Mirant

[dblpc]

No one has posted for a few days. Are we giving up or simply demoralized? Does anyone have any new information warranting maintaining or acquiring a position in this stock?

[Bruce A Thompson]

MIR stockholders

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1601151261&tid=soe&sid=1...

[mrrkidd]

What are the major implications, both pro and con, for the request to be given advance notice of either buys or sells of huge blocks of Mirant stock? How will this ruling affect Mirant stock?
Thanks.

[south louisiana]

Bruce - Approximately 400M shares outstanding and therefore my calculation - all for $100M; half for $50M.

[Bruce A Thompson]

Actually,

Controlling interest could be bought for $26MM. The whole company can be bought for the $50MM. (g/NG) For around $2Bil, the company could be bought out of BK and put back on the NYSE. Are you listening Warren?

BT

[Joe Stocks]

MIRANT CORP.: Investors resigned to loss of stake
Margaret Newkirk and Robert Luke - Staff
http://www.ajc.com/tuesday/content/epaper/editions/tuesday/business_f3c1fd5440dd32f900ce.html
Tuesday, July 22, 2003

When John Hunter woke up a week ago, he realized he'd probably lost the $50,000 he'd invested in Mirant Corp. during the past few years.

He and thousands like him still own shares of the Atlanta-based energy company, which filed for Chapter 11 bankruptcy last week.

And while many wonder if they will ever recoup any of their investment in the company, Hunter is resigned that he won't.

"I feel so foolish," said the former Atlantan, who now resides in Winter Park, Fla.

Bankruptcy experts share his pessimism. They believe Mirant's shareholders are unlikely to recoup anything, even if the company emerges from bankruptcy.

Investors have watched as Mirant shares, which once traded as high as $47, have fallen to about a quarter. Based on Monday's closing price of 24.5 cents, the company now has a stock market value of about $99 million.

"The stock price suggests the debt may actually exceed the assets," said Lynn M. LoPucki, a law professor and bankruptcy expert at the University of California at Los Angeles Law School. "So, often, the rosy picture at the beginning turns out to be a zero for shareholders."

When Mirant filed for Chapter 11 on July 14, the company listed assets of $20.57 billion and debts of $11.4 billion. The difference --- $9.17 billion --- represents the net worth of the company.

That works out to close to $23 a share, based on 404 million common shares outstanding.

"If those asset and liability numbers are accurate, they are telling us there are enough assets to pay creditors in full and allow equity shareholders to retain their shares," LoPucki said. "But it often occurs in bankruptcy cases that assets are overstated and liabilities are understated at the beginning of the case."

That's the case in most large public bankruptcies, such as Kmart and US Air, where common stockholders were wiped out, LoPucki said. Often, companies that successfully emerge from Chapter 11 cancel their old stock, rendering it worthless.

In a few cases, common stockholders may receive something of nominal value.

"Typically that's warrants to buy shares in the emerging company," LoPucki said. "They represent hope for those shareholders. So shareholders like to get them, and companies like to give them because they can say their shareholders weren't wiped out in the bankruptcy."

If Mirant's officers and directors worked for the best interests of the company's shareholders before the Chapter 11 filing, they now have a different duty, said Jack Williams, a law professor and bankruptcy expert at Georgia State University.

"From now on, Mirant's directors and officers must first act in the best interests of the company's creditors, rather than its shareholders," Williams said. "Bankruptcy causes a dramatic change in who is the beneficiary of the fiduciary duty."

Investors apparently believe Mirant's bondholders won't come out whole. For example, Mirant's 7.9 percent notes maturing in 2009 were trading last week at about 43 cents on the dollar.

Mirant's own financial adviser has estimated that if the company were to be liquidated, creditors would recoup only about 39 cents on the dollar.

Stockholders would get nothing, according to documents filed last month with the Securities and Exchange Commission. About 40 percent of Mirant's shares were owned by institutional investors, such as mutual funds.

Despite the bankruptcy, some still are willing to place a bet on Mirant's shares, as Monday's trading attests.

