S&P cuts Mirant

Standard & Poor's downgraded Mirant Corp. including cutting its senior unsecured debt to D from CC, preferred stock to D from C, Mirant Americas Generation Inc.'s senior unsecured debt and senior unsecured bank loan to D from CC and Mirant Mid-Atlantic LLC's senior secured passthrough certificates to D from CC.

S&P said the action follows Mirant's voluntary filing for protection from creditors under Chapter 11 of the U.S. bankruptcy code.

S&P said it expects that the immediate recovery prospects for the outstanding unsecured debt will be less than par value given the amount of outstanding debt and the depressed state of many of Mirant's nonregulated businesses.

Estimates of enterprise value, assuming very conservative valuation of U.S. power plants, no value attributed to the company's energy trading and marketing division, forecasts of international cash flow, and current liquidity suggest roughly $5 billion - about 51% of current total debt, although Mirant's obligations could rise during bankruptcy proceedings with additional claims.

An improved recovery could occur if power prices were to recover strongly.

However, S&P cautioned that estimating recovery values for Mirant's obligations is complicated by a likely complex bankruptcy process that will need to reconcile the interests of multiple creditor classes, an illiquid market for merchant power plants, poor price discovery for future power prices, substantial uncertainty regarding the liabilities and assets of the trading operations, potential deterioration in Mirant's businesses caused by the bankruptcy process itself and pending and future litigation.

The bankruptcy proceedings for Mirant and its subsidiaries are likely to be lengthy, complex, and litigious, given the divergent interests of holders of the bank debt, boldholders and Mirant, S&P said.

Mirant's bankruptcy filing was prompted by an inability to agree with its bank lenders and bondholders on a transaction that would have extended the maturity to 2008 of $4.8 billion of debt obligations at the corporate and subsidiary levels. This divergence of interests is underscored by Mirant's election not to submit a prepackaged bankruptcy plan for which it had sought creditor approval. Related to this are the numerous lawsuits already brought against Mirant, mostly related to California operations, which could introduce further pressures into the bankruptcy proceedings.

Fitch cuts Mirant

Fitch Ratings downgraded Mirant Corp. including cutting its senior notes and convertible senior notes to DD from CCC and convertible trust preferred securities to D from CCC-. Fitch also cut Mirant Mirant Americas Generation, Inc.'s senior notes and senior bank facility to DD from CCC and Mirant Mid-Atlantic LLC's passthrough certificates series A, B, and C to C from CCC+.

A D rating indicates expected recovery below 50% and DD from 50% to 90%.

Fitch said the downgrade follows Mirant's Chapter 11 filing.

Although Mirant Mid-Atlantic joined in the bankruptcy petition, the Mirant Mid-Atlantic lease passthrough certificates benefit from structural features such as a strong collateral package relative to the amount of secured debt and a six month debt service reserve. Two significant coal-fired power plants owned by the owner-lessors are an important part of the collateral package, and are not included in Mirant Mid-Atlantic's bankruptcy estate.

S&P cuts Loral

Standard & Poor's downgraded Loral Space & Communications Ltd. including cutting its $187.3 million 6% convertible redeemable preferred stock due 2006 to D from CC, $350 million 9.5% senior notes due 2006 to D from CCC-, $36.7 million 6% convertible redeemable preferred stock due 2007 to D from CC and Loral Orion Inc.'s $37 million 11.25% senior notes due 2007, $49 million 12.5% discount notes due 2007 and $613 million 10% senior notes due 2006 to D from CCC+.

S&P said the actions follow the company's announced filing of Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Southern District of New York.

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