Here are some of my thoughts on the bank loan due Nov 20, which is the key reason why ENT stopped the distribution and crashed.
I am guessing ENT expected to renew the $40 million loan. Then the credit crisis hit in August, and banks informed ENT they won't renew. Note that the credit crisis in Canada such as banks refusing to renew loans, commercial paper market disappearing, etc. has been just as bad as in the US. ENT started panicked negotiations, and the banks demanded an immediate stop to the distribution just to keep talking.
ENT put some "non-core" assets on sale to raise money for the loan, just in case, while continuing bank negotiations. The CFO, who was in a way responsible for the mess (though the credit crisis was not his fault) resigned. So did the COO of the US operations, where some very bad flooding in Oklahoma affected adversely results in July and August (see this quarter's report).
Bids for the non-core assets were due Oct 18. The offers were probably not very good -- everybody smelled a fire sale. ENT probably figured the cash flow from those mostly oily assets was too sweet to give up, especially with oil hitting new highs. So, they did not announce any sales, and concentrated on the bank negotiations. Meanwhile the chairman of the board and some directors resigned, the CEO announced his retirement next year, probably over disputes about how the trust will operate in the future: remain a trust, convert to a corporation, or put itself up for sale. Also somebody needed to be held responsible for the precipitous fall from $26 to $1 and change in two years.
Some resolution to this drama is due on Nov 21st. In the meantime, one can buy oil and gas at half price or less, provided the company does not go bankrupt. |
