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Mirant's Bank Debt Surges In Run Up To Equity Conversion

Mirant bank debt jumped 10 points as the company converted $4.8 billion of bank debt into equity last week.

Mirant bank debt jumped 10 points as the company converted $4.8 billion of bank debt into equity last week. According to PFR sister publication Credit Investment News, Mirant's '03, '04 and '05 revolvers jumped 10 points across the board to 125 points. Traders are upbeat about the performance of Mirant's debt post-bankruptcy. "People like this credit. The company has done well. It has some good contracts," says a trader.

Lehman Brothers published a bullish report on the performance of the company's equity, which a trader says had encouraged investors to pile into the debt as it converted. All of the debt at Mirant Corp. has been converted into equity as part of the reorganization plan. The debt was converted as of Jan. 3 when the company announced it had completed its reorganization and emergence from Chapter 11. The reorganized company will have $4.4 billion of debt compared to about $9.1 billion before the reorganization, according to a company spokesman. "With a strong balance sheet and a new management team focused on providing tremendous shareholder value, we have successfully restructured Mirant to provide it with the financial flexibility necessary to be a leader in the industry," says the spokesman.

Mirant has applied for a re-listing on the New York Stock Exchange and expects its common stock to begin trading on Jan. 11 under the ticker symbol MIR. Lehman is upbeat about Mirant's prospects, pointing out its well diversified portfolio in the U.S. and its strong balance sheet. It estimates Mirant's EBITDA will be $1.48 billion for 2006 and $1.5 billion for 2007.

Mirant's new seven-year, $700 million term loan also broke in the secondary market last week at 100 3/4 and traded up to 101 1/4. The term loan, which is priced at LIBOR plus 1 3/4%, is part of the company's $2.35 billion exit financing. One trader estimatez $25 million of debt exchanged hands when it broke. The credit line also includes an $800 million revolver and a new issue of $850 million in bonds. The new issue of notes, which has a 7 3/8% coupon and mature in 2013, are currently trading in the 102-103 range.

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