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08 Oct 2009
New York, October 08, 2009 -- Moody's Investors Service affirmed the ratings of Mirant Corporation (Mirant:
B1 Corporate Family Rating) and its subsidiaries Mirant Mid-Atlantic,
LLC (MIRMA: Ba1 pass through trust certificates), Mirant North
America, LLC (MNA: Ba2 senior secured and B1 senior unsecured)
and Mirant Americas Generation, LLC (MAG: B3 senior unsecured).
Separately, Moody's affirmed Mirant's speculative grade liquidity
rating at SGL-1. The rating outlook remains stable for Mirant,
MIRMA, MNA and MAG.
"The ratings affirmed for Mirant and its subsidiaries incorporate
the company's forward hedging strategy, which has provided some
near-term cushion against current challenging market conditions,
and its good liquidity position" said Moody's Vice President
Scott Solomon. "The rating, however, is tempered
by our expectation for reduced cash flow generation and downward pressure
on the company's financial metrics over the near-term"
Mirant's financial performance had been driven in large part by declining
reserve margins and an increase in the price paid for power and capacity
in the markets that Mirant operates. As a result, Mirant's
key consolidated financial metrics (consolidated ratio of adjusted consolidated
cash from operations before changes in working capital or CFO pre W/C
to consolidated debt and CFO pre W/C to interest expense) have been strong
for its rating category, averaging approximately 19% and
3.5 times, respectively, during the three year period
The current weak state of the economy, however, has been a
significant factor for an increase in natural gas supply and a reduction
in electric demand. As a result, these factors have pressured
power prices and Mirant's profitability margins to a certain degree.
Mirant's strategy of hedging forward a significant portion of its base
load capacity has provided near-term protection against current
market conditions. That being said, the expiration of hedged
positions over the near-term, which were entered into when
power prices where stronger, are expected to cause a weakening of
Mirant's CFO pre W/C to consolidated debt and CFO pre W/C to interest
expense to a range of 10 to 15% and 2.2 to 3.0 times
level, respectively, in 2010. While clearly lower,
we believe that the above cited ranges, when combined with the company's
current good liquidity position, support Mirant's existing
The SGL-1 rating reflects an expectation that Mirant's liquidity
profile will remain good over the next four quarters as a result of an
expected generation of a modest amount of free cash flow, maintenance
of significant cash balances and continued access to substantial revolving
credit availability. The company faces limited scheduled debt payments
Mirant's liquidity profile at June 30, 2009 was strong, consisting
of approximately $1.9 billion of consolidated cash holdings
and $600 million of availability under MNA's senior secured revolving
credit facility due 2012. The only items outstanding against the
revolving credit facility were letters of credit tied to its hedging program.
MNA remains well within the required compliance with its two financial
covenants and does not anticipate any need to drawn upon its senior secured
credit facilities over the near term. Mirant's consolidated 2009
year-end liquidity is expected to well exceed $2 billion.
Although MNA is in compliance with its financial covenants, it is
currently restricted from making distributions by the free cash flow requirements
under the restricted payment test. The primary factor lowering
the free cash flow calculation for MNA is its significant capital expenditure
program. The restriction, however, is not of significant
analytical concern as (1) Mirant has significant unrestricted cash available,
at its discretion, to make capital contributions to MNA and (2)
the restricted payment test has a carveout that provides for distributions
to MAG in an amount equal to the amount of interest payable by MAG.
Given the amortization of MNA's senior secured term loan and voluntary
repayment of MAG's senior unsecured notes due 2011, Moody's
has revised its LGD point estimates for Mirant's subsidiaries as
Mirant North America, LLC
$850 million 7.375% senior unsecured bonds due 2013
to LGD 4, 54% from LGD 4, 55%;
$755 million senior secured revolving credit facility due 2013
to LGD 2, 29% from LGD 2, 21%;
$376 million (originally $700 million) senior secured term
loan due 2013 to LGD 2, 29% from LGD 2, 21%;
Mirant Americas Generation, LLC
$535 million 8.3% senior unsecured notes due 2011
to LGD 5, 86% from LGD 5, 85%;
$450 million 8.5% senior unsecured notes due 2021
to LGD 5, 86% from LGD 5, 85%;
$400 million 9.125% senior unsecured notes due 2031
to LGD 5, 86% from LGD 5, 85%.
The point estimate for Mirant Mid-Atlantic's approximately
$873 million pass through certificates is unchanged at LGD 2,
For more information, please refer to Mirant's Credit Opinion
dated June 1, 2009 which can be found at www.moodys.com.
Moody's last rating action on Mirant and its subsidiaries occurred on
December 20, 2007 when the CFR for Mirant was upgraded to B1 from
The principal methodology used in rating Mirant was Moody's Rating
Methodology: Unregulated Utilities and Power Companies, published
in August 2009 and available on www.moodys.com in the Rating
Methodologies sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Mirant Corporation, headquartered in Atlanta, Georgia,
is an independent power producer that owns or leases a portfolio of electricity
generating facilities totaling approximately 10,300 megawatts.
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service
Moody's affirms the ratings for Mirant and its subsidiaries; outlook remains stable
William L. Hess
Infrastructure Finance Group
Moody's Investors Service
No Related Data.
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