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November 21, 2007 |
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MIRANT CORP: Buyback Program Cues S&P to Hold 'B+' Rating Standard & Poor's Rating Services affirmed its 'B+' corporate credit rating on Mirant Corp. and its subsidiaries Mirant North America LLC and Mirant Americas Generating LLC, and removed the ratings from CreditWatch with negative implications. Standard & Poor's placed the ratings on CreditWatch on July 11, 2006. The current outlook is stable. The rating actions reflect Atlanta, Georgia-based Mirant's announcement that it will return US$4.6 billion in cash on the balance sheet to shareholders through a stock buyback program and retain the remaining cash balance in the business to fund capital expenditures and maintain strong liquidity. S&P also retained the '1' recovery rating on MNA's $700 million senior secured term loan B facility and US$800 million revolver, but raised the issue ratings on these credit facilities to 'BB' from 'BB-', consistent with the revised recovery notching criteria that S&P initiated in June 2007. Under this revised methodology, secured debt with a '1' recovery rating is notched up two times from the corporate credit rating. S&P also affirmed the 'B-' rating on MNA US$850 million in unsecured notes. In addition, S&P affirmed the 'B-' rating on MAG's senior unsecured debt. S&P also affirmed the 'BB' rating and '1' recovery score on Mirant Mid-Atlantic LLC's pass-through certificates, and removed the debt ratings from CreditWatch Negative. The outlook on MIRMA debt is stable. The outlook on Mirant is stable. The stable outlook reflects prospects for relatively stable cash flow generation in the near term. S&P base this conclusion on the company's large base load generation position and the large amount of fuel and generation that are hedged over the next several years. Also contributing to a stable outlook is the now-resolved litigation that had remained after Mirant emerged from bankruptcy -- specifically the settlement with Potomac Electric Power Co. -- and the completed large-asset-sale program. Liquidity is ample to support operations and fund the large capital-expenditure program at MIRMA, as well. "We could raise the rating on Mirant if financial metrics improve, as long as current operations are maintained and the MIRMA capital-expenditure program goes as planned," said Standard & Poor's credit analyst Terry A. Pratt. "The rating could be pressured if Mirant reduces liquidity through additional buybacks or environmental compliance requirements arise that could reduce generation or increase costs at key coal-fired base load units," he continued. |
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