8-KOther Events

SOUTHERN CO 8-K Report, Corporate Update (Jun 21, 2005)

Filed June 21, 2005For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

Southern Company (SO) has filed an 8-K report on June 21, 2005, detailing a significant lawsuit filed against it by Mirant Corporation, as a debtor in possession, and the Official Committee of Unsecured Creditors of Mirant. The lawsuit, filed in the U.S. Bankruptcy Court, alleges fraudulent transfers and illegal dividend payments made by Mirant to Southern Company in 1999 and 2000. These alleged transactions, totaling over $2 billion including dividends, intercompany loan repayments, and a stock redemption, are claimed to have been made with intent to defraud creditors or when Mirant was allegedly insolvent. The complaint seeks substantial monetary damages, punitive damages, and attorneys' fees, exceeding $2 billion. Additionally, Mirant seeks to recharacterize certain advances from Southern Company as equity rather than debt and asserts Southern Company's liability under an 'alter ego' theory. Mirant also opposes Southern Company's existing claims against Mirant in bankruptcy and seeks their equitable subordination. Southern Company strongly denies these allegations and intends to vigorously defend itself, though the ultimate outcome remains uncertain.

Key Highlights

  • 1Southern Company is facing a lawsuit filed by Mirant Corporation and its creditors' committee in bankruptcy court.
  • 2The lawsuit alleges fraudulent transfers and illegal dividend payments totaling over $2 billion from Mirant to Southern Company in 1999-2000.
  • 3Key allegations include intent to defraud creditors or transactions made while Mirant was allegedly insolvent.
  • 4Mirant is seeking monetary damages exceeding $2 billion, plus punitive damages, interest, and legal fees.
  • 5The complaint also aims to recharacterize certain Southern Company advances as equity and argues for 'alter ego' liability.
  • 6Mirant is contesting Southern Company's existing claims against Mirant in bankruptcy and seeks their subordination.
  • 7Southern Company believes the claims lack merit and plans a vigorous defense.

Frequently Asked Questions

The main event is the filing of a lawsuit against Southern Company by Mirant Corporation (in bankruptcy) and its creditors' committee. The lawsuit alleges fraudulent transfers and illegal dividend payments made by Mirant to Southern Company between 1999 and 2000.

Mirant is seeking monetary damages in excess of $2 billion, plus interest, punitive damages, attorneys' fees, and costs.

The alleged fraudulent transactions include: (1) dividends totaling $668 million, (2) repayment of intercompany loans and interest totaling $1.035 billion, and (3) a stock redemption valued at $247.9 million, all of which Mirant claims were made with fraudulent intent or while Mirant was insolvent.

Southern Company states that it believes there is no meritorious basis for these claims and intends to vigorously defend itself against the lawsuit. The company acknowledges that the ultimate outcome cannot be determined at this time.