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Rating Action:

MOODY'S DOWNGRADES MIRANT, MAEM AND MAGI TO Ba1 AND PLACES MIRMA ON REVIEW FOR POSSIBLE DOWNGRADE

19 Dec 2001
MOODY'S DOWNGRADES MIRANT, MAEM AND MAGI TO Ba1 AND PLACES MIRMA ON REVIEW FOR POSSIBLE DOWNGRADE

Approximately $4.9 Billion of Debt Securities Affected.

New York, December 19, 2001 -- Moody's Investors Service lowered its ratings for Mirant Corporation (Mirant), Mirant Americas Energy Marketing, L.P. (MAEM) and Mirant Americas Generation, Inc. (MAGI) to Ba1 and Mirant Trust I to Ba2. The ratings remain under review for further downgrade pending Mirant's actions to improve its capitalization and arrangements to obtain financing.

Moody's also placed its Baa3 rating for Mirant Mid-Atlantic, LLC (MirMA) under review for possible downgrade to reflect the risk that Mirant can draw on MirMA's liquidity sources for its own needs.

Mirant owns an international portfolio of electric and gas assets. MAEM is Mirant's US marketing and trading arm. Subsidiary MAGI holds a portfolio of US power assets. MAGI subsidiary MirMA holds power assets near Washington D.C.

Moody's has lowered the following ratings:

· Mirant Corporation senior unsecured debt, to Ba1 from Baa2;

· Mirant Corporation commercial paper, to Not Prime from Prime 2;

· Mirant Americas Energy Marketing, L.P. issuer rating to Ba1 from Baa2;

· Mirant Americas Energy Marketing, L.P. commercial paper, to Not Prime from Prime 2;

· Mirant Trust I preferred stock to Ba2 from Baa3 and

· Mirant Americas Generation, Inc. to Ba1 from Baa3.

Moody's MAEM, Mirant Trust I and MAGI ratings are derivative of Mirant's rating. The MirMA notes are highly structured in the manner of a project financing.

Moody's lowered Mirant's rating to reflect expectations for moderating cash flows in light of the heavy debt burden.

Moody's believes Mirant's cash flow will be restricted over the coming months. Throughout this time, Mirant plans to continue funding power plant construction expenditures as well as cover ongoing interest payments and preferred dividends. Additionally, the company will require credit support for its marketing and trading operations.

The company's only maturing debt until 2003 is a $792 million bank loan at its Asia intermediate holding company. The loan matures in January. Mirant's Asian projects, not Mirant's credit, back that loan. Mirant may find refinancing that loan challenging given that Mirant's two major Asia projects are project financed and currently operating under waived insurance defaults.

$1.125 billion of the company's $2.7 billion corporate bank facilities is in the form of a 364 line maturing July 2002. The company, however, can term out that facility until July 2003.

The company also plans to invest $600 million by year end to purchase EcoElectrica from Edison Mission Energy and Enron. On the positive side, Mirant plans to receive $900 million early next year from the sale of its Bewag interests to Vattenfall. The Bewag sale is subject to European Union approval.

Mirant also plans to finance the construction of certain of its US projects. Moody's believes Mirant would need to fund up to an additional $200 million construction from cash over the coming months if it could not arrange construction financing. Moody's notes, however, Mirant's ability to slow down construction on certain of its announced power assets.

Lastly, although Mirant's corporate revolvers contain no material adverse change clauses or ratings triggers which could stop funding, a drop in Mirant's ratings below investment grade will trip collateral needs under certain project finance and commercial arrangements. Mirant's trading partners would also likely demand additional collateral.

Mirant's near-term liquidity sources, aside from the somewhat restricted cash from operations, are $800 million of cash on the balance sheet and $850 million of unused Mirant and MAGI revolver capacity.

Mirant owns some liquid unencumbered assets which could be sold or monetized, such as accounts receivable, a receivable from PG&E and gas assets. Mirant also owns many less liquid unencumbered power assets which could be sold. Selling or monetizing any of these assets may not only take time, but would also lower Mirant's future cash flows and effectively or structurally subordinate the senior unsecured notes.

Moody's believes Mirant can pledge over $1.0 billion in additional assets without violating additional lien covenants. Mirant has no tangible net worth covenants and therefore can take losses on asset sales.

Mirant's senior noteholders are already structurally subordinated to debt at MAGI, MirMA, WPD Holdings UK, the Asia intermediate holding company, the two large Asia project and other levered assets. Moody's believes Mirant's current liquidity and reduced financial flexibility has placed Mirant's senior unsecured note holders at greater risk of effective or structural subordination to the extent Mirant monetizes assets.

New York
Susan D. Abbott
Managing Director
Corporate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Andy Jacobyansky
VP - Senior Credit Officer
Corporate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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