"It's simply a question of risk-reward," Williams said. "It depends solely on your tolerance for risk and your capital outlay. After all, the risk of winning the Georgia lottery is very, very remote. But for a buck investment, many people take it."

Hunter, the Florida shareholder, said he's learned his lesson about Mirant.

He said he got his first Mirant shares three years ago, when Southern Co. split off its former subsidiary, and picked up more as the stock price began falling in the belief that the company would turn around.

He said he held on because he believed company promises that it could restructure its debts. He also believed that its stock, trading for about $2 a week ago Monday, would double when the restructuring was complete.

Hunter believes some burned investors are now trading the stock in the over-the-counter market on hopes of recouping some of their money should the shares rebound.

"They're just sick and desperate,'' Hunter said. "I'm like, 'Haven't you learned?' "

[JohnD]

Now thats a pretty damn scary thought~
JohnD

[south louisiana]

At this share price [.25] and given the daily float, it would be possible to own a controlling interest for about $50 million.

[mrrkidd]

Unfortunately false hope is not much better than no hope. I am making the assumption here that Marce Fuller is an honest person, and making this same assupmtion for the other board members at Mirant. Unlike Enron, Mirant has assets to reorganize and Mirant should be able to one day in the near future trade like a "real" stock again, and get back in to the S&P 500 again. If the senior managers are honorable people they will take the existing shareholders along for the ride to the blue skies of profitability. Sure are a lot of dark clouds in the sky though aren't there?

[ssnyl]

False hope is better than no hope

[south louisiana]

mrrkidd - well said.

[mrrkidd]

I remain hopeful that Marce Fuller and the rest of the Mirant managers truly want to do what is right by the shareholders and will at some time in the near future reward those of us that have stuck with Mirant through this debacle. If there is any honor among the senior managers and board directors we will be treated fairly and our shares will be kept intact.

[south louisiana]

Would anyone like to take a shot at what Dangremond meant in the AJC article when he said:

"Our position with the common shareholders is that right now obviously their shares are trading at absolute minimal values in off-market transactions."

Some read this positively.

[BullNBear52]

What do you expect the Trustee to do? He has a fiduciary responsibility to the participants of the 401k plan; not the company.

[Bruce A Thompson]

This says it all

The plunge in the value of the shares isn't expected to have a big impact on the company's 401(k) plan, which has 3,098 participants. That's because Mirant stock represented only 6.1 percent of plan investments as of July 14. The plan's trustee has notified the company of plans to liquidate those shares, a Mirant spokesman said.

Mirant's defined-benefit pension plan, which covers about 2,700 current employes and 235 retirees, doesn't own any Mirant stock.



http://www.ajc.com/business/content/business/0703/17mirant.html

[BullNBear52]

Mirant Could Further Test Cos Ability To Shed Contracts
Wednesday July 16, 8:37 pm ET
By Kristen McNamara


NEW YORK -- Mirant Corp. (NYSE:MIR - News; MIRKQ) might be the next energy company to test its ability to shed money-losing power contracts in bankruptcy court, according to legal and financial experts.

The Atlanta-based power marketer filed for Chapter 11 bankruptcy protection Monday in the U.S. Bankruptcy Court for the Northern District of Texas in Fort Worth Monday, after it was unable to negotiate a restructuring package with its lenders. Falling power prices and overly ambitious expansion plans left the company unable to service its mounting debt.

Mirant has said it will review all of its contracts to determine which, if any, are hurting its efforts to restructure. If it seeks to reject any, it could face the same sort of multijurisdictional battle a unit of NRG Energy Inc. is waging with Connecticut Light & Power Co., legal experts said.

"While I think the purpose of Mirant's going into Chapter 11 is to find a way to deal with the loans they weren't able to restructure, at the same time it's probably going to be an opportunity to get rid of any problem contracts," said Phillip Lookadoo, an energy-contract expert and partner in the Washington office of law firm Thelen Reid & Priest LLP. "If they want to do that, they're going to run the risk of running into the same kind of FERC-versus-bankruptcy squabble NRG did with CL&P."

