Out of the National Post Mar.19/99
Bid to declare Blue Range
bankrupt
Enron petitions court
Claudia Cattaneo
Financial Post
Blue Range Resource Corp.'s largest creditor, U.S. energy giant
Enron Corp., is taking steps to have the natural gas producer
declared bankrupt.
Blue Range, wholly owned by Big Bear Exploration Ltd., was
placed under court protection from creditors two weeks ago so its
parent could sell assets and re-organize its activities.
Big Bear, which took over Blue Range on Dec. 12 in a hostile
takeover, took the dramatic step after discovering "irregular"
accounting led to higher debt and lower value than stated in its
public reporting. The issue is under review by securities regulators.
As part of obtaining court protection under the Companies'
Creditors Arrangement Act, Big Bear also obtained a stay on court
proceedings.
Enron's petition to place Blue Range into bankruptcy was heard in
chambers on March 12, but the stay was confirmed until April 1.
Enron's Canadian unit, Enron Capital & Trade Resources Canada
Corp., is one of Blue Range's major unsecured creditors.
Big Bear terminated future natural gas sales contracts with Enron,
along with other agreements, as a result of the CCAA. Big Bear
estimated the contracts to be worth $49-million in future cash flow
at today's natural gas prices.
The move was intended to improve its chances of selling natural gas
assets to reduce debt.
Enron officials have refused comment on the situation.
"Blue Range has operated with insufficient cash flow to meet its
principal repayment obligations and to fund its necessary capital
expenditures, both before and after Big Bear took control of Blue
Range's operations," Enron says in new court documents.
Blue Range granted a general security agreement to parent Big
Bear, which "may constitute a fraudulent preference of review or
reviewable transaction," the documents allege.
Big Bear chief executive Jeff Tonken could not be reached
yesterday. Mr. Tonken has said Blue Range was effectively
insolvent when taken over last December.
The CCAA move allows Big Bear management to remain in control
of Blue Range assets. It was supported by its banking syndicate --
the National Bank of Canada, the Royal Bank of Canada and First
National Bank of Chicago -- which holds $110-million of Blue
Range debt.
If Blue Range is placed in bankruptcy, its assets would be
liquidated. Big Bear, the parent company, is not affected by the
proceedings. |
