================================================================= MIRANT BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2003 (ISSN XXXX-XXXX) July 15, 2003 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- MIRANT BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Iris L. Sasing, Frauline Sinson-Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of MIRANT BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO MIRANT BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF MIRANT CORPORATION [00002] DEBTORS' CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2002 [00003] COMPANY'S PRESS RELEASE CONCERNING THE CHAPTER 11 FILINGS [00004] MIRANT CORPORATION CHAPTER 11 DATABASE [00005] LIST OF MIRANT'S 50-LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION TO HONOR & CONTINUE TRADING CONTRACTS [00007] DEBTORS' MOTION TO PAY CRITICAL PREPETITION VENDOR CLAIMS KEY DATE CALENDAR ----------------- 07/14/03 Voluntary Petition Date 07/__/03 Organizational Meeting with UST to form Committees 07/29/03 Deadline for filing Schedules of Assets and Liabilities 07/29/03 Deadline for filing Statement of Financial Affairs 07/29/03 Deadline for filing Lists of Leases and Contracts 08/03/03 Deadline to provide Utilities with adequate assurance 09/12/03 Deadline to make decisions about lease dispositions 10/12/03 Deadline to remove actions pursuant to F.R.B.P. 9027 11/11/03 Expiration of Debtors' Exclusive Plan Proposal Period 01/10/04 Expiration of Debtors' Exclusive Solicitation Period 07/14/05 Deadline for Debtors' Commencement of Avoidance Actions First Meeting of Creditors pursuant to 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO MIRANT BANKRUPTCY NEWS ----------------------------------------------------------------- MIRANT BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of MIRANT BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving MIRANT BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 24 Perdicaris Place Trenton, NJ 08618 Telephone (609) 392-0900 Fax (609) 392-0040 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) MIRANT BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of MIRANT BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF MIRANT CORPORATION ----------------------------------------------------------------- Mirant Corporation 1155 Perimeter Center West, Ste. 100 Atlanta, Georgia 30338 Telephone (678) 579-5000 Fax (678) 579-5001 http://www.mirant.com/ Mirant (pronounced MEER-uhnt) (NYSE: MIR), together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. Mirant's customers include utilities, municipal systems, aggregators, electric-cooperative utilities, producers, generators, marketers and large industrial customers in the United States. Mirant's business, with 2002 revenues topping $6 billion, has two sides: ____________ | | Mirant's core business centers on the production | GENERATING | and sale of electricity and electrical capacity |____________| (essentially the ability to produce electricity on demand). Mirant currently owns or controls more than 21,800 megawatts of electric generating capacity around the world, of which more than 18,000 megawatts is located in the United States. In 2002, Mirant produced 73 million megawatt-hours of electricity, sold 312 million megawatt-hours of electricity and sold or marketed an aggregate average of 21 billion cubic feet per day of natural gas. ____________ | | The other core part of Mirant's business is its | TRADING | purchase, sale and management of various |____________| contracts which concern, in the largest sense, the production and sale of electricity. To manage efficiently its power generating assets, control the market risks associated with the purchase of fuel for, and the sale of energy generated by, its power generating assets, and to optimize overall revenues, Mirant has developed an integrated business model pursuant to which fuel (i.e., natural gas, coal and oil) is purchased, energy is sold, and related commodities forwards, futures, swaps and other similar physical, financial and hedging products are traded. Substantially all of these functions are performed by Mirant Americas Energy Marketing, L.P. These dual generating and trading operations employ more than 7,000 workers around the globe. Approximately 1,100 employees are based at Mirant's corporate headquarters in Atlanta and approximately 5,900 employees are based at operating facilities. Approximately 1,000 of Mirant's employees located in the United States are subject to collective bargaining agreements with the International Brotherhood of Electrical Workers, the Utilities Workers of America or the United Steel Workers. Roughly 2,100 of Mirant's employees in the international business units also belong to unions. Mirant Corporation itself is a holding company with approximately $8.9 billion of consolidated public and private indebtedness as of December 31, 2002. Mirant Corp. conducts its operations through its subsidiaries. Mirant depends primarily on earnings and cash flows of its subsidiaries to fund its operations, and its subsidiaries defray substantially all of its obligations, including principal and interest on its indebtedness. Mirant Americas Energy Marketing, L.P. operates 24-hours a day and is one of the leading electricity and gas marketers in the United States markets. MAEM engages in, among other activities, asset and risk management with respect to the operation of the core generation business. As asset and risk manager, MAEM is responsible for, among other things, procuring and scheduling deliveries of fuel consumed by Mirant's domestic power generating assets, bidding and scheduling the generation facilities into local market areas, selling energy, energy capacity and related products produced by the plants, and hedging gross margin expectations to reduce the risks associated with market volatility. MAEM currently holds many of the regulatory approvals necessary for Mirant to continue operating within the gas and power market environments. Through its wholly owned subsidiary, Mirant Americas Inc., and its indirect wholly owned subsidiaries, MAEM, Mirant Americas Generation, LLC and Mirant Mid-Atlantic, LLC, Mirant owns or controls generation facilities in the United States with an aggregate generation capacity of 18,000 megawatts. These facilities include: * the Apex generating plant, located near Las Vegas, Nevada; * the Sugar Creek generating plant located in West Terre Haute, Indiana; * the Shady Hills