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

To: Raymond Duray who wrote (740)	11/28/2001 1:06:04 AM
From: James Calladine	Respond to of 1433

New negotiations for Dynegy purchase of Enron sends shares higher HOUSTON, Nov 27, 2001 (AP WorldStream via COMTEX) -- The high-profile deal to merge energy marketers Enron Corp. and Dynegy Inc. has gone back to the drawing board. Meanwhile, Enron reportedly has made progress securing more than dlrs 1.5 billion in new cash to keep its business stable while it renegotiates with Dynegy. In a move that sent Enron shares higher after days of double-digit declines, Dynegy confirmed Tuesday that it is in talks to renegotiate its dlrs 9 billion deal to buy its larger but financially troubled rival. The disclosure that the two companies are revisiting the terms sent Enron shares up 2.5 percent, apparently easing some investors' concerns that the deal would fall through. "There are discussions occurring related to the structure of the transaction," said Dynegy spokesman Steve Stengel, who declined to elaborate. While news that the two Houston-based companies were renegotiating temporarily appeased investors, observers said they won't be confident about the deal's future until they hear details about new cash infusions to help keep Enron afloat. "Putting more money into the deal to shore up Enron's credit situation, that would be a sign that Dynegy would be committed to the deal going through," said Mike Heim, an analyst with A.G. Edwards & Sons. Late Tuesday, The Financial Times of London reported on its Web site that a new consortium of investors is proposing making a dlrs 1 billion equity investment in Enron, citing a person close to the talks. The newspaper didn't identify these investors, but said an agreement could be announced as soon as Wednesday. Separately, The Wall Street Journal reported on its Web site that J.P. Morgan Chase & Co. and Citigroup Inc.'s Citibank, which are advising on the Dynegy buyout, have agreed to invest dlrs 500 million in the merged company and have said they would consider increasing that amount if they fail to find additional outside investors to take part in the deal. The Journal, citing people close to the discussions, also said Dynegy and Enron have tentatively agreed to cut the value of the all-stock deal in half. Under a deal informally agreed to by Enron's board, Enron shareholders would get 0.12 Dynegy share for each Enron share held. That would value Enron at dlrs 4.17 billion. The original deal, valued at dlrs 9.3 billion, was based on an exchange rate of 0.2685 Dynegy share for each Enron share. As a condition of the reduced price, Enron executives were seeking more control of the combined company, the Journal said. Raymond James analyst Jon Kyle Cartwright said the buyout will hinge on Dynegy's ability to reinvigorate Enron's trading operation, which has been hurt as some energy companies have stopped selling it power and natural gas for fear they won't be paid. Many energy traders who have shied away from doing business with Enron worry that the company will go bankrupt, said Charlie Sanchez, energy markets manager for Gelber & Associates, a Houston-based energy trading firm. Restoring customer and investor faith "is not impossible. But it's more of an issue of gradually rebuilding (Enron's) confidence and legacy and developing confidence in the new legacy under Dynegy. It's just going to take time," he said. But Fadel Gheit, an analyst with Fahnestock & Co. Inc. said Enron is a bad investment and that Dynegy underestimated its potential liabilities after it announced Nov. 9 that it would buy the company at a price valuing Enron at about dlrs 10 per share. Under the terms of the deal, Dynegy also would assume dlrs 13 billion in Enron debt. "Chasing Enron is like trying to catch a falling knife," Gheit wrote Tuesday in a research note to investors. Stengel, the Dynegy spokesman, declined comment when asked if an announcement of renegotiated terms is expected soon. Enron spokesman Vance Meyer said the company had no comment about any discussions related to the merger and that Enron expected the deal to be completed. In trading on the New York Stock Exchange, Enron shares rose 10 cents to close at dlrs 4.11 - a stark contrast to trading a day earlier that saw Enron shares dip to an all-time low of dlrs 3.76 before closing down 15 percent at dlrs 4.01. Dynegy shares rose dlrs 1.64 to dlrs 40.89 on the NYSE. Enron's stock has plummeted more than 95 percent from its February 52-week high of dlrs 84.87, after a series of disclosures relating to the company's complicated finances raised concerns about its financial viability. Enron last month revealed that partnerships run by its executives had allowed the company to keep about half a billion in debt off its books and allowed the executives to profit from the arrangements. Enron's dealings with those partnerships are now the subject of a Securities and Exchange Commission investigation. The company ousted its top financial officer in October, and several weeks ago restated its earnings back to 1997 - eliminating more than dlrs 580 million in reported income. --- On the Net: enron.com By JUAN A. LOZANO Associated Press Writer

To: Raymond Duray who wrote (740)	11/28/2001 1:51:29 AM
From: ms.smartest.person	Read Replies (1) \| Respond to of 1433

