Replies to post #112 on Mirant

[Joe Stocks]

Evaluation Hearing, Day One, pt 7
by: shallow_explorer 04/18/05 10:58 pm
Msg: 56105 of 56342

The roll forward issue basically concerns Mirant’s expert, Mr. Coleman’s, inability to use actual 10-K info instead of erroneous estimates. Had Mr. Coleman been diligent, and used the actual, publically available results…

MIR EV INCREASES $0.235B

Mr. Coleman said Dynegy info for 2005 not available. However, the 2005 data was clearly printed on the sheet that Mr. Coleman used to get his 2004 info. This lack of due diligence seriously effects the comparable multiplier, once fixed, it results in

MIR EV INCREASES $0.411B

Mr. Coleman was the only banker from all the committees to not add back in NRG longterm notes receiveable to their comp. By doing this….

MIR EV INCREASES $0.235B

Mr. Coleman specifically excludes Calpine, even though many believe it is the single best comp and is Mirant’s only pure merchant comp. Including Calpine in the comps…

MIR EV INCREASES $0.352B

INCREASED VALUE TO DATE: $1.23B

Mr. W then moved on improper weighted average cost of capital calculations. Since the new Mirant, when it emerges from bankruptcy, will be lean and mean (assuming new, competent management – my add), the 4.2% Blackstone risk premium in the DCF calculations for distressed companies will be irrelevant. We say premium should be 0%, Corp used 2% in their evaluation, Magi used 1%. If we compromise and use 2% premium…

MIR EV INCREASES $0.400B

With respect to the Perpetuity Growth Rate – here I’m a little confused. Suffice it to say, Mirant keeps changing the numbers to their benefit. If use their original assumptions….

MIR EV INCREASES $0.300B

INCREASED VALUE TO DATE: $1.93B

Balance Sheet Issues

Debtors planning on being underleveraged at bankruptcy exit. Exit lender have indicated willingness to lend $1.25B not $0.75B. Difference

MIR EV INCREASES $0.5B

Mirant planning on current ratio 3-4x historic or 3-4x industry comps. If use 2x historic or comps:

MIR EV INCREASES $1.0B

Moving on to Energy Consultants

Blackstone historically used NYMEX, PIRA and EIA when projecting pricing. But in business plan, rejected historic indices and “cherry picked” indices to their advantage. Using historic indices results in

MIR EV INCREASES $0.5B

Capacity pricing. Significant changes happening in NE and NY isos. These changes ignored by debtor. Include these changes

MIR EV INCREASES $0.6B

Bowline/Lovett, skipped explanation due to time but correct and

MIR EV INCREASES $0.1B

NOLs are an interesting story. Blackstone value $114-158M. NOLs depend on assumed equity value. Long discussion on Mirant’s withholding of their prelim evaluation which had >$300M NOLs. Saturday’s rec’d testimony suggests $20M in NOLs is all. Fix this

MIR EV INCREASES $0.35B

International restricted cash. Nearly $400M not evaluated. Add it in

MIR EV INCREASES $0.357B

INCREASED VALUE TO DATE: $5.337B

At this point, Mr. Silverstein – creditors’ rude counsel laughs and Mr. Lauria – debtors lead counsel makes gestures. Judge Lynn interrupts and says that neither of these events will affect the Judge.

Then discuss $1.9B in avoided claims, ie. Southern. At some discount, provides

MIR EV INCREASES $0.5-1.0B

Added in Project Falcon savings at conservative 50% of synergy

MIR EV INCREASES $0.8B

TOTAL INCREASE IN EV: $6.6B to $7.0B