Mirant's exchange offer, bankruptcy vote sends energy lower; Global Crossing still going strong

By Carlise Newman

Chicago, June 3 - Energy companies ruled the roost in distressed trading Tuesday, led by news late Monday from Mirant Corp. that the company was launching an exchange offer and also asked bondholders for their votes on a prepackaged Chapter 11 plan of reorganization.

Mirant's 7 5/8% notes due 2006 were seen bid at 78 and offered at 80, a trader said, three points lower than Monday, when they were quoted at 81 bid/83 offered. The 7.20% notes due 2009 were quoted at 60 bid/62 offered, two points lower than Monday. The 7.40% notes due 2004 were quoted up one point at 74.5 bid/75.5 offered.

Mirant's 9 1/8% notes due 2031 quoted down "as much as three points" on the day at 56.5 bid. The company's 8½% notes due 2021 were said to be "down half a point."

One trader said the bonds had been "up, then down, and ended up." He ventured an opinion that the whole exchange "is sort of like an AES thing, but we'll have to see how the situation plays out."

Late last year AES Corp. exchanged a big chunk of its debt but was forced to offer sweetened terms before it could reach a successful conclusion.

Seeking to restructure its bond debt, Mirant offered to exchange new secured notes due 2008 for $1.45 billion of existing bonds due or putable within three years.

The Atlanta-based energy company, which is also seeking to refinance its bank debt, said it is negotiating with its bank lenders to obtain new senior secured revolving and term loan credit facilities to refinance existing credit facilities for itself and its Mirant Americas Generation LLC unit.

In a press release late Monday, the energy company said it is also asking holders of the bond debt to vote in favor of a "fast track" pre-packaged plan of reorganization, in case an insufficient number of banks or bondholders agree to its out-of-court restructuring plan.

The terms of the plan of reorganization are substantially similar to the terms of the exchange offer and bank debt refinancing, and wouldn't affect other creditors of Mirant or the Mirant Americas Generation unit.

On May 30, two of the agent banks informed Mirant that they don't support sharing first priority liens with bondholders.

"Mirant wasn't really as active as it could have been. Today's move was not so huge. They've just sort of been sliding downhill for a few weeks, so the impact today is less," said a trader. "I was off yesterday and heard about the exchange offer last night, and I thought when I came in they'd be cranking. But that wasn't the case."

Mirant said no agreement has been reached with its banks to refinance its credit facilities, but on May 29, Mirant obtained an extension of its waiver agreement with its banks to July 14. Implementation of the bond debt exchange offers is contingent upon successful renegotiation of the bank debt.

Mirant, which has about $5.3 billion of debt, said refinancing of the credit facilities requires the agreement of all of the company's banks. The Mirant exchange offers currently require holders of 85% of the face amount of the Mirant debt sought for exchange to agree to a new plan.

Mirant is offering to exchange $750 million of 2.5% convertible debentures due 2021, and $200 million of 7.4% senior notes due 2004 for new senior secured notes due 2008.

It is offering $1,000 of the new secured notes for each $1,000 of the convertible debentures, and $1,000 of the new secured notes for each $1,000 of the senior notes.

The Mirant Americas Generation unit is offering $1,000 principal amount of new 7.625% secured debt due 2008 in exchange for each $1,000 principal amount of the $500 million face amount of its outstanding 7.625% senior notes due 2006.

The exchange offers will expire on June 27, unless extended.

Traders said Mirant would likely open weaker on Wednesday due to a downgrade form Standard & Poor's Ratings Services' after the close. S&P downgraded the company's corporate credit rating and senior unsecured debt ratings to CCC from B. The ratings remain on CreditWatch, but the implications were revised to developing from negative. The rating action is based on Mirant's request Monday for the bondholder vote on a prepackaged Chapter 11 reorganization plan and the potential for a bankruptcy filing if the restructuring offer is unsuccessful, S&P said.

Traders said other energy names moved in accord with Mirant. Calpine's 8½% notes due 2008 were quoted down two points to 72 bid/73 offered from 74 bid/75 offered. Dynegy's bank debt was 96 7/8 bid/97 7/8 offered, down "about a half point" according to a trader.

"It's a completely different story than a month ago," said a trader, referring to the run-up in energy bonds that had sustained for several weeks. "After Calpine's earnings came out, they were in the low 80s for a while."

On the upside, Global Crossing Inc.'s bank debt traded at 21¾ Tuesday. It was quoted at 20 bid/21¾ offered by the close on Tuesday. On Friday, the debt had traded at 201/2, reportedly due to news that the company has interest from XO Communications Inc. Global Crossing's bonds were seen moving from 5¾ bid/6¾ offered to 6½ bid/7½ offered since Friday, a trader said.

"Global Crossing always trades, even at these low levels, but the last few days they've been more active than usual," said the trader.

XO Communications, the telephone company controlled by billionaire investor Carl Icahn, said on Friday it has offered more than $700 million to acquire bankrupt high-speed communications company Global Crossing Ltd.

Singapore Technologies Telemedia already has an agreement to pay $250 million for a 61.5% stake in Global Crossing, which filed for bankruptcy protection in January 2002.

The bankruptcy court must rule on the deal with Singapore Technologies before any new bids for Global Crossing can be considered. IDT Corp., a telecommunications company that has acquired the assets of several financially troubled rivals, also has said it would bid for Global Crossing.

In addition, the Florham Park, N.J.-based bankrupt telecommunications company on Friday said its net loss for April was $75 million compared with $89 million in March. Its revenue for the month fell slightly to $228 million from $231 million in March, but that did not seem to affect the battered company's bonds.

"Overall it was more active than Monday today. I think we're heading for some heavy-volume days coming up," said a distressed debt trader.

In other news, Charter Communications Inc.'s 8 5/8% notes due 2009 were quoted a point higher at 74 bid/75.5 offered, a trader said. Charter had been soaring in recent days on news of an amendment to its bank facility.

On Friday Charter asked senior lenders to approve a corporate structure to allow Microsoft Corp. co-founder Paul Allen to lend it $300 million.

Allen, Charter's chairman and largest shareholder, agreed last month to lend the nation's No. 3 cable operator $300 million to bolster its financial condition.

On Monday Allen agreed to delay Allen's planned purchase of Comcast's interest in CC VIII LLC, the companies' joint cable venture.

Morgan Stanley equity analysts said on Monday they had raised Charter to equal-weight from underweight, saying the company can restructure without filing for bankruptcy.

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