US energy company Mirant announced yesterday that, to facilitate its financial restructuring, it has filed voluntary petitions for reorganisation under Chapter 11 of the US Bankruptcy Code. Certain Canadian subsidiaries of Mirant will also file an application for creditor protection under the Companies Creditors’ Arrangement Act (CCAA) in Canada.
Mirant Corp, Mirant Americas Generation, LLC, and all of the companies’ wholly-owned subsidiaries in the United States are included in the Chapter 11 filings. Excluded from the filings are the company’s operations in the Philippines and the Caribbean.
Concurrently, Mirant announced that it has been granted permission by the US Bankruptcy Court to implement a Counterparty Assurance Program. This program supports the company’s ability to continue its asset optimisation and risk management operations without interruption.
The Court order is said to authorise immediate relief to honour any and all obligations under existing and future trading and marketing contracts that support Mirant’s asset base. This protection, however, applies only to counterparties that do not terminate trading and marketing contracts because of Mirant’s Chapter 11 filing.
Marce Fuller, president and chief executive officer of Mirant, said ‘Mirant’s worldwide operations are continuing without interruption and our vendors will be paid in full for all goods furnished and services provided after the filing date.’
Mirant said that as of July 11, Mirant and its subsidiaries had approximately $1.17 billion in total cash. Approximately $348 million is legally restricted and $89 million is held for operating, working capital or other purposes at subsidiaries. Additionally, the company has secured a commitment, subject to court approval, for $500 million in debtor-in-possession (DIP) financing to provide additional working capital.
As part of the company’s restructuring effort, it has been in negotiations for several months with its bank lenders and bondholders to restructure a significant portion of its debt and refinance its existing credit facilities.
‘Although we received broad support from the company’s creditors on our restructuring plan, failure to obtain the timely support of our key lenders created substantial uncertainty in the marketplace about the outcome of these discussions,’ Fuller said. ‘This, in turn, put a strain on our liquidity and threatened the feasibility of our business plan. Add to this, uncertainty about the timing of the recovery in power prices and a slow economic recovery in the US, and it became clear that a comprehensive financial reorganisation was the best approach for our stakeholders.’
Fuller continued, ‘While the decision to file for Chapter 11 was very difficult, we believe this process will allow us to emerge from Chapter 11 as a stronger, more viable and more competitive company positioned for long-term success.
‘Over the past 18 months, Mirant has successfully reduced costs, divested non-core assets and implemented operational efficiencies. We intend to continue these efforts to improve the operations of the business in the weeks and months ahead.’
The Chapter 11 petitions were filed in the U.S. Bankruptcy Court for the Northern District of Texas, Fort Worth Division. The CCAA application will be administered in the Court of Queen’s Bench of Alberta Judicial District of Calgary.