power project, located in Pasco County, Florida; * the Wichita Falls generating plant located in Texas; * the Zeeland generating plant located in Michigan; * the Potrero generating plant, located in the San Francisco Bay area of California; * the West Georgia generating plant located in Thomaston, Georgia; * the Canal and Kendall generating plants located in New England; * the Chalk Point and Morgantown generating plants, located in the Washington DC area; and * the Bowline and Lovett generating plants located in the New York City area. The Mountain of Debt As of December 31, 2002, Mirant's consolidated balance sheet assets totaled approximately $19.4 billion. Of this amount, approximately $773 million was comprised of cash and cash equivalents, $320 million was comprised of restricted cash, $8.3 billion in property, plant and equipment and approximately $9 billion was comprised of other assets. Mirant has incurred substantial indebtedness on a consolidated basis to finance its business operations. As of December 31, 2002, Mirant's total consolidated funded debt was $8.9 billion (of which approximately $4.4 billion was recourse to Mirant). Mirant is the borrower under three revolving credit facilities in the aggregate principal amount of $2.7 billion. A substantial portion of the Mirant Credit Facilities were made available by way of letters of credit issued to support the businesses of Mirant and its various subsidiaries, of which approximately $1.03 billion remain undrawn as of the Petition Date. Mirant's balance sheet also reflects approximately $1.8 billion of indebtedness due under four issuances of public bonds. These consist of $200 million of 7.4% Senior Notes due 2004, $500 million of 7.9% Senior Notes due 2009, $750 million of 2.5% Convertible Debentures due 2021 (subject to potential put rights) and $370 million of 5.75% Convertible Senior Notes due 2007. In addition, Mirant issued approximately $356 million in aggregate principal amount of 6.25% Series A Junior Convertible Subordinated Notes due 2030 which are held by Mirant Trust I, a Delaware business trust. Each of the Mirant Credit Facilities and bond issuances are unsecured obligations of Mirant and are not supported by guarantees of any of Mirant's subsidiaries. MAG is the borrower under two revolving credit facilities in the aggregate principal amount of $300 million, each of which mature in October 2004. In addition, MAG has issued approximately $2.5 billion in aggregate principal amount of public notes consisting of $500 million of 7.625% Senior Notes due 2006, $300 million of 7.2% Senior Notes due 2008, $850 million of 8.3% Senior Notes due 2011, $450 million of 8.5% Senior Notes due 2021 and $400 million of 9.125% Senior Notes due 2031. Mirant Americas Development Capital, LLC, is the borrower under an equipment warehouse facility for the purchase and lease of certain gas turbines, steam turbines, heat recovery generators and other equipment. MADC's indebtedness under the Equipment Warehouse Facility, as at the Petition Date, is approximately $221 million and is guaranteed by Mirant. The obligations of MADC and Mirant are otherwise unsecured. MAEM is the primary obligor under a Commodity Prepay Facility entered into under certain ISDA Master Agreements and related documents. MAEM's indebtedness under the Commodity Prepay Facility, as of July 14, 2003, is approximately $225 million and is guaranteed by Mirant. The funded debt obligations of MAEM and Mirant are otherwise unsecured. The Road to Chapter 11 Mirant says it's the victim of the financial crisis in the U.S. Power Industry. In the summer and fall of 2000, significant volatility existed in the California wholesale electricity markets. This market volatility substantially impaired certain California utilities' abilities to meet obligations owing to many power generators, including Mirant. As a result, the California Power Exchange Corporation and Pacific Gas and Electric Company each filed petitions for relief under chapter 11 of the Bankruptcy Code. In addition, the Southern California Edison Company issued a moratorium on all payments to various power generators. Mirant estimates that it holds approximately $320 million in claims as a result of the California utility crisis, although the amounts are still subject to dispute. In addition, Mirant is a named defendant in a number of lawsuits and the subject of a number of investigations arising out of the California utility crisis. Specifically, investigations and litigation commenced by the Federal Energy Regulatory Commission, the California Public Utilities Commission, and various other public and private interests, have questioned the efficacy of the California power markets, have challenged the right of energy marketers to receive and hold payment for energy deliveries in late 2000 and early 2001, and have sought affirmative remedies against participants in the market, including Mirant. On December 2, 2001, Enron Corporation and certain of its affiliates filed petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. Enron, at the time of its chapter 11 filings, was the world's largest energy trader. Mirant estimates that it holds approximately $82 million in claims against Enron, although these amounts are subject to dispute. The collapse of Enron had two other important negative consequences for Mirant. * First, it eliminated significant liquidity in certain energy related markets where Mirant had actively participated. * Second, the capital markets and credit ratings agencies began to take a more harsh view of the energy industry as a whole, adversely affecting Mirant's credit capacity and liquidity. On December 19, 2001, Moody's Investor Services unexpectedly downgraded Mirant's credit rating to below investment grade. As a consequence of the downgrade, and notwithstanding a reaffirmation of Mirant's historic investment grade credit rating by Standard & Poors, some of Mirant's counterparties began demanding credit support and exercising collateral and margin call rights to protect themselves against trading exposure to Mirant. On October 10, 2002, Moody's downgraded Mirant's credit rating even further below investment grade. On October 18, 2002, Standard & Poors downgraded Mirant's credit rating to below investment grade. Such downgrade triggered rights of additional parties among other things, to demand from Mirant collateral and margin in connection with Mirant's commodity and financial product trading activity