Enron, Dynegy Work to Save Deal Amid Threat of Credit Downgrade November 28, 2001 By REBECCA SMITH and GREGORY ZUCKERMAN Staff Reporters of THE WALL STREET JOURNAL Top executives of Enron Corp. and Dynegy Inc. raced to salvage a deal to combine the two energy-trading companies amid growing signs that Enron is facing cash-flow problems as a result of a sharp downturn in its core trading business. The executives' task gained urgency amid worries that Enron's debt may soon be downgraded to junk status by leading credit-rating agencies. After holding talks with executives of Enron and Dynegy, representatives of Moody's Investors Service Inc., Standard & Poor's Ratings Group and Fitch Inc. agreed to hold off on making any ratings move Tuesday, people familiar with the discussions said. J.P. Morgan Chase & Co. and Citigroup Inc.'s Citibank, which are shepherding the merger and have already loaned $1 billion and agreed to invest an additional $500 million in the merged company, may arrange still more funding for Enron, these people said. "I hope they err on the conservative side and stockpile cash," said Ralph Pellecchia, analyst for Fitch, the credit-rating agency. With few viable options remaining, Enron's board late Tuesday informally agreed to a new share-exchange ratio of 0.12 shares of Dynegy for each Enron share tendered, down more than 50% from the original offer of 0.2685 Dynegy share for each Enron share, according to one person familiar with the situation. But the talks were still fluid as of late Tuesday. The latest proposed share-exchange ratio values Enron at $4.91 a share, or a total of $4.17 billion. This would compare with the original value of $10.98 a share, or $9.33 billion. In exchange for reducing the purchase price, some members of the Enron team were insisting on more control over the merged company. Dynegy also was considering an additional $250 million cash investment in Enron. Dynegy, together with ChevronTexaco Inc., has already injected $1.5 billion into Enron in an effort to stabilize the company. Talks between Enron and Dynegy were said to be tense and occasionally acrimonious. At 4 p.m., Enron shares were up 10 cents to $4.11, while Dynegy shares were up $1.64 to $40.89, in New York Stock Exchange composite trading. Talks between Enron and Dynegy began in earnest over the weekend to cut the price of the all-stock transaction after Enron's share price had plummeted in the wake of disclosures that its future earnings wouldn't be as high as originally anticipated. On Nov. 9, Dynegy originally agreed to buy Enron after the emergence of damaging revelations concerning a series of deals that allowed Enron executives to profit personally at the expense of the company and its shareholders. Those deals are now the subject of a Securities and Exchange Commission investigation. While struggling to keep the planned merger alive, Enron also has been seeking to extend the maturity dates of some of its borrowings. Enron has a total of about $13 billion of debt, of which about $9 billion comes due by the end of next year. The company may find itself on the hook for an additional $7 billion in off-balance-sheet debt and another $3.9 billion in potential liabilities, related to troubled investment partnerships, if its credit rating drops to below investment grade, says Mr. Pellecchia, the Fitch analyst. A cut to a junk-status credit rating could deal a fatal blow to Enron, which needs huge sums of cheap money to keep its trading operations alive. Enron, nowadays, seems to be generating less cash from that business, which accounted for more than 90% of its profit in the most recent quarter. In the five weeks since Enron's problems became widely known, its trading partners have sought to protect themselves by shifting deals elsewhere from the dominant EnronOnline trading exchange and to limit their exposure to the Houston-based company. About a week ago, Enron said it had about $1.6 billion in cash, which surprised analysts who expected a number at least $1 billion higher given the most recent infusions from Dynegy and the banks. Enron spokeswoman Karen Denne said the company "is continuing to meet all our obligations." She added that trading activity at the EnronOnline unit had been "below average" in recent days, but that the company believes "it has stabilized." Analysts say cash on hand doesn't appear to be enough to keep Enron alive for long, given the reluctance of its trading partners and creditors. Rebecca Followill, an analyst at Howard Weil in Houston, says that Enron needs a bigger cash hoard than ever to rebuild confidence. She reckons Enron needs $4 billion to $5 billion on hand while the merger deal winds its way through shareholder and regulatory approvals. -- Robin Sidel and Jathon Sapsford contributed to this article. Write to Rebecca Smith at rebecca.smith@wsj.com3 and Gregory Zuckerman at gregory.zuckerman@wsj.com4 URL for this Article: interactive.wsj.com Copyright © 2001 Dow Jones & Company, Inc. All Rights Reserved. Printing, distribution, and use of this material is governed by your Subscription Agreement and copyright laws. For information about subscribing, go to wsj.com Used with permission of wsj.com