By McPherse Thompson, Assistant News EditorTHE ATLANTA, United States-based Mirant Corporation, which has controlling interest in the Jamaica Public Service Company (JPSCo), has offered its creditors a plan to restructure US$1.45 billion of debt as part of a wider refinancing effort aimed at avoiding bankruptcy.
At the same time, it warned that if the plan is not quickly approved, it might seek Chapter 11 bankruptcy protection using the same plan as the foundation for restructuring, according to a Reuters report out of New York yesterday.
In a recent release issued through its JPSCo Kingston office, Marce Fuller, Mirant's chief executive officer, was quoted as saying that the company has proposed a refinancing plan that would allow it to reduce its debt over time.
She did not disclose details of the plan, but said the company was now working with its various lenders and investor groups to put in place the arrangement. Mrs. Fuller said the company was "committed to repaying, in full, all our obligations with interest, and to producing value for each of our stakeholders."
Reuters also reported that Standard & Poor's Ratings Services has lowered its corporate credit rating and senior unsecured debt ratings on the energy provider and its subsidiaries to 'CCC' from 'B'.
It said the ratings remain on CreditWatch, but the implications were revised to developing from negative. The rating action was based on Mirant's request for a bondholder vote on a prepackaged Chapter 11 reorganisation plan and the potential for a bankruptcy filing if the restructuring offer was unsuccessful.
According to the report, Mirant has about $9.7 billion in debt, including lease-related debt.
"The prepackaged bankruptcy plan is a contingency against Mirant's plan to exchange new secured notes for $950 million in existing debt," it said. "Mirant Americas Generation Inc. (MAG) also has an offer to exchange $500 million of existing notes, but the offer does not include a prepackaged bankruptcy plan. The company is currently negotiating with a bank consortium to refinance $3.45 billion in unsecured debt and the bond exchange is contingent on bondholder approval and refinancing the bank debt," said Standard & Poor's.
EXTENSION
The report said further that on May 29, Mirant obtained an extension to July 14 of its waiver agreement with its banks. The proposed new senior secured credit facilities and the new notes would be secured by first priority liens on the assets of certain direct and indirect U.S. subsidiaries of Mirant, shared equally among the holders of the new notes, the new MAG notes, and the existing bank lenders on the new credit facilities. They will also be backed by a pledge of 100 per cent of the stock of certain indirect U.S. subsidiaries of Mirant and 65 per cent of the stock of certain indirect foreign subsidiaries of Mirant.
In the release issued locally, Mrs. Fuller reportedly told shareholders at the company's recent annual meeting that "we have proposed a refinancing plan that I believe will allow us to maintain sufficient liquidity and flexibility to execute our business plan and, importantly, puts us on a path to reduce our overall debt levels through time."
She added that "because of the aggressive actions we've taken over the last 18 months, I'm optimistic we will achieve a sucessful refinancing."
Last year, the JPSCo moved from a loss to record a net profit of more than $1.1 billion, primarily because of a 7.4 per cent increase in electricity rates and a restructuring of its debt portfolio.
The JPSCo is 80 per cent owned by Mirant, which bought the loss-making utility company from the Jamaican Government for US$201 in February 2001. The Government retains a 20 per cent stake in the company. Mirant acquired US$120 million of the utility's short-term debt when it bought JPSCo.
At the annual meeting, Ms. Fuller also said that although Mirant still faced significant challenges, "I'm confident about the long-term viability of our business."
According to her, "we are focused on well-designed markets where we have a critical mass of assets, people and customers, and markets where we have adequate presence to compete and the opportunity to expand." In addition, she said Mirant "still firmly believe that integrating our asset operations with risk management and marketing is the right business model."
According to the chief executive, Mirant now owns or controls nearly 22,000 megawatts of diverse, reliable generation. She pointed out that the company, which ranked among the 15 largest generators in the United States, was the largest such private sector entity in the Philippines and the Caribbean.