and certain other key vendor and trade relationships. "Ironically," John W. Ragan, Mirant's Senior Vice President of North America Operations says, "in the rush to protect against downside exposure, energy traders tied up billions of dollars of each other's liquidity by demanding collateral, only to further increase rating agency and investor concern and perpetuate a cycle of liquidity contraction within the industry." Mirant Tries to Improve its Credit Ratings Following this rating collapse, Mirant has concentrated on near- term strategic objectives intended to guide its activities until market fundamentals improved. These objectives include: * restructuring a significant portion of Mirant's debt, * reducing uncertainty associated with its business in California, * focusing on core markets internationally and in North America, * enhancing its liquidity position through the sale of assets and reductions in posted collateral, * curtailing non-core trading activities, * reducing capital expenditures, * continuing to reduce overhead costs, and * realizing operating efficiencies in the U.S. generation portfolio. Since July 2002, with the assistance of its advisors, Mirant has been attempting to develop and implement a strategic plan to enable it to manage the current downturn in the wholesale power industry, improve liquidity and strengthen its long-term viability. "Mirant formulated a comprehensive business plan which demonstrated that over the next five years both its business and general economic conditions will recover so as to permit the [Company] to repay all of their creditors in full," Mr. Ragan relates. "This strategic plan was designed to reschedule Mirant's indebtedness and to enable its businesses to successfully compete in growing energy markets over the long term." The plan, Mr. Ragan continues, included initiatives to * reduce Mirant's consolidated debt and improve liquidity and capital resources by selling certain of Mirant's investments in Europe and Asia, the proceeds of which were applied to reduce debt by approximately $847 million; * canceling the purchase of, or selling, turbines and power islands not required for Mirant's ongoing business to reduce future cash expenditures; * reducing Mirant's workforce by approximately 655 employees, resulting in approximately $78 million of annual payroll savings; * repurchasing $83 million of TIERS Fixed Rate Trust Certificates at a cost of $51 million; and * selling certain of Mirant's Canadian assets. Mirant's Current Fiscal Crisis Despite the success of the foregoing initial steps, Mirant still faces significant near-term debt maturities that can only be extended by consent. As of April 2003, although Mirant had approximately $1.4 billion of cash and available credit, it faced approximately $4.5 billion of near-term debt repayments, including a repayment of credit in the principal amount of $1.125 billion due under a 364-day revolving credit facility on July 15, 2003. Under normal circumstances, Mirant would have expected to refinance its debt as it matures in the ordinary course in a manner that would not jeopardize its ability to conduct its businesses prudently or call into question its ability to repay all creditors in full and enhance value for stockholders. However, based upon Mirant's projected cash flow, existing liquidity and scheduled debt maturities, Mirant determined that it would be unable to meet its ongoing debt repayment obligations as currently scheduled or to refinance the same without pledging substantially all of its unencumbered assets. The restructuring of Mirant's bank and bond debt was therefore a key step in Mirant's overall restructuring plan. In February 2003, Mirant began discussions with Credit Suisse First Boston and Citibank, as agents for the lenders under the Mirant Credit Facilities and on behalf of the lenders under the Equipment Warehouse Facility with a view toward extending the maturity of certain debt, which would otherwise mature before 2007, until 2008 when Mirant believed the debt could be repaid or refinanced. Subsequently, on June 2, 2003, Mirant launched an Exchange Offer proposing a Prepackaged Chapter 11 Plan of Reorganization dated June 2, 2003 (amended on June 20, 2003, further amended on June 30 2003 and supplemented on July 9, 2003). That Prepackacted Plan would have swapped the 7.4% Senior Notes due 2004 and 2.5% Convertible Debentures due 2021 for new 8.25% Senior Secured Notes due 2008, cash and warrants to acquire the common stock of Mirant. Concurrently, MAG proposed a separate Exchange Offer to swap its 7.625% Senior Notes due 2006 for new 8.25% Senior Secured Notes due 2008 and cash. MAG also began negotiations with its own lenders in connection with the restructuring of the MAG Credit Facilities. In essence, Mr. Ragan explains, the business deal proposed under the Mirant Exchange Offer and the MAG Exchange Offer was to provide security for the repayment of certain debt in exchange for a consensual extension of the maturity dates under the relevant credit and indenture documentation. The Prepackaged Chapter 11 Plan was crafted to minimize disruption on a business level and leave shareholders unimpaired. Although discussions between Mirant and certain creditors about the Prepackaged Plan continued up until the bankruptcy filing, too many creditors publicly opposed Mirant's proposal. Because it looked like the Prepackaged Plan might not fly, certain of Mirant's counterparties began tightening its access to credit, impairing Mirant's liquidity and producing unfavorable results against plan. While Mirant believes that it would receive sufficient votes in favor of the Plan to implement the restructuring through the chapter 11 process, Mirant does not expect to receive sufficient votes to confirm the Plan on a fully consensual basis. After careful analysis, Mirant's Board determined that the most prudent course of action is to pursue a restructuring in a traditional chapter 11 setting. ----------------------------------------------------------------- [00002] DEBTORS' CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2002 ----------------------------------------------------------------- MIRANT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2002 (RESTATED) ASSETS CURRENT ASSETS: Cash and cash equivalents.................. $1,708,000,000 Funds on deposit........................... 180,000,000 Receivables, less provision for uncollectibles of $191,000,000.......... 