In re Mirant Corp.
| Decision Date | 09 December 2005 |
| Docket Number | No. 03-46590-DML-11.,03-46590-DML-11. |
| Citation | 334 B.R. 800 |
| Parties | In re MIRANT CORP., et al., Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Ian Peck, Haynes & Boone, L.L.P., Fort Worth, TX, Craig Averch, Michelle Campbell, Daniel Woods, White & Case, Los Angeles, CA, Frank Eaton, White & Case, Miami, FL, for Debtors.
Monica Blacker, Michael Coffman, Andrews & Kurth, L.L.P., Dallas, TX, Paul Silverstein, Andrews & Kurth, L.L.P., New York City, for Mirant Committee.
Howard Siegel, Daniel Saval, Edward Weisfelner, Jeffrey Jonas, Andrew Dash, Leslie Scharf, Brown, Rudnick, Berlack, Israels, L.L.P., Boston, MA, for Ad Hoc Committee of Equity Holders.
Ingrid Bagby, Cadwalader, Wickersham & Taft, New York City, Tom Rice, Cox Smith & Matthews, Inc., San Antonio, TX, for Magi Committee.
George McElreath, Office of the U.S. Trustee, Dallas, TX, for U.S. Trustee.
Solomon Noh, Fred Sosnick, Shearman & Sterling, New York City, for Mirant Corporation.
Jeffrey Hurt, Hurt & Lilly, Dallas, TX, for Ad Hoc Committee.
Sean Christopher Serpe, Seward & Kissel, LLP, New York City, for Law Debenture Trust Company of New York, as Indenture Trustee and Property Trustee.
Joseph Smolinsky, Chardbourne & Parke, LLP, New York City, for Credit Suisse First Boston and Citibank, as Agent.
David Bennett, Judith Ross, Thompson & Knight, Dallas, TX, for Credit Suisse First Boston and Citibank as Agent.
Matt Wilson, Dustin Thompson, Wilson Law Firm, PC, Atlanta, GA, for Certain Shareholders.
Phillip Lamberson, Winstead, Sechrest & Minick, PC, Dallas, TX, for U.S. Bank, N.A., as Lease Indenture Trustee and Pass Through Trustee.
In this opinion the court addresses principally the issue of how to determine the total enterprise value of the entities that make up Mirant Group.1 The court addresses that question, pursuant to Fed. R. Civ. P. 42(a) (),2 for purposes of confirmation of a plan of reorganization for Debtors.3 This matter is subject to the court's core jurisdiction. 28 U.S.C. §§ 1334(a) and 157(b)(2)(L). This Memorandum Opinion constitutes the court's findings of fact and conclusions of law with respect to the matter discussed below. Fed. R. Bankr. P. 7052 and 9014.
Mirant Group is engaged in the business of producing and marketing electric power. Mirant Group conducts business not only in the United States but also in the Caribbean and the Philippines. Domestic operations are throughout the United States, but Mirant Group's principal geographic presences are in the New England, New York (outside of New York City and Long Island) and PJM4 markets.
Mirant Group owns or leases electric generation facilities capable of producing approximately 14,000 megawatts of electric power in the United States, 2,200 megawatts in the Philippines and over 2,000 megawatts in the Caribbean. Through Mirant Americas Energy Marketing, L.P. ("MAEM"), Mirant Group buys and sells fuel, electricity and other commodities. Certain emissions (sulphur dioxide and nitrous oxide, commonly referred to as "SOX" and "NOX" respectively) which are subject to regulation are dealt with (and monetized) through a market exchange.
Besides revenues generated through transactions in commodities (a relatively small amount), Mirant Group's principal business is in the merchant energy business. Thus, aside from a small income generated through the sale of electricity to consumers by Mirant's partly-owned subsidiaries in Jamaica and Grand Bahama Island, Mirant Group's revenue is derived from long-term contract sales of power to utilities (most notably in the Philippines) and from sales of power and capacity in the wholesale energy market.
Actual sales of electric power occur when power from a facility is "dispatched." Whether any power is dispatched depends on whether the power is offered at or below a price established at regular (usually hourly) intervals.5 Each facility may bid to sell power for a price at which, for it, generation and dispatch are profitable.
Payments for capacity are made on the basis of capacity made available by the generating facility. In other words, the energy merchant, in a classic case of the aphorism "they also serve who sit and wait," is paid, even if the power it can produce is not used, in exchange for making power available should the market require it.6 The price paid for (unused) capacity is determined based on supply, demand and the needs of the market for availability of power. The last of these factors is addressed by tying capacity payments to the cost of building and operating a benchmark gas turbine generating facility.7 Thus, in theory, if capacity falls below a certain point (required peak Load capacity plus a margin) the price paid for capacity will stimulate construction of new generation facilities.8
Mirant began its life as a subsidiary of The Southern Company ("TSC").9 Through a public offering in November of 2000 and a stock dividend to its shareholders the following April, TSC divested itself of Mirant and its subsidiaries. Many, but not all, of Mirant Group's generation facilities were acquired and placed in operation while Mirant Group was controlled by TSC.