Mirant owns about 16,000 megawatts of generation in the U.S. About 63% of the total, or 10,150 megawatts, is under contract in 2003, company spokesman James Peters said. Much of the contracted power is committed to Pepco Holdings Inc. (NYSE:POM - News) utility Pepco. The rest of the output is sold into the wholesale power market.

Pepco At Risk

After purchasing four plants in Virginia and Maryland from Pepco in 2000, Mirant entered into agreements to provide the utility with all the electricity it needs to serve its more than 700,000 customers in Maryland and the District of Columbia.

Mirant and Pepco haven't disclosed the per-megawatt cost of their power supply agreement, but the utility has paid Mirant an average of $615 million a year, Pepco spokesman Robert Dobkin said.

Merrill Lynch estimated in a research note Tuesday that Mirant collects $34 a megawatt-hour from Pepco, about $7 less than Pepco recovers from its customers and much less than Mirant could earn selling the electricity into the Mid- Atlantic wholesale market, where daily prices have run near $50 a megawatt-hour this week.

Mirant's contract with Pepco in Maryland expires on June 20, 2004, and the one in Washington runs until Jan. 19, 2005, Mr. Dobkin said. Pepco said it would mount a fight if Mirant moved to reject the agreements.

"We would vigorously oppose that," Mr. Dobkin said.

If Mirant won the right to shed the contracts, Pepco could enter contracts with other suppliers or purchase wholesale power from the spot market. But the utility could have a hard time securing supplies at a price below the approximately $41 a megawatt-hour rate it collects from its customers, Merrill Lynch said Tuesday.

Standard & Poor's placed the long-term corporate debt rating of Pepco and its subsidiaries on CreditWatch with negative implications in light of the possibility that Mirant's energy marketing subsidiary could seek to reject the companies' power purchase agreements.

Others Watching

Washington Gas Energy Services Inc., a unit of WGL Holdings Inc. (NYSE:WGL - News) , also receives all of its electricity from Mirant. The companies haven't disclosed the terms of their supply agreement, but Merrill Lynch estimated Tuesday that Mirant provides power to the Washington, D.C., utility at a price in the middle to high $30 a megawatt-hour range.

Washington Gas Energy said it has the right to draw on $30 million in collateral posted by Mirant if the contracts are terminated and it needs to find replacement power at a higher cost.

It isn't clear how long it will take Mirant to examine its existing contracts.

"It hasn't been even 48 hours since we filed," Mirant spokesman James Peters said. "Our business plan will be revisited. All of our contracts and operations will be evaluated."

The bankruptcy court on Monday approved a program that allows Mirant to continue upholding obligations under existing and future trading contracts that support Mirant's assets.

The ability of companies to reject burdensome contracts in Chapter 11 is established. Debtors can move to reject an executory contract, or one in which both parties still have obligations to each other, at any time until the company files its disclosure statement, or prospectus for its reorganization plan, said Nancy Rapoport, dean of the University of Houston Law Center and a bankruptcy expert.

FERC In The Middle

In practice, however, the process isn't proving to be that straightforward for energy companies.

"If you're a utility debtor, you can't simply assume you'll be able to reject a contract," said David Skeel Jr., a law professor at the University of Pennsylvania and author of a recent book on the history of U.S. bankruptcy law. "You have to assume the Federal Energy Regulatory Commission is right in the middle of all these decisions."

Almost immediately after Xcel Energy Inc. (NYSE:XEL - News) unit NRG filed for Chapter 11 protection in May, it sought to reject a money-losing power supply contract with Northeast Utilities unit CL&P. Connecticut utility regulators and the state attorney general jumped in to protest the move at FERC. Ultimately, a U.S. district court and a federal appeals court were pulled into the fray.

FERC directed NRG last month to continue supplying power under the CL&P contract over the next four months while a commission judge considers the matter. On Wednesday, the U.S. Appeals Court for the District of Columbia Circuit rejected a request from NRG to stay FERC's order.