2,092,000,000 Price risk management assets............... 1,536,000,000 Deferred income taxes...................... 21,000,000 Assets held for sale....................... 423,000,000 Other...................................... 541,000,000 --------------- Total current assets..................... 6,501,000,000 --------------- PROPERTY, PLANT AND EQUIPMENT, NET......... 8,419,000,000 --------------- NONCURRENT ASSETS: Goodwill, net of accumulated amortization of $300,000,000............ 2,683,000,000 Other intangible assets, net of accumulated amortization of $60,000,000. 535,000,000 Investments................................ 296,000,000 Notes and other receivables, less $104,000,000 provision for uncollectibles ......................... 140,000,000 Price risk management assets............... 582,000,000 Deferred income taxes...................... 17,000,000 Other...................................... 242,000,000 --------------- Total noncurrent assets.................. 4,495,000,000 --------------- TOTAL ASSETS............................. $19,415,000,000 =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt............................ $65,000,000 Current portion of long-term debt.......... 1,731,000,000 Accounts payable and accrued liabilities... 2,359,000,000 Taxes accrued.............................. 86,000,000 Price risk management liabilities.......... 1,535,000,000 Obligations under energy delivery and purchase commitments................ 567,000,000 Other...................................... 293,000,000 --------------- Total current liabilities................ 6,636,000,000 --------------- NONCURRENT LIABILITIES: Long-term debt............................. 7,091,000,000 Price risk management liabilities.......... 1,196,000,000 Obligations under energy delivery and purchase commitments................ 335,000,000 Deferred income taxes...................... 18,000,000 Other...................................... 534,000,000 --------------- Total noncurrent liabilities............. 9,174,000,000 --------------- MINORITY INTEREST IN SUBSIDIARY COMPANIES.. 305,000,000 COMPANY OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF A SUBSIDIARY HOLDING SOLELY PARENT COMPANY SUBORDINATED DEBENTURES.............................. 345,000,000 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $.01 par value, per share.... 4,000,000 Authorized -- 2,000,000,000 shares Issued -- 404,018,156 shares Treasury -- 100,000 shares Additional paid-in capital................. 4,899,000,000 Retained earnings (accumulated deficit).... (1,844,000,000) Accumulated other comprehensive loss....... (102,000,000) Treasury stock, at cost.................... (2,000,000) --------------- Total stockholders' equity............... 2,955,000,000 --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $19,415,000,000 =============== The audit of the Company's 2002 financial statements and the reaudits of the Company's 2000 and 2001 financial statements were completed on April 29, 2003. That process delayed Mirant's ability to begin focusing on first quarter 2003 financial information. Senior Vice President John W. Ragan reports that Mirant has in excess of $733 million of unencumbered cash as of July 14, 2003, and the company has "billions of dollars of unencumbered assets as a source of collateral for debtor in possession financing." ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING THE CHAPTER 11 FILINGS ----------------------------------------------------------------- Mirant Files Chapter 11 Petitions to Facilitate Financial Restructuring * Worldwide operations continue without interruption * Philippine and Caribbean operations are excluded from the filing * Secures $500 million in debtor-in-possession financing ATLANTA, Georgia -- July 14, 2003 -- Mirant (NYSE: MIR) announced today that, to facilitate its financial restructuring, it has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Additionally, certain of the company's Canadian subsidiaries will file an application for creditor protection under the Companies Creditors' Arrangement Act (CCAA) in Canada. Mirant Corp., Mirant Americas Generation, LLC, and substantially 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 U.S. Bankruptcy Court to implement a Counterparty Assurance Program. This program supports the company's ability to continue its asset optimization and risk management operations without interruption. The Court order authorizes immediate relief to honor any and all obligations under existing and future trading and marketing contracts (known as "safe harbor" 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. 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 U.S., and it became clear that a comprehensive financial reorganization 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." Since the plan of reorganization has not yet been developed, the treatment of existing creditor and stockholder interests in the company is uncertain at this time. 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. Along with its Chapter 11 filing, Mirant is terminating its offers to exchange its 2.5 percent convertible debentures due 2021 and its 7.4 percent senior notes due 2004. Mirant Americas Generation, LLC is also terminating its offer to exchange its 7.625 percent 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. Mirant has established a toll-free information line for vendors, customers and other interested parties. The number is (888) 870-7626. Information is also available at http://www.mirant.com/ Mirant (NYSE: MIR) is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or controls more than 22,000 megawatts of electric generating capacity globally. We operate an integrated asset management and energy marketing organization from our headquarters in Atlanta. ----------------------------------------------------------------- [00004] MIRANT CORPORATION CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor Entities filing separate chapter 11 petitions on Monday, July 14, 2003: Case No. Debtor Entity -------- ------------- 03-46590 Mirant Corporation 03-46591 Mirant Americas Energy Marketing, LP 03-46592 Mirant Americas Generation, LLC 03-46593 Mirant Mid-Atlantic, LLC 03-46594 Mirant Americas, Inc. 03-46595 Hudson Valley Gas Corporation 03-46596 Mint Farm Generation, LLC 03-46597 Mirant Americas Development Capital, LLC 03-46598 Mirant Americas Development, Inc. 03-46599 Mirant Americas Energy Marketing Investments, Inc. 03-46600 Mirant Americas Gas Marketing