Evaluation Hearing, Day One, pt 3
by: shallow_explorer 04/18/05 10:55 pm
Msg: 56101 of 56342
Meanwhile they, the debtors counsel, represented that the dreaded SHC experts were extremely biased and they had the following seven issues w/respect to the SHC experts’ business plan evaluation:
1. Energy Margins – represented that their POSSE (internal proprietary) forecasting model was historically “spot-on” when back tested verses actual data. While SHC experts’ model couldn’t back cast.
2. Capacity Pricing – SHC expert supposedly ignored NY imported electricity and thus over estimated the capacity value. Additionally accused experts of prematurely assuming plant abandonment to make remaining assets in area more valuable.
3. Commodity Pricing – actually asserted that spike in gas price is not sustainable. Stated that SHC experts “cherry picked” what prices went up (ie. gas) while ignoring increases in other commodities which would actually hurt the enterprise value.
4. Outsourcing MAEM – stated that Mirant management didn’t think outsourcing would save $$’s.
5. Challenged SHC wanting Bowline Plant construction – business judgement and who would question Mirant’s business judgement (I added this last comment).
6. Lovett plant mothball – stated no value here.
7. Working Capital – said not secreting value here and that Mirant Treasurer would show their assumptions are absolutely correct.
From the business plan, debtors attorney moved on to the evaluation metrics. Accused Mr. Maxwell, our expert, of inflating comparables value. Stated that Calpine can not be used as a comparable to Mirant, since their debt is trading at $0.70, ie. they are a distressed company. Stated that SHC overvalued nonoperating assets. With respect to the Discounted Cash Flow DCF models, debtors claimed our experts were, once again, much too optimistic.
In conclusion, the debtors, while hoping to have equity recovery, just realize it’s not possible. In fact, poor Mr. Dahlberg actually bought stock for his grandchildren, so you know he’s got to be pulling for us… and so on.
Bottomline debtors position:
Max estate value = $8.0-8.6 Billion
Claims = $11.4-11.6 Billion
Equity Out of the Money by $2.7-3.6 Billion
Here we took a 10 minute recess…
