Crunched for cash,
said Monday it will issue new debt to fund its business operations.
The Atlanta-based energy trader said it will offer $370 million in convertible debt securities to bolster its liquidity and finance its business obligations. The offering, to be priced shortly, comes as Mirant attempts to renew a $1.13 billion revolving credit facility set to mature July 17.
That revolver represents half of Mirant's total credit line.
Shares of Mirant fell hard, toppling $1.01 to $6.29, on news of the planned offering. Sales of convertible securities typically hurt stock prices because convertible debt holders may trade the bonds for stock at some point down the road, potentially diluting current shareholders. But at least one analyst viewed Monday's drop as a momentary hiccup.¿
"I think you've got some people who may be shorting the stock in front of the offering," said Martin Malloy, an analyst at Hibernia Southcoast Capital with no financial stake in the company. "What's going on today is temporary."
Malloy's firm, which does no underwriting for Mirant, currently has a buy rating on the stock.
Malloy predicted that Mirant's negotiations with lenders -- particularly its upcoming short-term credit renewal -- will be a "key catalyst" for the stock. He doubts Mirant will encounter any major problems securing the financing it needs to operate.
Fitch Ratings shared Malloy's view, predicting that Mirant will emerge from the negotiations with some type of financing in place.
"We're not particularly concerned about the revolver," said Fitch analyst Ellen Lapson. "The company has the right to draw down the revolver and term it out for a year."
Fitch said it will rate Mirant's new debt one notch above "junk" status -- the same as its current debt -- but maintain a negative outlook for the company. The agency indicated that Mirant's credit rating could change if liquidity becomes a problem.
Mirant is one of several energy merchants seeking summer credit renewals from lenders that have grown increasingly stingy since last year's collapse of Enron.
, also clinging to weak investment-grade ratings, are among the companies currently in line.