I, LLC 03-46601 Mirant Americas Gas Marketing II, LLC 03-46602 Mirant Americas Gas Marketing III, LLC 03-46603 Mirant Americas Gas Marketing IV, LLC 03-46604 Mirant Americas Gas Marketing V, LLC 03-46605 Mirant Americas Gas Marketing VI, LLC 03-46606 Mirant Americas Gas Marketing VII, LLC 03-46607 Mirant Americas Gas Marketing VIII, LLC 03-46608 Mirant Americas Gas Marketing IX, LLC 03-46609 Mirant Americas Gas Marketing X, LLC 03-46610 Mirant Americas Gas Marketing XI, LLC 03-46611 Mirant Americas Gas Marketing XII, LLC 03-46612 Mirant Americas Gas Marketing XIII, LLC 03-46613 Mirant Americas Gas Marketing XIV, LLC 03-46614 Mirant Americas Gas Marketing XV, LLC 03-46615 Mirant Americas Procurement, Inc. 03-46616 Mirant Americas Production Company 03-46617 Mirant Americas Retail Energy Marketing, LP 03-46618 Mirant Bowline, LLC 03-46619 Mirant California Investments, Inc. 03-46620 Mirant California, LLC 03-46621 Mirant Canal, LLC 03-46622 Mirant Capital Management, LLC 03-46623 Mirant Capital, Inc. 03-46624 Mirant Central Texas, LP 03-46625 Mirant Chalk Point Development, LLC 03-46626 Mirant Chalk Point, LLC 03-46627 Mirant D.C. O&M, LLC 03-46628 Mirant Danville, LLC 03-46629 Mirant Delta, LLC Debtor Entities filing separate chapter 11 petitions on Tuesday, July 15, 2003: 03-46630 Mirant Dickerson Development, LLC 03-46631 Mirant Fund 2001, LLC 03-46632 Mirant Gastonia, LLC 03-46633 Mirant Intellectual Asset Management and Marketing 03-46634 Mirant Kendall, LLC 03-46635 Mirant Las Vegas, LLC 03-46636 Mirant Lovett, LLC 03-46637 Mirant MD Ash Management, LLC 03-46638 Mirant Michigan Investments, Inc. 03-46639 Mirant Mid-Atlantic Services, LLC 03-46640 Mirant New England, Inc. 03-46641 Mirant New York, Inc. 03-46642 Mirant NY-Gen, LLC 03-46643 Mirant Parker, LLC 03-46644 Mirant Peaker, LLC 03-46645 Mirant Piney Point, LLC 03-46646 Mirant Portage County, LLC 03-46647 Mirant Potomac River, LLC 03-46648 Mirant Potrero, LLC 03-46649 Mirant Services, LLC 03-46650 Mirant Special Procurement, Inc. 03-46651 Mirant Sugar Creek Holdings, Inc. 03-46652 Mirant Sugar Creek Ventures, Inc. 03-46653 Mirant Sugar Creek, LLC 03-46654 Mirant Texas Investments, Inc. 03-46655 Mirant Texas Management, Inc. 03-46656 Mirant Texas, LP 03-46657 Mirant Wichita Falls Investments, Inc. 03-46658 Mirant Wichita Falls Management, Inc. 03-46659 Mirant Wichita Falls, LP 03-46660 Mirant Wyandotte, LLC 03-46661 MIrant Zeeland, LLC 03-46662 Shady Hills Power Company, L.L.C. 03-46663 West Georgia Generating Company, L.L.C. Bankruptcy Court: United States Bankruptcy Court Northern District of Texas Fort Worth Division Eldon B. Mahon U.S. Courthouse 501 W. Tenth Street Fort Worth, TX 76102-3643 Telephone (817) 333-6000 Bankruptcy Judge: The Honorable D. Michael Lynn Debtors' Lead Bankruptcy Counsel: Thomas E. Lauria, Esq. White & Case LLP Wachovia Financial Center 200 S. Biscayne Blvd., Suite 4900 Miami, Florida 33131 Telephone (305) 371-2700 Fax (305) 358-5744 http://www.whitecase.com/ Debtors' Local Bankruptcy Counsel: Judith Elkin, Esq. Robin Phelan, Esq. Haynes and Boone, LLP 901 Main Street, Suite 3100 Dallas, Texas 75202 Telephone (214) 651-5000 Fax (214) 651-5940 http://www.hayboo.com/ Debtors' Special Corporate Counsel: J. Gregory Milmoe, Esq. Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Telephone (212) 735-3000 http://www.skadden.com/ Debtors' Financial Advisors: The Blackstone Group, L.P. http://www.blackstone.com/ Debtors' Financial, Restructuring and Case Management Consultants: AlixPartners, LLC http://www.alixpartners.com/ Debtors' Accountants, Auditors & Tax Advisors: KPMG LLP http://www.kpmg.com/ Debtors' Special Conflicts Counsel: Forshey & Prostock, L.L.P. http://www.forsheyprostok.com/ Claims Agent: Kathy Gerber Bankruptcy Services, LLC 757 Third Avenue, 3rd Floor New York, NY 10017 Telephone (212) 376-8902 kgerber@bsillc.com http://www.bsillc.com/ Debtors' Communications Consultants: Sitrick and Company, Inc. http://www.sitrick.com/ U.S. Trustee: WILLIAM T. NEARY, UNITED STATES TRUSTEE for Region 6 GEORGE F. McELREATH, ASSISTANT U.S. TRUSTEE 1100 COMMERCE STREET, ROOM 976 DALLAS, TX 75242 Telephone (214) 767-8967 Fax (214) 767-8971 http://www.usdoj.gov/ust/r06/template2.htm ----------------------------------------------------------------- [00005] LIST OF MIRANT'S 50-LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ State Street Bank Bonds $486,094,000 and Trust Company 1776 Heritage Drive Global Corp. Action Unit No. Quincy, MA 02171 Joseph J. Callahan Jane O'Rourke Tel: 617-985-6453 Fax: 617-537-5004 Bear Stearns Securities Bonds $447,326,000 Corp. One Metrotech Center North 4th Floor Brooklyn, NY 11201-3862 Vincent Marzella Tel: 347-643-2302 Fax: 347-643-4625 JP Morgan Chase Bank Bank Facilities, $430,355,700 277 Park Avenue, Bonds New York, NY 10072 Bank Facilities --------------- Bert Valdman Tel: 212-622-6924 Fax: 646-534-1355 Anthony Ianno Tel: 212-622-6990 Fax: 646-534-1355 Bond Debt --------- JP Morgan Chase Bank 14201 Dallas Parkway Dallas, TX 75254 Paula Dabner Tel: 649-477-0081 Fax: 469-477-2183 US Bank National Bonds $370,685,000 Association 1555 Rivercenter Drive Suite 0300 Milwaukee, WI 53212 Keith Frohilcher Securities Control Tel: 414-905-5064 Fax: 414-905-5581 Citibank N.A. Bank Facilities; $320,139,000 250 West Street, 8th Floor Bonds New York, NY 10013 Bank Facilities --------------- John Dorans Tel: 212-723-3104 Fax: 212-723-3899 Trevor Houston Tel: 212-723-3964 Fax: 212-723-3964 Bond Debt --------- Citibank N.A. 3800 Citibank Center, B3-15 Tampa, FL 33610 David A. Leslie Tel: 813-604-1193 Fax: 813-604-1155 Hypovereinsbank Bank facilities $317,994,000 150 East 42nd Street New York, NY 10017-4679 Yoram Danker Tel: 212-672-5446 Fax: 212-672-5530 Credit Suisse First Bank facilities; $307,860,000 Boston Bonds 11 Madison Avenue New York, NY 10010-3629 Bank Facilities --------------- David Sawyer Tel: 212-325-3641 Fax: 212-743-2659 Didier Siffer Tel: 212-325-3641 Fax: 212-325-0304 Monique Renta Tel: 212-538-0239 Fax: 917-326-8189 Bond Debt --------- Credit Suisse First Boston Issuer Services c/o ADP Proxy Services 51 Mercedes Way Brentwood, NY 11717 Tel: 631-254-7400 Fax: 631-254-7618 The Bank of New York Bonds $256,242,000 One Wall Street New York, NY 10286 Cecile Lamarco Tel: 201-325-7801 Bank of America Bank facilities; $236,937,000 Securities LLC Bonds 100 North Tryon Charlotte, NC 28255-0001 Bank Facilities --------------- Michael McKenney Tel: 704-388-5920 Fax: 704-389-3890 Cynthia