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

To: Marty Rubin who wrote (926)	11/29/2001 9:51:02 AM
From: James Calladine	Read Replies (1) \| Respond to of 1433

Enron Bankruptcy Would Be Largest Chapter 11 Filing (Update1) By Jeff St.Onge Washington, Nov. 29 (Bloomberg) -- Enron Corp. may file for bankruptcy protection in the biggest Chapter 11 reorganization in history, forcing the largest U.S. energy trader to liquidate billions of dollars in assets to pay creditors. Dynegy Inc. yesterday abandoned its proposed merger with Enron, leaving the Houston-based company burdened with debt and the likelihood of insolvency. Some analysts said bankruptcy is inevitable and may come as early as today. A bankruptcy filing by Enron, which reported more than $61 billion in assets, would top Texaco Inc.'s record $35.9 billion case filed in 1987. Under Chapter 11 protection, Enron officials could continue to control the company while negotiating a recovery plan with creditors. An ``automatic stay'' under U.S. bankruptcy law would block debt-collection efforts, lawsuits and other actions against the company. ``A Chapter 11 filing can be a great thing for a cash-starved company being attacked from all sides,'' said Nancy Rapoport, dean of the University of Houston Law Center. An Enron bankruptcy would affect thousands of people including the company's 21,000 employees, its customers, suppliers, investors and other creditors. The court-supervised recovery process would give Enron a chance to change strategies and fix mistakes. It might take years to complete and may end in the company's liquidation. In addition to its energy trading operation, Enron operates a nationwide gas pipeline system spanning 25,000 miles. It also owns Portland General Electric, which generates and distributes power to about 725,000 customers in the Pacific Northwest. The company's Enron Broadband Services is building a global fiber-optic communications network. `Witches Brew' Chapter 11 reorganization lets companies abandon onerous contracts and unprofitable leases. ``Every bad business deal Enron got into they'll walk away from,'' said Peter Chapman, a distressed-debt investor who also publishes newsletters on high-profile bankruptcy reorganizations. The goal in Chapter 11 is a recovery plan that allows a company to pay creditors and come out of bankruptcy. A plan typically must be approved by a majority of creditors representing two-thirds of a company's debts. Then a company would ask a bankruptcy judge for final approval. The recovery plan divides a company's value among various classes of creditors. Under a hierarchy set by the U.S. Bankruptcy Code, secured creditors -- those with collateral backing their claims -- are paid ahead of unsecured creditors, such as bondholders and suppliers. Financial advisers to creditors and companies in large bankruptcies say a Chapter 11 recovery plan for Enron would be particularly difficult to produce. ``You have a host of intangible assets combined with a morass of contingent liabilities creating a potential witches' brew of a bankruptcy,'' said Jeff Werbalowsky of Houlihan Lokey Howard & Zukin, an investment banking firm that has been contacted for advice by Enron bondholders. Enron's shareholders are likely to lose all of their investment in a Chapter 11 case because they would be last in line to get paid. Shares, the most active in pre-market trading on Instinet, gained 2 cents to 63 cents after plunging 85 percent yesterday. The company's 6.4 percent notes that mature in 2006 were unchanged at about 22 cents on the dollar, traders said. At that price the notes yield 53 percent. Enron said this morning it was evaluating whether it will pay a declared dividend. The company is scheduled to pay a 12.5-cent quarter dividend on Dec. 20 `Black Hole' For investors now considering buying Enron's bonds and other debts, a major issue is the uncertainty surrounding the company's value. ``Until the forensic accountants can get in there and sort things out you just don't know what Enron's worth,'' said Gary Hindes, managing director of Deltec Asset Management LLC. ``It's a black hole.'' Deltec has no investment in Enron, Hindes said. Enron's bond prices reflect the uncertainty. The company's 6.4 percent bonds, which mature in 2006, were quoted at 20 cents on the dollar, down from 53 cents Tuesday. Some recovery for Enron creditors in a bankruptcy case may come from lawsuits, said Russell A. Belinsky, an investment banker with Chanin Capital Partners, which also has been approached for advice by Enron bondholders. ``There's a lot of juicy legal issues,'' said Belinsky. Potential targets include Enron's accounting firm and its officers and directors, he said. Liability Dynegy might face some liability for canceling its purchase of Enron. Dynegy invoked terms of the buyout agreement that gave it the right to purchase an Enron natural gas pipeline if the takeover fell apart. Dynegy received the right to the pipeline in exchange for a $1.5 billion investment in Enron by ChevronTexaco Corp., which owns one-fourth of Dynegy. Enron might use bankruptcy to prevent Dynegy from walking away from the buyout and claiming ownership to the pipeline. The Dynegy acquisition, valued at $23 billion when it was proposed on Nov. 9, collapsed as bankers failed to raise the $1.5 billion Enron needed to operate until the deal was completed. The lack of funds and a credit downgrade contributed to Dynegy's decision. Bankers led by J.P. Morgan Chase & Co. Vice Chairman James B. Lee tried for two weeks to raise the cash Enron needed. Investors turned them down because of heightened concern Enron wouldn't be able to pay its debts. Three credit-rating agencies yesterday cut Enron's credit rating to junk status, triggering an acceleration of the company's debt obligations. Unraveling Enron's unraveling began in October after it said shareholders' equity was reduced by $1.2 billion because of the way the company accounted for outside partnerships it created. The announcement prompted lawsuits and an investigation by the U.S. Securities and Exchange Commission, and Enron ended up restating earnings for almost five years. As shares plunged, Enron's trading partners lost confidence the company would have the cash to pay bills. Trading partners such as Mirant Corp. either demanded more collateral to trade or restricted trading with the company. ``The situation is dire,'' said Deltec's Hindes. ``No one's going to trade with Enron right now because you could wind up being an unsecured creditor tomorrow.''