Until the NRG-CL&P dispute is resolved, energy companies seeking to reject burdensome contracts will continue to face uncertainty, Mr. Skeel said.

"It reinforces the importance of getting some resolution to this issue," he said. "Until there's a definitive resolution, it's going to come up on each case."

Energy companies are watching the NRG developments closely. Mirant, though, is unlikely to wait for resolution before deciding whether to reject any of its power supply contracts, Mr. Skeel said.

"It's a pretty long time for Mirant to wait," he said. "I don't think they can just stop everything for 120 days."

-By Kristen McNamara, Dow Jones Newswires; 201-938-2061; [e-mail]

[BullNBear52]

Mirant Says Won't Force Pre-Packaged Plan On Banks
Wednesday July 16, 6:30 pm ET
By David Bogoslaw, Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--In an about-face from a statement in a government filing in early June, Mirant Corp. (NYSE:MIR - News) said Wednesday it won't try to force a pre- packaged bankruptcy plan on its bank lenders.

The Atlanta power-generation company needed approval for the pre-packaged plan or reorganization from two-thirds of its bond and bank debt but only got 60% of its bank debt to support the plan, sources said. The plan was supported by 80% of Mirant's bondholders.

In its June 2 filing to the Securities and Exchange Commission (News - Websites), Mirant said it would use the "cramdown" provisions of the bankruptcy code to force the pre- packaged plan on the dissenting debt group if it received the requisite approval from the other group.

But Mirant no longer sees the cramdown measure as an option, spokesman James Peters told Dow Jones Newswires on Wednesday.

"After looking at our options and even though we received broad support for the proposed plan ... given the uncertain outcome, the company felt it best to do a comprehensive reorganization and traditional chapter 11 (bankruptcy)," he said.

Peters wouldn't speculate about whether or not a bankruptcy court judge would choose to adopt certain terms from the pre-packaged proposal.

One shareholder said he had bought Mirant shares in the past few months because the company had assured him that his equity stake would be secure under a pre-packaged plan. He said he was angry Mirant had decided not to pursue that tack.

While investors and analysts are speculating as to why Mirant isn't planning to press banks to accept a pre-packaged plan of reorganization, bankruptcy lawyer Craig Litherland at Gilbert Heinz & Randolph said equity in the company is almost certainly more secure because of it.

"It's much harder in a cramdown situation to allow equity holders to maintain any substantial interest at all," he said.

That's because pushing through a pre-packaged plan over the objections of dissenting creditors triggers the absolute priority rule, which prevents any group of creditors or shareholders that has lower priority from retaining any interest or property unless the dissenting creditors group is paid in full, he explained.

"It may be that dynamic that's making the company a little reluctant to go immediately to a cramdown," he said. "Typically, companies prefer to negotiate a consensual agreement, because it gives them flexibility in allowing shareholders of lower status to maintain value."

Although it's common for companies to use the threat of a cramdown to force creditors to support pre-packaged reorganization plans, it's rare to see it actually used, he said.

Flexibility or not, many people believe there will be little if any equity value remaining after the bankruptcy. Existing equity would surely be wiped out if the court nods to an alternative proposal put forth last week by two agent banks, Citibank and Credit Suisse First Boston. Under that proposal, Mirant's bank debt would be slashed to $1.5 billion from $4.5 billion in return for a debt-for-equity swap.

But there are other threats to equity shareholder interests, such as liquidation of the company's assets to pay off debt holders.

Standard & Poor's Ratings Service lowered Mirant's debt another rung into junk on Tuesday, saying it expected unsecured creditors to be recover roughly 51% of the value of the debt, based on an estimated value of $5 billion of Mirant's assets and international cash flow forecasts.

Spokesman Peters said he wouldn't comment on how much value debt holders may retain.

"We're in the initial stages of this. We just filed less than 48 hours ago," he said. "We have to revisit our business plan. All our contracts and projects will be re-evaluated."

After suspending trading of Mirant's common stock and 6.25% convertible preferred trust securities on Tuesday, the New York Stock Exchange (News - Websites) said it was considering delisting the Mirant securities. Shares last traded at $2.01 on Monday.