Grimm Tel: 704-386-5484 Fax: 704-386-1319 Bond Debt --------- Bank of America Securities LLC 300 Harman Meadow Blvd. Secaucus NJ 07094 Scott Reifer Tel: 201-325-4328 Fax: 415-835-2581 Morgan Stanley & Co. Inc. Bonds $195,683,000 One Pierrepont Plaza 7th Floor Brooklyn, NY 11201 Victor Reich Tel: 718-754-4019 Fax: 718-754-4291 CommerzBank AG Bank facilities $191,913,000 2 World Financial Center 225 Liberty Street New York, NY 10281-1060 Subash Viswanathan Tel: 212-266-7200 Fax: 404-888-6539 Goldman Sachs Bonds $190,021,000 1 New York Plaza 45th Floor New York, NY 10004 Patricia Baldwin Tel: 212-902-8244 Fax: 212-902-1431 Bayerische Landesbank Bank facilities $184,900,000 560 Lexington Avenue 17th Floor New York, NY 10022 Sean O'Sullivan Tel: 212-310-9913 Fax: 212-310-9868 The Royal Bank of Bank Facilities $184,102,000 Scotland Plc 101 Park Avenue New York, NY 10178 Charles Greer Tel: 212-401-3757 Fax: 212-401-3759 Gauri Ketcher Tel: 212-401-3751 Fax: 212-401-3759 Bank of New York/UBS AG Bonds $180,950,000 Designed Equities One Wall Street 14th Floor New York, NY 10286 John Mancuso Tel: 212-635-4762 Dresdner Kleinwort Bank facilities $172,572,000 Wasserstein 1301 Avenue of the Americas New York, NY 10029-6163 Paul Kehoe Tel: 212-969-2612 Fax: 212-969-2710 Wells Fargo Bank Bonds $166,530,000 Minnesota NA 1600 East Madison Avenue Mankato, MN 56001 Tel: 613-254-7400 Fax: 613-254-7618 Wells Fargo Bank Minnesota NA c/o Issuer Services ADP Proxy services 51 Mercedes Way Edgecombe New York, NY 11717 Bank of Tokyo-Mitsubishi Bank facilities $155,619,000 Trust Co. 1251 Avenue of the Americas New York, NY 10020-1104 Bill Rhodes Tel: 212-782-4184 Fax: 212-782-6400 Bank of Nova Scotia Bank facilities $151,913,000 One Liberty Plaza 26th Floor New York, NY 10006 Frank Sandler Tel: 212-225-5000 Fax: 212-225-5172 JP Morgan Securities Inc. Bonds $146,462,000 34 Exchange Place Jersey City, NJ 07302 Ken Donohue Tel: 201-524-8297 Fax: 201-324-1691 Boston Safe Deposit Bonds $141,359,000 & Trust Co. 525 William Penn Place Pittsburgh, PA 15259 Melissa Tarasovich Tel: 412-234-2475 Fax: 412-234-7244 Deutsche Bank AG Bank facility $140,000,000 60 Wall Street New York, NY 10019 Mark B. Cohen Tel: 212-250-6038 Fax: 212-797-5695 Anca Trifan Tel: 212-250-6159 Fax: 212-797-5695 Citigroup Global Markets Bonds $119,903,000 Inc. 333 West 34th Street New York, NY 10001 Pat Haller Tel: 212-615-9212 Fax: 212-615-9053 UBS Securities, LLC Bonds $114,961,000 677 Washington Boulevard Stamford, CT 06901 Carlos Lede Tel: 203-719-7644 Fax: 203-719-0795 Barclays Bank PLC Bank facilities; $112,658,000 200 Park Avenue Bonds New York, NY 10166 Bank Facilities --------------- Chris Kinney Tel: 212-412-2756 Bond Debt --------- Barclays Capital 222 Broadway New York, NY 10038 Larry Hammond Tel: 212-412-4000 Fax: 212-412-3350 TD Securities (USA) Inc. Bank facilities $111,717,000 31 West 52nd Street New York, NY 10019-6101 Robyn Zeller Tel: 212-827-7770 Fax: 212-827-7284 Deborah Gravainese Tel: 212-827-7777 Fax: 212-827-7244 UBS Warburg Bank facilities $100,931,000 299 Park Avenue New York, 10171 David Kalal Tel: 212-821-3000 Fax: 203-719-3162 Walter Hulse Tel: 212-821-2280 Fax: 212-821-2287 UBS Warburg Impaired Loan Management Stamford Branch 677 Washington Boulevard Stamford, CT 06901 Credit Lyonnais Americas Bank facilities $94,688,000 1301 Travis Street Suite 2100 Houston, TX 77002 Darrell Stanley Tel: 713-890-8602 Fax: 713-890-8669 Lehman Brothers Inc. Bank facilities; $93,392,000 745 7th Avenue Bonds 19th Floor New York, NY 10285 Bank Facilities --------------- Frank Turner Tel: 212-526-1463 Fax: 646-758-1986 Bond Debt --------- Lehman Brothers Inc. 70 Hudson Street Jersey City, NJ 07302 John E. Byrne Tel: 201-499-8466 Fax: 212-548-9262 DZ Bank AG Bank facility $89,063,000 609 Fifth Avenue New York, NY 10017 William Procasky Tel: 212-745-1575 Fax: 212-745-1422 Wachovia Securities Bank facilities; $83,714,000 1339 Chestnut Street Bonds 3rd Floor Philadelphia, PA 19107 Jill Akre Bank Facilities --------------- Wachovia Bank GA9174 999 Peachtree Street Atlanta, GA 30309 Caperton Putt Tel: 404-225-4125 Bond Debt --------- Wachovia Securities Class Action & Bankruptcy 111 8th Avenue New York, NY 10011 Gen Simms Fax: 212-776-8161 CIBC World Markets Corp. Bank facility $75,000,000 425 Lexington Avenue 17th Floor New York, NY 10022 Sanjeeva Senanayake Tel: 212-856-3595 Fleet National Bank Bank facility $75,000,000 100 Federal street 12th Floor Boston, MA 02110 Peggy Peckham Tel: 617-434-7829 Fax: 617-434-3652 Westdeutsche Landesbank Bank facility $72,500,000 1211 Avenue of the Americas 25th Floor New York, NY 10036 Felicia LaForgia Tel: 212-697-6301 Fax: 212-652-5971 KBC Bank NV Bank facilities $71,304,000 245 Peachtree Center Avenue Suite 2550 Atlanta, GA 30303 Jacqueline Brunetto Tel: 404-584-5466 Fax: 404-584-5466 The Northern Trust Company Bonds $59,969,000 801 Canal C-In Chicago, IL 60607 Karen Greene Tel: 312-444-7109 Fax: 312-444-3882 Export Development Corp. Bank facility $50,000,000 151 O'Connor Ottawa, KIA IK3 Canada Samuel Asiedo Tel: 613-598-2500 Fax: 613-598-3186 Deutsche Bank Securities Bonds $49,701,000 Inc. 1251 Avenue of the Americas New York, NY 10020 Andrea Agustin Tel: 212-469-2399 Fax: 212-463-3326 Deutsche Bank Trust Bonds $49,025,000 Corporation Americas/ DBG London Global Markets 16 Wall Street, 5th Floor New York, NY 10005 Scott Habura Tel: 212-618-2216 Fax: 212-618-3722 Deutsche Bank Trust Bonds $47,352,000 Company Americas 1251 Avenue of the Americas New York, NY 10020 Andrea Agustina Tel: 212-469-2399 Fax: 212-463-3326 - and - Deutsche Bank Trust Company Americas 648 Grassmere Park Road Nashville, TN 37211 John Lasher Tel: 615-835-3419 Fax: 615-835-3409 Mizuho Corporate Bank Bank facilities $44,056,000 1251 Avenue of the Americas New York, NY 10020 Yasuo Imaizumi Tel: 212-282-9700 Fax: 212-282-4250 - and - Mizuho Corporate Bank 191 Peachtree St., N.E. Suite 3825 Atlanta, GA 30303 Noel Purcell Tel: 212-282-3486 Fax: 212-282-4490 Pershing Bonds $38,048,000 Securities Corporation 1 Pershing Plaza Jersey City, NJ 07399 Al Hernandez Tel: 201-413-3090 Fax: 201-413-5263 Goldman Sachs Bonds $37,286,000 International 1 New York Plaza 45th Floor New York, NY 10004 Patricia Baldwin Tel: 212-902-8244 Fax: 212-902-1431 ING Bank NV Bank facilities $33,518,000 1325 Avenue of the Americas New York, NY 10019 Charles O'Neil Tel: 646-424-6450 Fax: 646-424-6440 Merrill Lynch Professional Bonds $32,550,000 Clearing Corp. 101 Hudson Street Jersey