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Southern Company Message Board

  • finenergy finenergy Jul 11, 2005 8:39 PM Flag

    NY proposed tax settlement is HUGE!!!

    It looks like their may be a new agreement other than the proposed agreement in the Disclosure Statement.

    At March 31, 2005 Mirant had accrued on its financial statements unpaid NY property taxes of $115M, page 35 of 10-Q.

    The proposed agreement was to reduce the above unpaid taxes by 80%. The remaining 20% was to be applied against Overpayment Notes.

    To reimbuse Mirant for back taxes that were overpaid due to over-assessments on back taxes from 1995 to 2002, Overpayment Notes were to be issued to Mirant in the amount of $269.8M. These Overpayment Notes could then be used to pay for future taxes due on the Lovett & Bowline plants.

    The 20% reduced taxes above could be applied against these notes.

    The NY taxes have not been booked on the financial statement nor in the projections contained in the Discloure Statement because the proposed settlement has not been approved by the Court or the NY cities and counties. However, these agreements WILL be approved, therefore, these assets and reduced liabilities need to be considered in Valuing the Equity.

    The Examiner needs to be made aware of these adjustments and then the question is: Do these adjustments change Judge Lynn's instructions for recalulation? These amounts are not minor.

    Accrued taxes that will not be paid $115.0M
    (This amount should be in the Claims total)

    Overpayment Notes----------------------$269.8M
    Less 20% of unpaid taxes applied------($ 23.0M)
    Net balance of Overpayment Note--------$246.8

    Reduced Claims ------$115.0M
    Increased assets:
    Overpayment Notes---$246.8M
    Total change ------- $361.8M

    Judge Lynn's adjsutment does not address these VERY MATERIAL additions to value.

    Per the latest articale dated July 9, 2005 by the Albany Bureau, it looks like the above proposed agreement has been changed somewhat. If the article is correct, 30 year bonds may be issued by the cities and proceeds from these bonds used to pay Mirant cash.

    In any event, I woudl expect the final agreement to be somewhat close to the proposed settlement described int he Disclosure Statement.


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    • >> Total change ------- $361.8M <<

      Forgive me if the point has been made in the 700+ posts since news of the tax settlement . . .

      $361.8M, on a bit more than 400M shares -- doesn't this add up to about 90 cents/share additional equity?

    • Thanks, Fine.

      52 recommendations plus fine =53 posters or board participants can not have bought all the last 50 plus million shares at .50 and above pps, IMO.

      There are other buyers who are investing knowing the risk.

      Time will tell.

    • This does seem to be good news for the post BK common.

      For the court appointed valuation though, you need to look at the business plan which is what the Blackstone valuation is based on and then estimate the delta between what you have posted and that assumed in the business plan.

      The '2005' business plan NY Tax assumption are on page 15.


    • Fine
      Thanks This was one of the major issues.According to the article Mirant got everything they asked for and more. Now NY PLANTS VALUE SHOULD ALSO GO UP.I know Evil Bill said repeatedly in the beginning if they get a settlement Tax settlement equity should be in the money.If I recall in one of the earlier transcripts, Judge Lynn asked one of the attorneys for Rockland county if they lose whether they can write a refund check for about 200 Million ( not sure about the exact amount) and he said yes they could.

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