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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (3610)	11/4/2001 8:40:07 PM
From: isopatch	Respond to of 36161

How vulnerable is Enron? Of course, analysts differ<g> Houston (Platts)--2Nov2001 Enron credit analysts at Standard & Poor's said Friday that "haven't seen anything near a significant change among the counterparties that would lead to a run," and that they have concluded that Enron "has the resources needed" to back its businesses. Enron's stock has fallen dramatically in recent weeks fanning concerns about the company's financial stability. The company's stock at midday Friday was down nearly 5% to $11.40. Despite the overall strength of the company, primary Enron credit analysts Todd Shipman and Ronald M Barone said during a conference call that counterparties' exposure to Enron on a daily, or even an hour-to-hour basis, "could change at anytime, and that is why we put out a credit downgrade, in order to say that Enron is in a dicey time." The analysts said S&P, a division of the McGraw-Hill Companies, has "done a tremendous amount of due diligence" with the credit risk managers at "many counterparties." Shipman said that S&P, along with Enron, "has also gone over their credit exposure and counterparty creditworthiness." He said that they have reviewed Enron's own risk management guidelines, and looked at "who reports to whom." Shipman said, "We are not auditors of their trade book, but rather of their risk management strategy and procedures, and we have always been comfortable with Enron's abilities and procedures in this area." The two analysts argued that it wasn't clear that Enron would even "touch in the short, medium or even long term" the cash the company said it raised yesterday through a new 364-day revolving credit line with JP Morgan Chase and Citigroup. They said, "This isn't a company watching cash go out the door everyday. This is not California." Asked what event would cause a further credit downgrade, the analysts said, "In general, we believe if things stay under management's control, everything will be okay. But if things spiral out of their control, that's another matter. If there is lack of investor confidence, that leads to a lack of confidence by counterparties, and they ask for letters of credit or they want their money, and cash is going out the door, that would be a 'credit event.' If that happens, would we still feel comfortable with their liquidity short-term? We would not," said Shipman. Asked what the probability is of Enron going bankrupt, Barone said, "If we thought it was a high probability, the company's rating wouldnt be where it is today." S&P issued Enron a BBB rating yesterday.