City, NJ 07302 Romalo Catalano Tel: 201-557-0855 Fax: 201-557-1876 Neuberger Berman LLC Bonds $28,985,000 605 Third Avenue New York, NY 10158 - and - Neuberger Berman LLC c/o Issuer Services ADP Proxy Services 51 Mercedes Way Edgecombe New York, NY 11717 Tel: 516-254-7400 Fax: 561-254-7618 Bank One NA Bank facilities $27,672,000 One Bank Plaza 8th Floor Chicago, Il 60607 Kenneth J. Bauer Tel: 312-732-6282 Fax: 312-732-3055 Morgan Stanley Senior Bank facilities $27,500,000 Funding Inc. 1633 Broadway25th Floor New York, NY 10019 Daniel Allen James Morgan Citibank Global Markets Bonds $26,559,000 Inc. Salomon Brothers 333 West 34th Street 3rd Floor New York, NY 100014 Patricia Haller Tel: 212-615-9346 Landesbank Rheinland-Phalz Bank facilities $25,000,000 Grosse Bleiche 54-56 Mainz, Germany D-55096 Stefan Huber Tel: 011-49-61-3113-2284 Fax: 011-49-69-3211-3170 ----------------------------------------------------------------- [00006] DEBTORS' MOTION TO HONOR & CONTINUE TRADING CONTRACTS ----------------------------------------------------------------- Mirant Americas Energy Marketing LP is responsible for procuring the fuel consumed by Mirant's power generating assets, selling the power, scheduling those purchases and sales, maintaining necessary transportation routes and performing dynamic hedgning to reduce the risks associated with market prove volatility. MAEM also handles many of the regulatory compliance tasks necessary for Mirant to operate its core power generation business. MAEM also engages in proprietary trading activities for its own account. As a result, Cameron Bready, Vice President and Global Chief Risk Officer for Mirant Corp. and its affiliates explains, the Company has a sizeable portfolio of active physical commodities and financial products trading positions. "The Debtors' portfolio or 'book,'" Mr. Bready tells Judge Lynn, "represents a valuable and substantial asset of the estates." To preserve and maintain that value, the Debtors need bankruptcy court authority to: (1) honor prepetition trading contracts; (2) enter into new postpetition trading contracts; and (3) provide credit support for these contracts, in the form of letters of credit, collateral or prepayments. Absent specific authority from the Court, Mirant fears that most, if not all, of their trading partners will refuse to continue trading relationships. Historically and consistently, Mr. Bready says, the commodity and financial product trading sector is resistant to conducting business with trading entities in distress because ultimate contract performance lacks certainty. A distressed termination of Mirant's book would eliminate counterparties' uncertainty, but the loss of value would be enormous. MAEM is party to a variety of ISDA, EEI, MEPSA, GISB and NAESB master agreements and related Schedules and Credit Support Annexes for trading in natural gas, crude oil, fuel oil, gas, petroleum-related products, natural gas liquids, coal, emissions, electric power, electric capacity, goods (as defined in the UCC), swaps, options, derivatives, other securities, contract rights, instruments and other items that can be bought, sold, exchanged or capable of being traded in the future. Master Netting Agreements are used to aggregate exposure under multiple contracts with any particular counterparty. The largest counterparties entered into prepetition Assurance and Amendment Agreements as Mirant's financial condition deteriorated. Under those Assurance Agreements, Assured Counterparties agreed that the filing of these chapter 11 cases would not trigger an immediate default. The quid pro quo was Mirant's agreement to bring this motion, honor all prepetition obligations, get the court's stamp of approval to engage in post-petition trading, and provide adequate post-petition credit support. Mirant's hedging and derivative contracts come in seven common forms: (1) Back-to-back forward contracts, in which a trader buys power from one source, and then resells it to another party at a higher price. This kind of arrangement can lock in a product on a power sale; (2) Privately negotiated options to purchase a portion of the required power from another source at a given price -- so that if a seller is unable to deliver the power from its own plant, the seller can exercise the option and have the power delivered to the buyer at a known price; (3) Electricity and natural gas futures contracts purchased on a commodity exchange like the New York Mercantile Exchange. NYMEX offers standardized futures contracts for delivery at five specified locations around the country (California-Oregon Border, or COB; Palo Verde in Arizona; Cinergy in Ohio; Entergy in Louisiana; and PJM (Pennsylvania-New Jersey-Maryland); (4) Call options to purchase electricity futures contracts at a future date on a commodity exchange; (5) Contracts or options to purchase the required fuel (e.g., natural gas) for delivery at a given time to a power plan, thus locking in one major variable cost in producing the power; (6) Collars, which provide financial protection if the price goes outside a defined range, either up or down; and (7) Contracts that will provide financial protection if transmission line congestion makes it impossible to deliver power to the recipient. "I believe the termination of the Prepetition Trading Contracts would likely destabilize the organization," Mr. Bready warns Judge Lynn, "and could have a rippling effect on certain energy markets." Thomas E. Lauria, Esq., at White & Case LLP, relates that this Motion is intended to put a protocol in place that protects counterparties and provides assurance that the Debtors can and will perform their obligations under their Trading Contracts. While counterparties will have to waive their postpetition rights to liquidate a commodity or forward contract under 11 U.S.C. Sec. 556 or terminate a swap agreement under 11 U.S.C. Sec. 560, that won't make any difference because the Debtors will perform all of their prepetition and postpetition obligations under the Trading Contracts. Mr. Lauria notes that MAEM's business is trading and all of the Trading Contract obligations are ordinary course of business transactions from MAEM's perspective. Section 1107 of the Bankruptcy Code already authorizes MAEM to engage in transactions in the ordinary course of business. This Motion, probably not required, is designed to provide counterparties with comfort that the Debtors can and will perform their obligations. To the extent that