RRI Energy Inc. and Mirant Corp. bond prices went up after the announcement that both the companies would come together in a $1.6 billion stock transaction to become the second largest independent power producer in the U.S.
The movement of the stock prices of Mirant showed that such a move was anticipated in the markets.
RRI’s 7.875 percent notes due in 2017 climbed 4.5 cents on the dollar, the most on record, to 96.75 cents to yield 8.5 percent, or 462.2 basis points more than similar-maturity Treasuries as of 9:59 a.m. in New York.
"We have been seeing unusual volume for weeks" on Mirant, said Jon Najarian, a founder of web information site optionMonster.com. "The rumor has been out there for a long time."
A total of 5,369 January 2011 $10 calls and 5,122 puts at the same strike were traded, according to option analytics firm Trade Alert with the implied volatility shooting upto 42 percent compared to the stock’s 30 day volatility of 30 percent.
Shareholders of Atlanta-based Mirant will receive 2.835 shares of RRI common stock for each share of Mirant they own. They will own about 54 percent of the new company’s equity, while RRI Energy stockholders will own about 46 percent, the companies said. The name of the new company will be GenOn Energy and will be based in Houston where RRI headquarters are also based.
