UNITED STATES energy company, Mirant Corporation, announced late Monday night that in order to facilitate its financial restructuring it has filed petitions for reorganisation under Chapter 11 of the US Bankruptcy Code.
Mirant is the majority shareholder of the Jamaica Public Service Company (JPSCo), the country's monopoly supplier of electricity to households and commercial entities.
As a result of the Chapter 11 filings, certain of Mirant's Canadian subsidiaries will file an application for creditor protection under the Companies Creditors' Arrange-ment Act (CCAA) in Canada.
The Atlanta-based company, which owns and controls more than 22,000 megawatts of electric generating capacity globally, stressed that its operations in the Caribbean and the Phillipines were excluded from the Chapter 11 filings. However, Mirant Corp., Mirant Americas Generation and most of the company's wholly-owned subsidiaries in the United States were included in the filings.
As of July 11, Mirant and its subsidiaries had about US$1.17 billion in total cash, according to a release from the company.
In order to get the energy giant back on its feet, it has been engaged 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.
Wednesday Business understands that Mirant has offered its creditors a plan to restructure US$1.45 billion of its debt as part of a wider refinancing plan. Only recently, Standard & Poors lowered Mirant's corporate credit rating and senior unsecured debt rating to "CCC" from "B".
In the release Monday, president and chief executive officer of Mirant, Marce Fuller said: "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.
Mirant also announced that it has been granted permission by the US Bankruptcy Court to implement a counter party assurance programme. This programme supports the company's ability to continue its asset optimisation and risk management operations without interruption. The Court order authorises immediate relief to honour any and all obligations under existing and future trading and marketing contracts (known as 'safe harbour' contracts) that support Mirant's extensive asset base. This protection, however, applies only to counterparties that do not terminate trading and marketing contracts because of Mirant's Chapter 11 filing.
Two years ago, Mirant purchased 80 per cent of the shares of JPSCo for US$201 million. A spokesman for Mirant made it clear that this latest news will not unduly affect the running of JPSCo as the local company had recently secured loan financing from the International Finance Corporation to complete the final stage of its 40-megawatt expansion project in Jamaica.
Despite the woes of Mirant, the financial fortunes of JPSCo has discernibly improved as the company reported a $26.5 million increase in net profit for the nine months to December 2002, compared with the 12-month period the previous year. In the release, Mirant's president said that "since the parent company's plan of reorganisation has not yet been fully developed, the treatment of existing creditor and stockholder interests in the company is uncertain at this time."
Along with its Chapter 11 filing, Mirant is terminating its offers to exchange its 2.5 per cent convertible debentures due 2021 and its 7.4 per cent senior notes due in 2004. Mirant Americas Generation is also terminating its offer to exchange its 7.625 per cent senior notes due 2006. In accordance with the terms of the offerings, Mirant will instruct the exchange agent to return the notes, which were tendered for exchange, to their respective tendering bondholders.
JPSCo's president and chief executive officer, Charles Matthews, was unavailable for comment when contacted yesterday.
