Posted on 12/01/2004 9:22:43 PM PST by MeneMeneTekelUpharsin
Fearing shares will be worthless, they're playing hardball with management
Last month, when the formerly bankrupt Kmart bought Sears, one group of investors was paying particularly close attention. They are the stockholders of Atlanta merchant energy company Mirant, in Chapter 11 bankruptcy protection since July 2003. In Kmart's rags-to-riches, back-from-bankruptcy tale, Mirant's stockholders saw a hint of what might be lying in wait for them.
Nothing.
The retailer's story line goes like this: A hedge fund billionaire who bought large amounts of Kmart's debt becomes controlling owner of its new post-bankruptcy stock. He unloads stores and people, pumping billions into the reorganized company. Stock price soars. For its former shareholders, it happens too late. Kmart's pre-bankruptcy investors were wiped out long before the Sears deal and long before the stock's recent stratospheric climb. The Kmart-Sears news left Mirant's shareholders "ranting," as one stockholder put it. They fear the same thing is about to happen to them.
In the two weeks following the Kmart announcement, Mirant stockholders' Yahoo message board went nuts and their shareholder committee — assigned to represent their interests in the bankruptcy case — began playing serious hardball with the company's management for the first time in 15 months. The shareholders say they believe Mirant is lowballing its value in court, in an effort to sell them out to creditors. They fear creditors are poised to take control of Mirant and that current shareholders will lose everything, like Kmart's did. Last week, the stockholder committee took its harshest anti-management step to date in Mirant's bankruptcy, asking the court to force an annual meeting for the purpose of driving the board of directors out. The recrimination-laced request was a marked departure for that committee, which had been treating Mirant's management as its closest friend until last month.
'Little guys' gripe
Shareholders got a committee to represent them more than a year ago, after the court said there might be enough money in Mirant to give them something after creditors had been satisfied. In a bankruptcy, shareholders get paid last, if at all. They usually get wiped out. Mirant's shareholder committee includes both institutional investors and representation from small shareholders. A Houston businessman, Mike Willingham, represents those "little guys" after pooling millions of shares from investors using the Yahoo message board. Because of the confidential nature of much of the case, though, he's been prevented from telling his Yahoo supporters what's going on, leaving them to interpret events for themselves. According to case filings, the committee spent most of the past 15 months treating Mirant's management as an ally and the company's creditors as a foe. The alliance was formed even before Mirant filed for bankruptcy. Management proposed protecting shareholders' interests in a 2003 restructuring plan. Creditors vetoed it and forced the company into Chapter 11. Stockholders also believed Mirant was on their side because "we believed in the Mirant Mindset," said Washington state shareholder David Gordon, referring to Mirant's in-house code of behavior. "We thought management would do right by people." The trust wasn't universal. Some members of the stockholder committee wanted to push management to sell assets while the proceeds could do shareholders some good. Criticism sharpened when Mirant wrote down the value of many of those assets and cut the value of the pool that stockholders had hoped to share.
Change of heart
Among the panel members advocating hardball was Atlanta lawyer Matt Wilson. "Mirant owns wonderful power plants, which are well-located and extremely valuable, just like Kmart had some excellent store locations," Wilson says now, referring to the assets Kmart sold after its former shareholders' interests had been extinguished. Wilson was in the minority. His fellow members kicked him off the committee months ago, along with two other members who argued for more aggressive action. The committee's loyalty to management eroded, though, this fall. According to court filings, the committee didn't like the way Mirant was valuing its assets and business prospects in a new, confidential business plan, and began having difficulties getting management to talk to them about it. They complained in court filings, which were in turn read by stockholders like Wilson. "It now appears that management is not talking to the shareholders committee," he said. "And the reason management is not talking, a lot of people think, is because the shareholders are getting hosed. It's like, 'We don't have anything to talk to you about.' " Then, beginning in early November, some Mirant bonds — secured by the company's power plant assets in North America — began trading more often and at prices above par, or above their stated value. To shareholders, it suggested that those bondholders knew they would be taken care of, at shareholders' expense
Then came the Kmart announcement — the final straw.