On Wednesday, the company announced its common stock and 6.25% Convertible Trust Preferred Series A securities will be quoted on Pink Sheets - a daily listing of over-the-counter stocks not quoted on the OTC bulletin board - under stock symbols MIRKQ and MIRPQ, respectively.

-By David Bogoslaw, Dow Jones Newswires; 201-938-5289;

[south louisiana]

News re restructure chief:

SAN FRANCISCO, July 16 (Reuters) - Mirant Corp (NYSE:MIR - News), the energy producer and trader which filed for bankruptcy protection earlier this week, said on Wednesday it named Robert Dangremond to the role of Chief Restructuring Officer.

Dangremond is a principal with AlixPartners, which specializes in corporate turnarounds. His job will involve helping define Mirant's restructuring goals, preparing a long-term business plan and a plan to emerge from bankruptcy.

The company also announced on Wednesday that its shares, which previously traded on the New York Stock Exchange (News - Websites), will now trade on the pink sheets under the symbol (Other OTC:MIRKQ.PK - News).

Mirant, whose bankruptcy filing is ranked the tenth largest in U.S. history, listed $20.6 billion in assets and $11.4 billion in debt.

Dangremond recently served as senior vice president and chief restructuring officer at the mining pulp and paper company Harnischfeger Industries Inc (OTC BB:HRZIQ.OB - News), and previously served as chief financial officer of Zenith Corp (Paris:ZENP.PA - News).

[south louisiana]

Perhaps MIR is awaiting the outcome of the NRG/FERC dispute over whether a bk court can allow abrogation of onerous contracts over FERC objection.

[Joe Stocks]

35 mil share traded in the last two hours. The pace is not letting up. 140 mil so far.

[BullNBear52]

MIR "sweetened" deal would have made the banks shareholders. A position they obviously did not want any part of.

In Wednesday's revised proposal, bank lenders would get warrants on almost 25 million shares of Mirant common stock, up from almost 15 million shares. The strike price on the warrants for stock was reduced to the market price six months after reorganization's closing from 120% of the market price.

The strike price for the warrants to be granted to bondholders was also lowered to the market price. The number of warrants offered to bondholders in the exchange remains unchanged for a total of about 16 million shares. Mirant has slightly more than 400 million shares of common stock outstanding.

Apparently the bondholders ie. State Street B&T didn't want to give up their position as first in line or share it either with the banks.

Last week, the company said it gained approval from the holders of more than two-thirds of bonds for the exchange. That's the amount of support needed for a prepackaged reorganization in bankruptcy court. For an out-of-court refinancing, 85% of bondholders must agree to an exchange. Mirant president and chief executive Marce Fuller expressed confidence last week that the company would obtain the 85% bondholder approval needed for an out-of-court restructuring.

But the bond exchange is contingent on the successful refinancing of the bank debt. The bank lenders have opposed the restructuring because they want the new bank debt to have a senior position in the capital structure to the new bonds. For an out-of-court restructuring, 100% of the banks involved must approve, compared with two-thirds lender approval for a prepackaged bankruptcy reorganization.

http://biz.yahoo.com/djus/030709/2205001506_1.html

My bet is State Street sues CSFB too.

[BullNBear52]

That is being tested as we speak with NRG in CT.

http://biz.yahoo.com/djus/030711/1846000773_1.html

NRG Asks Bankruptcy Court To Amend Contract Rejection Order
Friday July 11, 6:46 pm ET


NEW YORK -(Dow Jones)- Units of NRG Energy Inc. (NYSE:NRZ - News) have asked a federal bankruptcy court to amend an order that allowed the units to reject 10 contracts NRG said is hurting its efforts to restructure under Chapter 11.

NRG Power Marketing Inc., Connecticut Jet Power LLC and Oswego Harbor Power LLC asked Judge Prudence Carter Beatty of the U.S. Bankruptcy Court in Manhattan Thursday to remove a resource-pooling arrangement with New England's power grid operator from the batch of contracts she allowed them to reject on Tuesday.