Following overbuilding of generation facilities and a downturn in the energy market in 2001 and 2002, Mirant Group was in a troubled financial condition. After failing to accomplish an out-of-court workout with their creditors, Debtors sought relief under chapter 11.10
During their chapter 11 cases Debtors have continued to operate their business. Two official committees of unsecured creditors have been appointed by the United States Trustee (the "U.S. Trustee") pursuant to Bankruptcy Code § 1102 (the "Code")11 to represent the creditors of Mirant (the "Corp. Committee") and the creditors of Mirant's second tier subsidiary, Mirant Americas Generation LLC ("MAG" and the "MAG Committee"), and a committee has been appointed to represent Mirant's stockholders (the "Equity Committee" and, together with the Corp. Committee and the MAG Committee, the "Committees"). The court directed appointment of an examiner (Code § 1104(c)) by order dated April 7, 2004, and William Snyder (the "Examiner") was selected by the U.S. Trustee and approved by the court to perform that role.
Although the Plan as originally filed was a "waterfall" plan, meaning it was designed to deliver value until creditors are satisfied in full, and, if value remained, provide a return to stockholders, Debtors formulated and proposed the Plan initially based on the assumption that unsecured creditors of Mirant (the last creditor constituency before subordinated debt held for the benefit of, inter alia, Phoenix Partners LP, Phoenix Partners II LP and Phaeton International (BVI) Ltd. (collectively "Phoenix"))12 would not receive full satisfaction from the enterprise value of Mirant Group. Thus, the Plan provided for Mirant's creditors, other then Phoenix, to receive 90% of Mirant's equity post-confirmation.13
The 3/25 Plan originally provided (and the 9/22 Plan still provides) for creation of a trust (the "Plan Trust") to hold certain assets not necessary to the ongoing business of Mirant Group, including litigation. Plan §§ 9.1-9.2. Besides warrants14 and any New Mirant common stock remaining after unsecured creditors were paid in full in accordance with the 3/25 Plan, stockholders of Mirant were to receive under the 3/25 Plan only the potential right to receive distributions from the Plan Trust, after complete satisfaction (i.e., return having a value equal to the allowed claims with interest) of Mirant creditors and full satisfaction of Phoenix (and other beneficiaries of subordinated debt). 3/25 Plan § 5.1(f).
Contending, inter alia, that Debtors undervalued Mirant Group in the Plan, the Equity Committee, on November 22, 2004, filed a motion and a complaint asking the court to direct Mirant to call a meeting of stockholders. It was in response to the motion and complaint of the Equity Committee that the court called a status conference (see Code § 105(d)) to discuss with the principal parties the wisdom of conducting a hearing to determine the total enterprise value of Mirant Group. The court considered this alternative preferable to a change in the direction of these cases through a change in management at the instance of shareholders, who might or might not ultimately be determined to have an economic entitlement to share in Mirant Group's value.
Given that a basic dispute existed concerning value and the parties entitled to participate under a plan of reorganization, the court determined it would address the issue of Mirant Group's enterprise value (as well as other issues pertinent to confirmation15) before proceeding to solicitation of votes. As a result of conferences presided over by the Examiner, Debtors filed their Motion for Order Determining Valuation and for Entry of a Scheduling Order in Connection Therewith (the "Motion"). The Examiner, working with the principal parties, developed a scheduling order (the "Scheduling Order") for consideration of the Motion,16 and general notice of the Motion and the scheduled valuation hearing (the "Valuation Hearing") was given to interested parties.17
Pursuant to the Scheduling Order, parties intending to participate actively in the Valuation Hearing were required to give notice of their intent to participate by February 18, 2005. As of that date, the following entities had given notice of their intent to participate: the Equity Committee, the Corp. Committee, the MAG Committee, Debtors, Phoenix, the Mirma Landlords,18 Edison Mission Energy,19 the Ad-Hoc Committee of Bondholders of MAG, U.S. Bank National Association as Lease Indenture Trustee and Pass Through Trustee,20 Law Debenture Trust Company of New York as...
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...2007 WL 4287507 (N.D. Ill. Dec. 4, 2007), aff'd sub nom., Baldi v. Samuel Son & Co., 548 F.3d 579 (7th Cir. 2008) • In re Mirant Corp., 334 B.R. 800 (Bankr. N.D. Tex. 2005) • In re Morse Tool Inc., 148 B.R. 97 (Bankr. D. Mass. 1992) • In re Nellson Nutraceutical Inc., No. 06-10072, 2007 WL ......
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