Moody's cuts Mirant

Moody's Investors Service downgraded Mirant Corp. including cutting its senior unsecured debt to Ca from Caa2, Mirant Americas Generation, LLC's senior unsecured debt to Caa3 from B3, Mirant Mid-Atlantic, LLC's senior secured debt to B3 from B2 and Mirant Trust I's trust preferred stock to C from Ca. The outlook is negative.

Moody's noted Mirant's senior unsecured ratings continue to be notched down from the senior implied rating to reflect the expectation that Mirant's restructuring efforts will result in significant amounts of new secured debt, effectively subordinating the senior unsecured bonds.

The ratings downgrade is in response to the company's announced offer to exchange up to $1.45 billion of existing unsecured bonds maturing prior to May 1, 2006 for new Secured Notes due July 15, 2008, Moody's said. The exchange offer is contingent upon the exchange of at least 85% of the aggregate outstanding principal amount of Mirant's senior notes and convertible debentures. This exchange offer is independent of Mirant Americas Generation's offer to exchange senior notes and both are contingent upon Mirant's and Mirant Americas Generation's ability to successfully refinance their existing bank facilities, totaling $3.45 billion.

The combined bank debt restructuring and exchange offers could result in a total of up to $4.8 billion of new secured debt, thereby encumbering essentially all of Mirant's domestic assets and further subordinating both Mirant Americas Generation's senior unsecured and Mirant's senior unsecured bonds.

Since Mirant's international assets are already largely encumbered by existing secured debt at the asset level, Moody's believes there is minimal value remaining for senior unsecured obligations at Mirant given current market conditions.

Moody's said the outlook is negative pending further clarification on the ultimate resolution of current negotiations with Mirant's bank group and the proposed exchange offers. Successful completion of both could result in a change in the outlook to stable.

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