any contract involves the extension of credit to the Debtors, the Debtors ask Judge Lynn for specific authority under 11 U.S.C. Sec. 364(c) to borrow money postpetition and that those "loans" be according superpriority administrative claim status. Judith Elkin, Esq., at Haynes and Boone, LLP, asks Judge Lynn to approve this request on an interim basis at an Emergency Hearing at 9:30 a.m., Dallas Time, this morning, or this afternoon at the latest. After the U.S. Trustee has had the opportunity to organize one or more creditors' committees, the Debtors will return to court in 20 to 30 days asking the request be approved on a final basis. ----------------------------------------------------------------- [00007] DEBTORS' MOTION TO PAY CRITICAL PREPETITION VENDOR CLAIMS ----------------------------------------------------------------- Mirant Corp. and its dozens of debtor-affiliates ask the Bankruptcy Court for permission to pay up to $5.2 million of prepetition amounts owed to critical vendors. The Debtors tell the Court that the amount is a fraction of one percent of the total $9 billion pool of unsecured debt and about 1.3% of $400 million owed to trade creditors. The Debtors ask the Court for permission to pay prepetition claims held by Critical Vendors that fall into five specific categories: (A) Shipping Obligations The Debtors receive and store fuel to operate their power plants and for resale to third parties. Continued delivery of fuel is essential. If the process is interrupted, power plant operations come to a halt and national electrical service may be disrupted. Power plants, Mirant tells Judge Lynn, can't be turned on and off at the mere flip of a switch. Coal comes by rail, gas and oil reserves are stored in third- party tanks, and spare parts are stored in third-party warehouses. The Debtors have to pay for these goods and services at a rate of about $2 million a week. Many of the carriers and storage facilities have statutory liens on the goods. (B) Essential Services The Debtors receive four types of essential services from sole- source vendors that impact employee safety and infrastructure integrity: -- permitting and environmental compliance services; -- emergency equipment and maintenance personnel; -- security, fire and alarm services; and -- water treatment. (C) Regulatory Compliance Vendors In the ordinary course of business, the Debtors rely on a number of Critical Vendors to assist in complying with applicable governmental laws and regulations, including regulated waste disposal and recycling. Payment of these vendors' claims will avoid fines and penalties or, at worst, closure of a facility. (D) Equipment Maintenance Vendors Boilers, turbines, cranes, motors, computers and other equipment in the Debtors' facilities must function properly and at peak performance. They require routine maintenance, cleaning and repair, and the Debtors believe many equipment maintenance vendors will refuse to provide postpetition goods and services is all or a portion of their prepetition claim is not paid. (E) Security, Fire and Alarm Services and Water Treatment If the Debtors don't pay amounts owed to sole-source security companies, fire and alarm service providers and water treatment facilities, proper and safe functioning of the Debtors' facilities is placed in jeopardy. The Debtors also ask for authority to pay up to $150,000, provided no single vendor is paid more than $25,000 and on 5 days' notice to the Court, the U.S. Trustee and counsel to the Debtors and any official committees, to any prepetition vendor the Debtors conclude is critical. The Doctrine of Necessity The ability of a Bankruptcy Court to authorize the payment of a prepetition debt when it'll facilitate rehabilitation of a debtor is not a novel concept, Robin Phelan, Esq., at Haynes & Boone, LLP, argues. The U.S. Supreme Court endorsed the equitable common law principle now dubbed the Doctrine of Necessity more than 100 years ago in Miltenberger v. Logansport, C. & S.W.R. Co., 106 U.S. 286, 1 S.Ct. 140, 27 L.Ed. 117 (1882). printiplae Judge Lifland in Mantalked about it years ago in In re Ionosphere Blubs, Inc., 98 B.R. 174 (Bankr. S.D.N.Y. 1989). The Northern District of Texas endorsed payment of critical vendor claims outside a plan of reorganization in In re CoServ, L.L.C., 273 B.R. 487 (Bankr. N.D. Tex. 2002). There is one recent decision in the Kmart bankruptcy case in which the court ruled that traditional critical vendor relief was not appropriate in that case. Capital Factors, Inc. v. Kmart Corp., 291 B.R. 818 (N.D. Ill. 2003). Mirant would argue that that the Kmart decision, which is not controlling in the Fifth Circuit, is inapposite here. Kmart sought authority to pay certain prepetition obligations to trade creditors that supplied goods to Kmart stores. Id. These creditors included, inter alia, egg and dairy vendors and liquor distributors. Id. at 820. While the supply of eggs, milk and alcoholic beverages may have enhanced the sundries offered by Kmart and possibly increased customer traffic at Kmart's stores and/or increased sales revenues, such items can hardly be considered "critical" when compared to the goods/services provided by the prepetition vendors that the Debtor has identified as critical. Further, such fungible goods could have been obtained by Kmart from other dairy farmers and liquor distributors, albeit presumably on less favorable terms. Id. Here, the critical vendors of the Debtor are truly "critical" in the most fundamental sense. Mirant's critical vendors are not mere suppliers of fungible goods easily obtainable on the open market from a host of generic vendors. Rather, these vendors provide unique, highly specialized services which are necessary to protect the environment, comply with environmental and energy restrictions at the local and federal level, and maintain adequate wholesale energy supplies which are ultimately enjoyed by thousands of businesses and consumers without disruption. Moreover, due to the highly specialized nature of the goods and services provided to the Debtor by these vendors, competing vendors or alternative options are practically nonexistent in areas in which the Debtor's facilities are located. Accordingly, the truly critical nature of the goods and services supplied by these vendors to the Debtor requires unique protection, in contrast to the goods not deemed critical in Kmart. *** End of Issue No. 1 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------