The NRG units also asked the judge to add language clarifying the specific gas transportation agreement she allowed them to reject with National Grid Group PLC's Niagara Mohawk Power Corp. unit.

Additionally, NRG requested that the contract with the Natural Gas Pipeline Co. be removed because it was inadvertently included on the list of contracts to be rejected.

A commodity swap agreement with a unit of Mirant Corp. (NYSE:MIR - News) has already been terminated so it wasn't necessary to include it on the list of agreements to be rejected, NRG said.

ST Linden Terminal LLC and a power trading subsidiary of Edison International's Edison Mission Energy unit each filed on June 27 objections to NRG's efforts to reject their contracts, NRG said. The court is expected to hold hearings on those contracts but hasn't yet scheduled the dates.

Edison Mission asked Judge Beatty last week to allow federal energy regulators to determine whether NRG's power marketing unit can reject a power supply agreement that runs through early 2017.

NRG didn't seek to amend the rejection of tolling deals with two NRG subsidiaries that own power plants, a leasing agreement with TCF Financial Corp. (NYSE:TCB - News; TCB) and two coal contracts with Courtney F. Foos Coal Co. Inc., which were among the agreements Beatty allowed NRG to reject this week.

Courtney Foos said in an interview Friday that his company has agreed not to fight NRG's rejection of their contract. Foos said it had required NRG to pay in advance for the coal it shipped to one of NRG's power plants in Delaware, so NRG doesn't owe it any money.

NRG units had filed with the bankruptcy court in mid-June to reject the contracts Beatty approved this week.

The contract rejections, which are a standard part of Chapter 11 proceedings, came amid an unusual dispute over NRG's efforts to shed a money-losing deal with Northeast Utilities Connecticut Light & Power Co.

Xcel Energy Inc.'s NRG, a power generator that became insolvent after falling electricity prices left it unable to service a huge load of debt, filed for Chapter 11 bankruptcy protection on May 14 to implement a restructuring agreement reached with its main creditors.


And what FERC has to say....

http://biz.yahoo.com/djus/030710/1907001393_1.html

FERC Asks Appeals Crt Not To Let NRG Shed Pwr Contract
Thursday July 10, 7:07 pm ET


NEW YORK (Dow Jones)--Federal energy regulators asked a U.S. appeals court Thursday not to allow a unit of NRG Energy Inc. (NYSE:NRZ - News) to exit a power supply contract with Northeast Utilities Connecticut Light & Power Co.

NRG Power Marketing Inc. asked the U.S. Appeals Court for the District of Columbia Circuit Tuesday to stay a June order from the Federal Energy Regulatory Commission that requires NRG to continue supplying CL&P with 45% of the power the utility needs to serve its customers.

Xcel Energy Inc.'s NRG, which filed for Chapter 11 bankruptcy protection in May, has been trying to shed the money-losing contract, saying it's hurting the company's efforts to restructure.

NRG hasn't shown that it will suffer irreparable harm if it's required to continue supplying CL&P, FERC said in its court filing.

"NRG-PMI has not shown the truly extraordinary circumstances necessary to warrant court intervention in a non-final agency action," FERC wrote.

Federal bankruptcy code, which allows debtors to reject burdensome contracts, doesn't supersede the Federal Power Act, which governs energy contracts and takes into account the public interest, FERC wrote.

The commission also said NRG hasn't given it enough information to determine whether rejecting the contract is in the public interest. It directed NRG's power marketing unit on June 25 to continue supplying CL&P while a FERC administrative law judge considers the matter over the next 120 days.

NRG told the appeals court that its power marketing unit will deplete its operating cash by the end of July if it's forced to continue purchasing wholesale power for CL&P at a higher price than it collects from the utility.

The appeals court gave NRG until Friday afternoon to respond to FERC's comments.

