Mirant, creditors agree to amended plan terms; $6.5 billion debt to be exchanged for 96.25% of new stock

By Caroline Salls

Pittsburgh, Sept. 8 - Mirant Corp. has reached an agreement with a number of the key constituencies in its Chapter 11 case that will lead to an amended plan of reorganization that exchanges $6.5 billion of unsecured debt for 96.25% of new common stock in the reorganized company, according to a company news release.

Parties to the agreement include the company, all three of the statutory committees appointed to represent creditors and stockholders (the Mirant creditors' committee, the Mirant Americas Generation, LLC creditors' committee and the Mirant equityholders committee), and Phoenix Partners, acting as an ad hoc representative of the holders of the Mirant Trust I subordinated trust preferred securities.

An ad hoc committee comprised of Mirant bondholders also announced its support for the arrangement.

Under the amended plan, $6.5 billion of unsecured debt and obligations at the parent level will be exchanged for 96.25% of the remaining common stock.

Also, holders of Mirant's subordinated trust preferred securities will receive 3.5% of the common stock and warrants to buy an additional 5% of the new common stock issued under the plan of reorganization.

The remaining 3.75% in common stock will go to the company's current shareholders, who will also receive warrants to purchase an additional 10% of the common stock of the company.

Also under the term sheet, recoveries on the company's avoidance actions, including the action against Mirant's former parent, Southern Co., will trigger payments to be shared by Mirant's former creditors and shareholders on a 50/50 basis.

The plan term sheet affirms that all Mirant Americas Generation debt obligations will be satisfied in full and its $1.7 billion of long-term debt will be reinstated.

Under the agreement, Mirant Americas Generation's $1.5 billion of short-term debt and other obligations will be satisfied with common stock in the reorganized parent company in exchange for 10% of the amount owed with the balance to be paid in cash.

Although the company still plans to raise the cash through a proposed $1.35 billion capital markets financing at its exit from Chapter 11, it said it still reserves the right to issue new notes directly to the creditors for this portion of their claims.

Also under the agreement, Edward Muller, the former chief executive officer of Southern California Edison's merchant energy subsidiary Edison Mission will be elected to the board of directors of Mirant and named chairman.

He will replace A.W. "Bill" Dahlberg, who has served as chairman of Mirant's board of directors since 2000, and Marce Fuller, who has served as Mirant's president and chief executive officer since 1999.

The agreement also provides that a new board of directors will be formed consisting of Muller, current board member A.D. "Pete" Correll, six independent members selected jointly by the company and the Mirant creditors' committee and one independent member to be chosen through a joint selection process with the Mirant equity committee.

Mirant will file an amended plan and disclosure statement soon, with a hearing on approval of the disclosure statement scheduled for Sept. 28.

Mirant, an Atlanta-based power company, filed for bankruptcy on July 14, 2003 in the U.S. Bankruptcy Court for the Northern District of Texas. Its Chapter 11 case number is 03-46590.

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