed its restructuring plan to allow it to emerge from bankruptcy by midyear. The January 19 plan filed in U.S. Bankruptcy Court for the Northern District of Texas would reduce the corporation?s debt by more than $5 billion, according to the company. ?It is important for Mirant to focus on its future as we progress toward emerging from bankruptcy as a new company,? stated Curt Morgan, executive vice-president and chief operating officer. A major component of the plan is the California Parties? settlement over allegations of manipulation during the state?s 2000-01 energy crisis. The plan also would put the California Parties in their own debtor class, Class 3 Secured Claims, with a setoff against payables owed by California Parties to the former (now also in bankruptcy) California Power Exchange or the California Independent System Operator. In addition, under the reorganization proposal: Unsecured claims would also include the California Parties as Class 4. Pacific Gas & Electric?s claims over reliability-must-run agreements would get their own class. This Class 5 would receive special treatment noted in the settlement. Prepetition taxes would be paid in full when each subsidiary of Mirant emerges from Chapter 11. Mirant Americas Generation notes due in 2011, 2021, and 2031 would be reinstated with accrued interest paid in cash. Mirant debtor claims would receive substantially all new Mirant equity. Current common stockholders? claims would be canceled. Equity holders would receive any surplus value after creditors are paid in full in addition to the right to a pro rata share of warrants issued by the new company if they vote to accept the plan. An offshore reincorporation of the company would be considered. While the company has assets nationwide, it also owns plants in Asia and the Caribbean. Mirant spun off from Southern Company in 2001, in part to take advantage of California?s newly deregulated market. It bought up power plants from Pacific Gas & Electric and broke ground on new plants in the same development areas. Its three facilities?Pittsburg, Contra Costa, and Potrero?provide 2,347 MW. However, the plants sold to Mirant were older facilities and have been saddled with expensive pollution-control requirements. That, in addition to postcrisis market conditions that offer more moderate profits than assumed during the spinoff, led to the company?s tailspin two years ago. The company filed for Chapter 11 in July 2003. Mirant had lost its Department of Water Resources contract and switched nearly all its units to steady capacity payments from CAISO through reliability-must-run commitments. Those were estimated to bring in $150 million/ year. Pittsburg units 4 and 5 were kept as merchant plants. The company?s books were reaudited in the wake of the Enron debacle, and chief executive officer Marce Fuller began hinting that the company would seek bankruptcy protection.

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Mirant Files Bankruptcy Reorganization Plan

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