DJ IN THE MONEY: New Enron DIP Leaves Transwestern Alone
04 Jan 08:35
By Carol S. Remond
A Dow Jones Newswires Column
(This item was originally published Thursday afternoon.)
NEW YORK (Dow Jones)--A new, and smaller, interim financing plan for Enron
Corp. (ENE) is shaping up as J.P. Morgan Chase & Co. (JPM) and Citigroup (C)
review the energy company's new business plan.
Under that new deal, the Transwestern Pipeline, one of Enron's prized
possessions, will remain out of bankruptcy. That means J.P. Morgan Chase and
Citigroup will not immediately recoup, as was expected, a $550 million loan
made to Enron just weeks before the company filed for Chapter 11 protection in
the U.S. Bankruptcy Court for the Southern District of New York.
So far, it's unclear how much of the originally planned $1.5 billion debtor
in possession, or DIP, financing, Enron will now get.
J.P. Morgan Chase and Citigroup's decision to retool Enron's DIP is based on
the company's better-than-anticipated cash position, as well as lingering
apathy among bankers recruited to take part in the loan, people familiar with
the matter said.
The two banks got a good look into Enron's recent financials over the weekend
after the company delivered its much-awaited business plan. The financial
institutions are now reviewing the plan, approval of which could trigger the
release of new financing.
Enron's DIP was first negotiated by J.P. Morgan Chase and Citigroup in early
December, shortly after the company filed for bankruptcy. Final approval of the
DIP, which is crucial for Enron to continue operating, is now scheduled for
Jan. 30.
So far, a first $250 million installment has been made available to Enron but
has yet to be tapped by the company.
Under the original DIP package, another $250 million was supposed to be
disbursed to Enron after approval of its business plan by J.P. Morgan Chase and
Citigroup. Another $1 billion, to come after final court approval, was
contingent on a number of conditions, including full syndication of the loan
and the filing for bankruptcy of Enron's Transwestern Pipeline to secure the
return of $550 million to J.P. Morgan Chase and Citigroup. (The $550 million is
part of a separate $1 billion financing deal put together by the two banks in
mid-November as they rushed to try to keep Enron out of bankruptcy. That loan
is secured by Transwestern, while another $450 million loan is back by Enron's
Northern Natural Gas Pipeline.)
J.P. Morgan Chase and Citigroup floated a syndication term sheet to other
large banks in mid-December but found that most were reluctant to take on more
exposure to Enron.
What's clear is that the lack of appetite of other financial institutions
will, at a minimum, delay J.P. Morgan Chase and Citigroup's plan to get back
some of the money they recently loaned to Enron, adding further uncertainty to
already very iffy recovery prospects for the two banks.
J.P. Morgan Chase's exposure to Enron now stands at $2.6 billion. Meanwhile,
Citigroup's Enron liabilities are believed to be around $1 billion.
-By Carol S. Remond, Dow Jones Newswires, 201-938-2074;
carol.remond@dowjones.com
(END) DOW JONES NEWS 01-04-02
08:35 AM |