[Joe Stocks]

Wall Street Journal: Mirant loses key lenders' favor, files for bankruptcy protection

Jul 16, 2003, (Wall Street Journal /FT Information via COMTEX) --

Mirant Corp has filed for Chapter 11 protection after some key lenders refused to support the firm's planned reorganization. Banks that include Toronto-Dominion Bank, Deutsche Bank and bondholders agreed to help Mirant. However, Credit Suisse First Boston and Citigroup Inc were against the deal, saying that banks should first collect on some of the company's assets. Mirant needs support from 2/3 of bank lenders to be able to implement the refinancing proposal through a "prepackaged" bankruptcy filing. The firm did not reach the minimum requirement. The deadline set by creditors for the proposed reorganization expired Monday midnight.

[BullNBear52]

Let the lawsuits begin.....

http://www.thedeal.com/NASApp/cs/CS?pagename=NYT&c=TDDArticle&cid=1057269322964

Mirant's 'free-fall' filing surprises
by Soma Biswas
Updated 07:21 AM EST, Jul-16-2003

Mirant Corp.'s bankruptcy left many observers and creditors baffled at its choice of filing a "free-fall" Chapter 11 rather than a prepackaged plan with the support of its creditors.
"It's very unusual. I think so far all the others [merchant energy companies] have gone into a long prenegotiation ahead of the filing to try to keep control of the process so they could better foresee the outcome. Here that didn't happen," said Howard Siegel, a lawyer at Brown Rudnick Berlack Israels LLP.

A "free-fall" Chapter 11 is another term for a regular bankruptcy filing in which a company and its creditors have no prior agreements on what creditors will get in a reorganization plan.

A lawyer representing Mirant bondholders blasted both the company and its lead bank lender, Citibank, for its choice.

"Citibank's behavior in this thing was outrageous. They, at the very least, irresponsibly overplayed a hand this transaction should have and could have been done as a prepackaged plan," said Paul Silverstein of Andrews & Kurth LLP, who represents holders of nearly $1 billion in Mirant bonds.

Mirant could have offered a prepackaged bankruptcy. The company already met the prepack threshold because it has support from two-thirds of its bank lenders. These include investors who bought loans in the secondary market and became eligible to vote on the plan Tuesday, July 15, Silverstein said. "The company in deciding to free-fall this thing made what I believe is one of the major blunders of recent restructurings," Silverstein said.

The Atlanta-based power producer acknowledged in its announcement that it received "broad support" from creditors for its restructuring plan. But Mirant cited a "failure to obtain timely support of our key lenders" that created market uncertainty and threatened the company's liquidity.

James Peters, a spokesman for Mirant, declined to comment on whether it had the required creditor support to file a prepackaged plan. "I'm not going to go into details about what the final discussions were," Peters said.

Mirant filed for Chapter 11 late Monday in the U.S. Bankruptcy Court for the Northern District of Texas in Fort Worth. The filing beat by a few hours a Monday midnight deadline for banks and bondholders to vote on its restructuring plan.

Mirant said it has lined up a $500 million debtor-in-possession loan, but declined to reveal the name of the lender. GE Capital Corp. and J.P. Morgan Chase & Co. are in line to provide the DIP, but Mirant's bank lenders are not, said sources close to the situation.

Prior to Mirant's filing, it offered its bank loans collateral on $1.25 billion out of $3.5 billion in existing loans, a higher interest rate and longer maturities. Mirant also offered to exchange its bonds for new bonds. The same terms were to apply to either an out-of-court restructuring or a prepackaged Chapter 11.

Now that Mirant has filed a regular bankruptcy, its bondholders and bank lenders will have to restart their fight.

Citibank and other banks opposed the plan because it didn't get a first lien on all of Mirant's assets.

Meanwhile, holders of bonds issued by Mirant Americas Generating Inc. sued the company in Chancery Court in Delaware to stop the company's debt swap. Chancery Court has delayed a decision on the lawsuit until November.

MAGI holds the majority of Mirant's generation plants, and bondholders want to keep Mirant from giving first liens on those assets to banks.

Unlike most corporate restructurings, banks were not in a better position than bondholders in the Mirant case because Mirant's bank loans are unsecured, and MAGI's bondholders can lay claim to the company's most valuable assets.

