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Gold/Mining/Energy : Enron - Natural Gas Industry
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To: SargeK who wrote (1336)1/30/2002 1:01:28 AM
From: Doughboy  Read Replies (3) of 1433
 
SargeK, A couple things to think about:

1. You put a lot of trust in the Court (and the new CEO) to protect "all stakeholders" including the shareholders. Under bankruptcy law, the fiduciary obligations of the Corporation swing entirely to the protection of the creditors. And the Court does not consider the interests of shareholders. Shareholders hold squat; and they have no place at the table.

2. The likelihood of any $$ being left for shareholders is diminished by the fact that Enron lathered secured creditors on all its assets. It's not a matter of selling off a billion here and a billion there; secured creditors get the vast majority of the bucks from those sales. The unsecured creditors pick over the scraps. No meat on the bones left for shareholders. What we have heard so far from the all the energy companies and the banks of the billions they are owed by Enron is the unsecured credit they extended. They don't count the billions they have in secured credit, since they are confident in collecting on that and investors would cringe to hear the multiple billions they have in those debts. Those secured creditors are sitting out there like invisible 800 pound gorillas protecting their Enron asset. Take for example, the $1.5 bb Enron gets from the sale of the Northern Natural Gas assets to Dynegy. Little reported was the fact that there were other secured creditors hanging onto the pipeline for dear life. Does Enron get a lot of the 1.5bb? I don't know, but my guess is that they don't get anything near that after they pay off the debt holders on the pipeline.

3. Let's take another example: Enron Broadband. I don't know for what amount Enron carries that on its books for, but Jeffrey Skilling said that that asset alone was worth 20 billion dollars a year ago. EBS was quietly shuttering its doors even before the bankruptcy. Enron went out to sell those assets, and got nothing. The billions of dollars Enron poured into EBS ($2-3bb?) have zero value to shareholders, and in fact probably carry a couple billion dollars of debt.

My guess: Enron assets are dwarfed by liabilities by 2 or 3 times, including the litigation costs. The savvy secured creditors will be converted to equity in the new entity collecting the share of UBS Warburg profits, and nothing, nada, not a thin dime goes to the common.

Doughboy.
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