US energy firm files for bankruptcy

American energy company Mirant has filed for bankruptcy after failing to reach a last-minute out-of-court debt restructuring plan with its creditors.

A $1.1bn (€976m)) debt payment was due today and Mirant needed all its banks and 85% of bondholders to support a debt exchange plan.

Mirant Corporation, Mirant Americas Generation, LLC, and nearly all their wholly owned subsidiaries in the United States are included in the filings for Chapter 11 bankruptcy protection. Mirant’s operations in the Philippines and the Caribbean were not included.

The filing is the latest milestone of financial turmoil for the company, which joined its rivals in furiously shedding assets, trimming the size of trading contracts and refinancing debt since the 2001 demise of energy giant Enron.

That debacle – coupled with a long slump in energy prices – left investors nervous about the huge debt loads independent energy merchants were carrying on their books and prompted credit downgrades for most firms, including Mirant.

In its filing, Mirant listed 11.4bn (€10.1bn) in total debts and $20.6bn (€18.3bn) in assets. It also had 1.17bn (€1bn) in cash and said it had arranged $500m (€443.8m) in financing to operate during bankruptcy.

The petition, along with one relating to several of its Canadian subsidiaries, was filed in US Bankruptcy Court in Fort Worth, Texas.

Atlanta-based Mirant said the court allowed it to honour obligations under existing and future trading and marketing contracts that supported Mirant’s extensive asset base. The protection applies only to parties that do not terminate trading and marketing contracts because of Mirant’s Chapter 11 filing.

“Mirant’s worldwide operations are continuing without interruption and our vendors will be paid in full for all goods furnished and services provided after the filing date,” president and chief executive Marce Fuller said in a statement.

Mirant shares are down about 95% from a peak of $47 (€42) on May 21, 2001.

Contributing to its problems were $ 2.4bn (€2.1bn) in losses last year, an audit that showed it overstated income by $188m (€166.8m), and allegations that it and other suppliers manipulated prices that led to California’s energy crisis three years ago. Mirant has denied the allegations.

A bankruptcy filing under Chapter 11 frees a company from the threat of creditors’ lawsuits while it reorganises its finances. The debtor’s reorganisation plan must be accepted by a majority of its creditors. Unless, the court rules otherwise, the debtor remains in control of the business and its assets.

Mirant, a spin-off of Southern Company, and its subsidiaries employ 7,000 people.