Many bankruptcy experts are surprised that bank lenders pushed Mirant into a Chapter 11 because a bankruptcy court is unlikely to give them the superior position they're seeking over bondholders. The banks may do no better by waging a full-blown battle in bankruptcy court than under Mirant's offer before the filing, the experts say.

Mirant listed $20.6 billion in assets and $11.4 billion in debt. It has cash reserves of $1.7 billion, with $348 million of this restricted.

The company put certain Canadian units into an insolvency process in the Court of Queen's Bench of Alberta Judicial District in Calgary.

White & Case's Thomas Lauria is Mirant's bankruptcy counsel.

[Joe Stocks]

Won't the BK judge "out rank" FERC?

[BullNBear52]

FERC won't let MIR off the hook imo.....

UPDATE - Bankruptcy seen threatening Mirant power contracts
Tuesday July 15, 6:29 pm ET
By Matt Daily

HOUSTON, July 15 (Reuters) - Mirant Corp's bankruptcy is stirring fears the energy merchant might try to back out of money-losing supply contracts, leaving customers scrambling for megawatts as it re-examines the deals, analysts said on Tuesday.

Atlanta-based Mirant, a struggling holdout from the once booming power markets of the 1990s, sought Chapter 11 bankruptcy protection late Monday after failing to win bondholder support for its latest debt restructuring.

"I think it was wise for them to go ahead with a conventional bankruptcy filing. It may give them better flexibility," said Ellen Lapson, credit analyst with Fitch Ratings (News).

The Atlanta-based company failed in an earlier attempt to secure a pre-packaged bankruptcy plan with lenders, and the current filing may give it more leeway to restructure its $11.4 billion debt as well as exit unprofitable supply deals.

Of Mirant's 19,000 megawatts of U.S. available generating capacity, more than 10,000 MW are already tied up in supply contracts, with most of that -- about 6,000 MW from Maryland and Virginia plants -- sold to Pepco Holdings Inc's (NYSE:POM - News) Potomac Electric Power, the utility that serves Washington D.C.

The remainder of that capacity is sold on the spot market.

Credit analysts said Mirant may ask a bankruptcy judge to void the Pepco contract, signed in 2000, because the region's sharply rising power prices have likely undermined its profitability.

The company declined to comment on whether it would seek to cancel that contract, but said all of its supply deals would come under scrutiny.

"Our business plan is going to be revisited and contracts will be evaluated under a new business plan," Mirant spokesman David Payne said.

SHOWDOWN

Pepco, sensing a battle, said in a statement it would "exercise its legal remedies and vigorously oppose" any attempts to cancel the contract to ensure its 700,000 customers would not be without power.

Pepco could most likely find new supplies locally and pass any extra costs onto its customers in the regulated market.

The Federal Energy Regulatory Commission has so far sought to force power suppliers to their uphold their contracts, regardless of their economic impact.

Last month, FERC ordered Xcel Energy Inc.'s (NYSE:XEL - News) bankrupt NRG unit to continue supplying power to utility Connecticut Light and Power under a contract that NRG said caused it losses of $500,000 a day.

Mirant's only major power contract in the western U.S. is with Las Vegas utility Nevada Power, a unit of Sierra Pacific Resources Corp. (NYSE:SRP - News), which receives 325 megawatts under three long-term deals it signed in January. The contracts extend to April 2008.

"As of today they (Mirant) are still honoring the contract but we will continue to monitor the situation," said Nevada Power spokeswoman Sonya Headen.

Meanwhile, Mirant issued a letter to elected officials and energy regulators in the United States and Canada reassuring them the company had no plans to immediately shut down power plants or any other of its operations.

"Mirant's daily operations continue," the letter said.

"Chapter 11 means reorganization, not liquidation. Facilities and offices remain open. Customers and suppliers continue to do business with us. We continue to own and operate a substantial fleet of power plants ... In short, we continue to produce and deliver power, as always," the company said. (Additional reporting by Nigel Hunt in Los Angeles and Leonard Anderson in San Francisco)