Mirant offers new secured notes at par for existing bonds, says two bank agents oppose plan

By Peter Heap

New York, June 2 - Mirant unveiled details of its debt restructuring, offering new bonds with longer maturities and superior security for an equal par amount of its existing notes and convertibles - and warned that Citibank, NA and Credit Suisse First Boston, the agents for more than $2.9 billion of bank debt, and a group of bondholders oppose part of the plan.

The Atlanta energy company is also negotiating new senior secured revolving and term loan facilities with its bank lenders to refinance the existing loans and disclosed details of the structure it is proposing.

While Mirant said it believes it will be able to restructure its debt without filing for bankruptcy, the company is also asking bondholders to approve a prepackaged plan for use if it fails to achieve the necessary support from its creditors.

The new senior secured credit facilities and the new notes will be secured by first priority liens on the assets of certain direct and indirect U.S. subsidiaries of Mirant. They will also be backed by a pledge of 100% of the stock of certain indirect U.S. subsidiaries of Mirant and 65% of the stock of certain indirect foreign subsidiaries of Mirant.

The new notes to be issued by Mirant and Mirant Americas Generation LLC and the credit facilities will share the security equally.

None of the debt that is the subject of the exchange offers and bank negotiations is currently secured.

Mirant said that on May 30 Citibank, NA and Credit Suisse First Boston, the agent banks for the company's $2.7 billion of bank debt and $237 million turbine facility, informed the company that they do not support sharing first priority liens with bondholders.

In the exchange offer document filed with the Securities and Exchange Commission, Mirant said the exchange is necessary because it does not expect to be able to refinance its $1.125 billion of senior unsecured bank debt that matures on July 15, 2003 on an unsecured basis.

"Mirant's Board of Directors believes it would be imprudent and subject the rights of its and MAG's [Mirant Americas Generation] creditors to unacceptable risks to pledge substantially all of its available collateral to achieve a refinancing solely of its shortest maturing indebtedness," the company added.

But it added that it believes that over five years the company's business and economic conditions will recover sufficiently to allow it to repay its creditors in full.

Mirant said it has discussed the plan with ad hoc bondholder committees but said neither the Mirant bondholder group nor the Mirant Americas Generation group has endorsed the plan. In fact, Mirant said the Mirant Americas Generation committee has told the company it believes the offer improperly favors Mirant creditors at the expense of Mirant Americas Generation creditors.

"After a great deal of analysis, we concluded that this bond debt restructuring, coupled with a concurrent bank debt restructuring, is the best way for all of our creditors to receive full payment for what we owe them, while taking steps to preserve value for our shareholders," said Marce Fuller, Mirant's president and chief executive officer, in a news release.

"We believe these exchange offers meet the needs of our debtholders and also are in the best interest of Mirant's various stakeholders."

The exchange offer is for Mirant's $750 million of 2.5% convertible debentures due 2021 but putable in 2004 and $200 million of 7.4% senior notes due 2004. The company is offering $1,000 of new 7.5% senior secured notes due 2008 for each $1,000 of the existing convertibles and senior notes. Mirant noted that it owns $83 million of the securities issued by TIERS trust 2001-14 which uses $400 million of the convertibles as the underlying assets. The TIERS issue is not covered by the exchange because they are not Mirant's securities but the company is proposing that Structured Products Corp. and Citibank make amendments to address this problem.

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

The bond exchanges are subject to successful renegotiation of the bank debt.

Talks with the banks are continuing. On May 29 Mirant obtained an extension of its waiver agreement with its banks to July 14.

Mirant is proposing that its restructured credit facility would consist of a $2.05 billion term loan and a $1.1 billion revolving letter of credit and working capital facility, both due after five years.

The proposed Mirant Americas Generation secured credit facility would be a $300 million term loan.

Interest would be at Libor plus 400 basis points, stepping up to Libor plus 450 basis points after three years if Mirant does not reduce borrowings by $300 million.

Mirant proposes paying a 100 basis points fee on closing of the news facilities and a further 100 basis points after three years if it has not reduced borrowings by $300 million.

The facilities would have an unused commitment fee of 50 basis points.

To refinance the credit facilities, Mirant must obtain the agreement of all its banks.

In addition, the exchange requires that holders of 85% of the bonds subject to exchange agree to the plan.

Mirant noted that the fall-back prepackaged Chapter 11 filing would be "substantially similar" to the exchange but would only require the support of two-thirds by amount and one-half by number of creditors voting.

The exchange runs through midnight ET on June 27 unless extended.

The exchange agent is Deutsche Bank Trust Co. Americas and the information agent and voting agent is Innisfree M&A Inc.

Full offering document at:

http://www.sec.gov/Archives/edgar/data/1010775/000095012303006756/g83182toexv99waw1wa.htm

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