Shareholders filed a motion demanding a Mirant annual meeting a week later. The company's last annual meeting was in May 2003, two months before Mirant filed for Chapter 11 protection. The company canceled this year's meeting, citing printing expenses. The filing alleged a failure of fiduciary duty by Mirant, as well as stonewalling and overspending. It said Mirant was attempting to "grossly understate" the company's value and future revenue in an effort to shut out shareholders and curry favor with creditors. Mirant spokesman James Peters said the company considered shareholders' allegations "without merit," and that Mirant "has and will continue to work with and involve the equity committee throughout our restructuring process." He also said that it was common for companies in Chapter 11 to hold off annual shareholder meetings while a reorganization plan is still pending.
Plan due Dec. 31
Barring another extension — which would be the third — that reorganization plan is due Dec. 31. Shareholders say they now believe only another extension will prevent them from being wiped out. Are Mirant's stockholders dreaming? Not necessarily, according to bankruptcy experts. The fact that they have a committee, capable of gumming up the works with motions and claims, is likely to deliver them something, said Georgia State University law professor Jack Williams. "A valuable commodity is time," he said. "An aggressive shareholders committee can make the company jump through all kinds of hoops. It takes time — lots of time — and it takes expense." And that gives companies an incentive to "gin up some kind of settlement, in exchange for shareholders dropping potential claims," he said. Another expert, University of California law professor Lynn LoPucki, put it succinctly: "If you get a committee, and the committee gets a lawyer, you're going to get something." Some shareholders, meanwhile, aren't waiting, according to Wilson, the former committee member. He said a group of shareholders independent of the official committee intends to force a full investigation of the value of Mirant's assets, by independently soliciting bids for them. The effort, he said, will show the court that Mirant has alternatives that would allow it to satisfy creditors and leave shareholder equity intact.
Some of us so believed in Mirant's ability to refinance debt maturities (the main problem as the company is PROFITABLE even at this time) persuaded relatives to also invest. Those relatives are also awaiting the outcome of this case. The common shareholders should NOT be wiped out in the case and we will have our day in court. This is not a case of wild speculators "hoping" value was there. This is a major electric utility with valuable assets tanked by the Enron mess. K-Mart investors were ripped off by slick operators, told the assets were "worthless" and suddenly saw the value of the company skyrocket AFTER their shares were cancelled. Don't believe the bankruptcy judge is going to let that happen in this case. I really don't. Some of you tire of my postings, I know it. But, everything I've ever worked for is tied up in this case and if nothing else, I'm going to see to it that the world knows what happened. This is truly a just cause and a lot of mom and pops should not be wiped out because some bondholder or bank wants to make an absolute killing on distressed assets...NOT this time.
You're already on record with comments about this one. I am trying to document this case so that whomever wants to research it can go back and look at everything: the case, the comments, the clowns.
FYI. You fellas need to help at least get this story out. Thought you might want to see this one, for sure.
A story you will want to read. Let everyone know. It's time.
One you will want to read. The heat is on.
Pass this one to everyone you know. Please.
You've pinged me many times. This one's for you.
If you could somehow get Rush Limbaugh to pick up on this truly "David (small shareholders) vs. Goliath (Banks and Bondholders who want it all)" story, please do. I rarely EVER ask for this kind of help, but we need it NOW.
I wish you well, but I think if you're a Mirant shareholder, you should get your stock certificates from your broker now. They won't be worth a cent as securities, but after this is all over you can sell them for a couple bucks apiece as collectors items on eBay.
Well, that IS an idea. Do people actually BUY things like that? Nevertheless, I do NOT believe that will be an action I will need to take. And, why would I need to get the certificates now?
This sounds like a good move!
"Do people actually BUY things like that? "
Yes! Go to eBay and click on "scripophilia!"
Might as well get them now, no reason to delay.
Seriously, it is pretty common practise for the "old" stockholders to be zeroed out in this kind of "reorganization." Hope you guys will be the exception.
Mirant stock is not analgous to owning a lottery ticket. Sorry...wrong thread.
Mirant stock is not analagous to owning a lottery ticket. Sorry...wrong thread.
"Mongo only a pawn in the game of life..."
Perhaps. Perhaps not. Light at the end of the tunnel.
Stock certificates on eBay? LOL...don't think so.
Here it is. Read this.
Hoping it will survive so I can pay my helicopter bills inflated by illegal immigration. No joke.
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