Client Mirant Corporation, based in Atlanta, Georgia, is a leading merchant energy company that produces and sells electricity in the United States, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally and operates an integrated asset management and energy marketing organization.
At the time of PJSC's engagement, Mirant was the second largest independent power producer in the U.S. with revenues of $5.2 billion
Assignment PJSC was engaged in September 2003 as financial advisor to the Official Committee of Equity Security Holders to represent shareholders in the bankruptcy of Mirant.
In this capacity PJSC reviewed and analyzed the operations of Mirant to determine a valuation for the company and reviewed any strategic alternatives which might add value for the company. Challenge Many merchant energy producers suffered from deteriorating financial performance and overleverage in 2001 - 2002, following the collapse of Enron and the California power crisis.
Mirant Corporation had been downgraded to below investment grade in December 2001, with further downgrades in October 2002.
Facing impending debt maturities, unprofitable contracts and a difficult financing environment, Mirant had filed for protection under Chapter 11 in July 2003.
During the course of the bankruptcy, Mirant, as well as its Creditors' Committees, tenaciously argued for a valuation for Mirant that provided no value for the common stockholders of the Company.
Process PJSC spent several months working closely with representatives of the company and the various other constituencies in developing a plan and determining a valuation. Eventually, however, it became apparent that PJSC and the other financial advisors, as well as the company, had different viewpoints regarding operational decisions and the valuation of Mirant Corp. These differences set the stage for an eventual valuation hearing to determine the proper valuation, the timeline of which follows:
In January 2005, the Debtor proposed a Plan of Reorganization that would provide shareholders with 5% out-of-the-money warrants based on a depressed valuation by the Debtor’s financial advisor.
In order to resolve the valuation dispute, the bankruptcy judge mandated that financial advisors for each committee file Expert Reports, Rebuttals and pursue discovery.
Following extensive discovery, a Valuation Hearing commenced in April 2005.
The hearing lasted 27 days in court, including a six day direct-, cross- and redirect-examination of PJSC Partner, Anders Maxwell, in defense of PJSC’s valuation.
On the strength of PJSC’s reports and testimony, the judge issued a letter adopting most of PJSC’s adjustments, implying a value for Mirant Corp. much closer to PJSC’s.
Results Under the aegis of the court, the Equity Committee earned a tenable negotiating position as a result of PJSC’s victory in the valuation hearing.
PJSC analyzed potential settlement frameworks and advised the Equity Committee in negotiations with the Debtor and Creditors’ Committees.
In September 2005, a negotiated settlement was reached in which common shareholders retain a stake of about 14% in the reorganized common stock, as well as representation on the reorganized Mirant Board of Directors.
As a result of the settlement, Mirant’s stock price has risen over 250% since the beginning of the case, to an equity market value of approximately $550 million, a gain of over $400 million.
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