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Gold/Mining/Energy : Enron - Natural Gas Industry -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (717)	11/27/2001 6:01:37 AM
From: hlpinout	Read Replies (1) \| Respond to of 1433

November 27, 2001 03:18 Enron, Dynegy Deal Back on Table By Laura Goldberg, Houston Chronicle Nov. 27--Dynegy and Enron Corp. could announce new terms for Dynegy's deal to buy Enron as soon as today, according to sources familiar with talks between the two companies. The two Houston-based energy traders, the sources said, spent the weekend and Monday discussing, among other issues, a lower exchange rate for Dynegy's stock deal to buy Enron. As of Monday evening, no exchange rate had been agreed to and discussions were continuing, the sources said, cautioning that the situation was fluid. Enron and Dynegy, the sources said, were working to finalize terms for an equity infusion into Enron of around $500 million that's expected to come from J.P. Morgan Chase & Co. and Citigroup. Another equity infusion from other parties could come later, the sources said. Enron, Dynegy and a group of banks were negotiating terms for a so-called "override" agreement that would extend, until after the merger closed, maturity dates for certain debt Enron is due to repay or that could come due before, the sources said. It was unclear how much of approximately the $9 billion in obligations Enron could have coming due in the next 12 months that would be covered by that restructuring. It was expected that Enron would start layoffs sometime this week. California Attorney General Bill Lockyer, not known for harboring a favorable attitude toward Enron or other Texas energy companies, has started reviewing the planned merger, looking for potential antitrust problems, his office said. Dynegy has power plants there, while Enron sells power and natural gas into the state. Shares in both companies fell, with Enron closing down 70 cents at $4.01, while shares in Dynegy ended the day down $1.15 at $39.25. The talks between Enron and Dynegy come amid Wall Street expectations that Dynegy will renegotiate the merger terms or back out of the deal completely. The sources said that at the moment, the companies aren't discussing canceling the deal. The day Dynegy announced it would acquire its troubled rival, Nov. 9, shares in Enron closed at $8.63, while shares in Dynegy closed at $38.76. The merger agreement calls for Enron shareholders to get 0.2685 share of Dynegy per Enron share. Based on the Nov. 9 closing prices, Dynegy would be paying $10.41 a share for Enron. But since, Enron's share prices have dropped significantly amid increasing concerns about its ability to maintain its core trading business and troubling new disclosures about its financial shape. Based on Monday's closing prices, Dynegy would be paying more -- $10.54 a share -- for Enron, which based on market capitalization is worth considerably less than than when the deal was announced. Last week, one stock analyst said he thought a ratio of no more than 0.15 share of Dynegy per Enron share might be more realistic. And that was when Enron shares closed above $5. Dynegy spokesman John Sousa said Monday that Dynegy was continuing its "due diligence" review of Enron's books and "looking at everything very closely." Karen Denne, an Enron spokeswoman, said her only comment was that any action the company would take concerning job cuts would be communicated first to employees. Unless the merger with Dynegy goes through, Enron could be forced into bankruptcy protection. Enron's core trading business has eroded, the Securities and Exchange Commission is investigating its finances and it faces a pile of debt as well as an increasing number of shareholder and employee lawsuits. Enron and Dynegy hoped the merger deal, which included an immediate infusion of $1.5 billion of equity into Enron, would stabilize Enron. But new financial disclosures have had the opposite effect. For example, on Nov. 19, Enron revealed $690 million in debt would come due sooner than expected because of a credit-rating downgrade. The news came as a surprise even to Dynegy. Dynegy has escape hatches in its merger agreement, including a "material adverse change" clause that applies generally to Enron's financial state. Also, if the amount of legal and shareholder claims Enron must pay out is greater than $3.5 billion, the deal can be called off. Sousa described the escape clauses as "broad provisions" to ensure Dynegy is adequately protected. -----