Tim, I think you raise some very good points, part of the concern is since ENE is engaged in trading, the
traders on the other side have counterparty risk with ENE, if the trading partners reduce those the exposure to
ENE trades or stop trading with them all together then that's very bad news.
ENE also has to engage in asset sales to pay off notes due in 20 months, and may have to issue more stock,
thereby diluting earnings.
The bear case is that ENE has a much bigger pyramid of bad trading and bad investment decisions that they
have been trying to conceal.
here is the treasurer talking about repaying the notes from the Investment vehicles they had created.
Wednesday October 24, 3:02 am Eastern Time
Enron mulls ways to cover portfolio shortfalls-WSJ
NEW YORK, Oct 24 (Reuters) - Enron Corp. (NYSE:ENE - news) Treasurer Ben Glisan said the company thinks it can repay about $3.3 billion in notes sold by investment vehicles it created without having to issue more stock, the Wall Street Journal reported in its online edition on Wednesday.
Enron may need to come up with funds to cover potential shortfalls in those investment vehicles, which could involve issuing additional shares, thereby diluting the position of current shareholders, the report said.
The report, which cites a Tuesday interview with Glisan, said the notes were sold to investors during recent years by several entities and are coming due during the next 20 months. The entities are known as the Marlin Water Trust II, the Marlin Water Capital Corp. II, the Osprey Trust and Osprey I Inc, the report said.
According to the report, Glisan said assets from those entities could be sold to pay off some of the notes. Enron is selling other assets, the report said. According to the newspaper, proceeds from those sales could go toward repaying the notes, which are ultimately guaranteed by Enron.
Glisan, according to the report, said it looks like asset sales will raise at least $2.2 billion by the end of 2002.
``There are a number of other assets we believe will raise sufficient proceeds'' to repay the notes, Glisan said, according to the report. ``But if we are wrong, we will issue equity.''
According to the report, Glisan said a worst-case scenario would involve issuing as much as $1 billion in stock.
Enron held a conference call on Tuesday, seeking to assuage investor concerns after U.S. regulators said they were looking into transactions involving the company's chief financial officer and its stock shed more than $10 billion in value over the past week.
Enron said on the call it can tap $3.35 billion from a credit line, suggesting it has enough liquidity to operate its core trading and marketing business, which can experience wide swings in cash flow, depending on commodity prices and market hedges. |
