Mirant converted $7B of debt into equity, emerged from Chapter 11 and merged into GenOn

Mirant, an Atlanta-based independent power producer with generation in California, the Mid-Atlantic and the Northeast, was crushed by the energy-trading bust. In 2003 it filed for Chapter 11 in what was at the time the 11th-largest bankruptcy in U.S. history, carrying billions of dollars of debt.

The reorganization plan, approved by a federal judge in Texas, converted nearly $7 billion of debt and liabilities into common stock of the reorganized company while reinstating $1.7 billion of debt at Mirant Generation LLC. Mirant secured about $2.4 billion in exit financing and prepared to re-list on the New York Stock Exchange.

Mirant emerged from Chapter 11 in early January 2006, and its shares resumed NYSE trading on January 11 under the ticker MIR. The U.S. Nuclear Regulatory Commission was officially notified that Mirant had emerged and continued operating its generation plants, including the Potomac River facility.

The reorganized Mirant focused on delivering value to shareholders. In April 2010 it agreed to combine with RRI Energy in a $1.61 billion stock-swap merger, creating GenOn Energy with about 24,650 megawatts of capacity, a $3.1 billion market value and $4.13 billion of combined 2009 revenue.

Converted nearly $7B of debt into equity, emerged in January 2006, relisted on the NYSE, and by 2010 merged with RRI Energy into GenOn.

Converting $7B of debt to equity removed the interest burden that triggered the filing.

$2.4B of exit financing funded operations after emergence.

Re-listing on the NYSE restored access to capital markets.

A merger with RRI turned a survivor into one of America's largest power producers.

A merchant power company can trade debt for equity, emerge, and then consolidate the industry; the turnaround is complete when the reorganized company becomes an acquirer.

GenOn Energy combined Mirant and RRI's fleets and expected $150 million in annual cost savings from overhead cuts. Mirant's CEO stayed on to lead the merged company until 2013. The case is a standard example of a merchant-energy company using a debt-for-equity Chapter 11 to reset its balance sheet and then consolidating its industry.