To: Marty Rubin who wrote (926)	11/29/2001 3:52:15 PM
From: Bob Rudd	Respond to of 1433

Enron Corp. (ENE / NYSE) Smith Barney Shearson Suspending earnings estimates following downgrades of Enron's debt to non-investment grade status by S&P, Moody's and Fitch today. Enron is obligated to pay $3.9 billion debt, which largely shuts down their trading desk. Target $0.25, equity value of zero.

To: Marty Rubin who wrote (926)	11/30/2001 9:30:04 AM
From: Marty Rubin	Read Replies (1) \| Respond to of 1433

FT: E* may file by Monday ___ Enron heading for largest ever US bankruptcy By Robert Clow and Andrew Hill in New York and Sheila McNulty in Houston Published: November 29 2001 19:37 \| Last Updated: November 30 2001 10:08 Enron, the crippled energy trader, is likely to file for Chapter 11 protection by Monday in what would be the largest ever US bankruptcy. The bulk of Enron's European trading operations were separately put into administration under PwC. But US bankers are searching for ways to ring-fence the core US trading business, to allow it to continue operating while the group is under bankruptcy protection. According to one person close to the talks, Enron has 100,000 trades outstanding, many of which will have to be unwound. The jobs of many of the company's 6,800 European workers are expected to be cut. At least three potential trade buyers have been identified for Enron Metals bought last year for £300m cash by Enron. Bankers were on Thursday assessing the value of the group's other assets, including Wessex Water in the UK and its share in a gas fired power station in north east England. Enron was pushed to the brink of ignominious failure on Wednesday after credit rating agencies downgraded its debt, and Dynegy, a smaller rival, pulled out of a $9.4bn (E10.5bn) rescue bid. Creditors were on Thursday understood to be discussing interim financing for Enron. Investors and bank creditors are unanimous in predicting that Enron will file for Chapter 11 bankruptcy protection in the US. A Chapter 11 bankruptcy filing is intended to protect a company from its creditors while it reorganises before re-emerging as a debt-free business. John Olson, vice-president of research at Sanders Morris Harris, a Texas-based investment bank, said: "Enron can rise and fight again if it can get the appropriate debtor-in-possession financing, $2bn or $3bn worth. If not, Enron investors will simply get a handful of dust." Enron declined to confirm the talks. The Enron debacle stirred up controversy in Washington, with Tom Daschle, Democratic Senate leader, saying it raised "some very serious questions". Additional reporting by Peter Spiegel in Washington and Andrew Taylor in London FT pg 1/http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT33OZXYMUC ___ Marty's Note: Use these two links for more FT stories: totalsearch.ft.com www.ft.com/enron