Mirant

[Joe Stocks]

My take FWIW (from Yahoo)
by: superanalyst2000 09/08/03 11:32 am
Msg: 279391 of 279421

Some comments:

- DIP financing was very important. Why? because it is critical for Mirant to continue trading as much as possible. Safe-harbor provisions entitle counterparties to terminate trading contracts half way after bk; the problem is that termination value is determined by the counterparty and it is usually much lower than value on the books. The DIP will allow the company to post bk letters of credit to support trading and lower termination costs. On the plus side Mirant disclosed that none of its contracts is subject to "low discovery rules", meaning the haircuts from termination will be somewhat limited.

- No need to keep guessing goodwill charges, long term asset valuations, or trading termination costs. The 10Q last week was squeaky clear: expect losses and write-offs of around 1.5 billion in the near future. All told the company has/will writte off some 5 billion since jan 02. As bad as it sounds, there will still be 1.5 billion left in shareholder equity (no wonder the shareholders committee is not facing any real challenges).

- Again, closing the loophole relating to sec. 108 was the best news for shareholders since this whole thing blew up. Any debt for equity will have to be recorded as income (with its nasty tax consequences). Selling assets at/or above book value is by far the cheapest way to deleverage this company.

- There is quite a bit of pressure for PEPCO to buy its generation assets back from Mirant (read commentary on Wash Post). PEPCO is in a really bad spot right now, hopefully Mirant can capitalize on it.

- Talk of strenghtening Asian currencies (check out Snow's trip to China last week) just keep making the Philippines assets more valuable. Another opportunity to deleverage the company.

I am still not sure how the share price will react to the upcoming charges: 1.5 billion sounds pretty bad, but the certainty of positive equity is the best possible news... we will see