This Enron deal effects many others. Hopefully few individuals.
11/30 19:27
Wall Street Firms, Pension Funds Face Enron Losses (Update8)
By Michael Nol
quote.bloomberg.com
New York, Nov. 30 (Bloomberg) -- Wall Street financial firms, banks in Europe and Asia, and pension funds from California to New York stand to lose billions of dollars from the collapse of energy trader Enron Corp.
``This is having a ripple effect across the world,'' said Robert Penaloza, a fund manager at Aberdeen Asset Management Asia in Singapore.
Analysts estimate companies that lent money to Enron -- from ABN Amro Holding NV, the largest Dutch bank, to National Australia Bank Ltd. -- may lose more than $5 billion. Lenders, trying to reassure clients and investors by disclosing how much they have at stake, have already revealed $3 billion in losses. Investment bankers such as Citigroup Inc. and J.P. Morgan Chase & Co. are working to line up financing for Enron to operate under bankruptcy protection.
The losses could extend beyond loans and stock market losses. Standard & Poor's estimates there are about $6.3 billion of securities, such as credit-default swaps, tied to Enron debt that could be affected by bankruptcy.
Funds
The Houston company's demise is also a blow to the mutual and pension funds that invested in it, tripling the stock price in 1999 and 2000. The shares, which started this year at more than $83.13, fell 6 cents to 30 cents today. Enron had $15 billion of debt and less than $2 billion of cash as of last week.
Bear Stearns Cos., the sixth-biggest U.S. securities firm by capital, said its exposure to Enron is $69 million. Energy companies, including Duke Energy Corp. and Williams Cos., and banks such as J.P. Morgan Chase and Abbey National Plc said they are on the hook for a total of $1.4 billion.
ABN Amro said it may set aside 110 million euros ($97.5 million) to cover its loans to Enron. Britain's Abbey National said it's owed almost $135 million. National Australia and other Australian lenders said exposure totals about $350 million. France's Credit Lyonnais SA said it has $250 million in loans outstanding.
ING Groep NV, the biggest Dutch financial-services company, said it holds about $195 million of Enron unsecured loans and bonds. Canadian Imperial Bank of Commerce, the country's third- biggest bank, said Enron owes it $215 million, more than half in unsecured loans, letters of credit and derivatives.
Power Companies, Insurers
Almost two dozen electricity and natural gas companies said Enron owed them about $700 million as of Wednesday, when Dynegy Inc. abandoned a plan to buy Enron, depriving it of the cash needed to avoid insolvency.
John Hancock Financial Services Inc., XL Capital Ltd. and other insurers may absorb total losses of more than $3 billion from the collapse, analysts said. Chubb Corp., the sixth-biggest U.S. business insurer, said its pretax exposure is about $220 million. Aegon NV, the No. 2 Dutch insurer, said it is owed about $300 million in loans.
ABN Amro is one of the lenders behind Enron's $3 billion Indian power plant. Enron owns 65 percent of the Dabhol Power Co. project outside of Mumbai, the city formerly known as Bombay. The plant has been hampered by cost overruns, penalty claims for undelivered power, and conflicts with its only client, the Maharashtra State Electricity Board.
``Should there be a need to provide (for a loss), we will do so in the fourth quarter of this year,'' said ABN Amro spokesman Martin Winn.
Australia to Germany
National Australia said it has A$200 million ($104 million) in secured and unsecured exposure.
``We had already factored in provisions for this kind of event, and it is consistent with our bad debt outlook for this year,'' said Majella Allen, a spokeswoman.
Australia & New Zealand Banking Group Ltd., the fourth- largest Australian bank, said its direct exposure is $69 million and it has a further $51 million of indirect exposure. The bank said it will put more aside for bad loans this fiscal year.
``Their exposures are a little surprising, but then again Enron is such a huge organization and spans the globe so it deals with syndicates of banks for its facilities,'' said Bill Chatterton, head of equities at ABN Amro Morgans Ltd., the 50 percent-owned private client arm of ABN Amro Australia Ltd.
Germany
In Germany, Dresdner Bank AG, which is owned by Allianz AG, said its exposure is less than $100 million, while HVB Group, Germany's No. 2 bank, has about $100 million. Deutsche Bank AG said its losses may be in the ``double-digit'' millions of dollars. Commerzbank AG said their exposure amounts to ``double- digit'' millions of euros.
U.S. banks have as much as $2.6 billion of exposure, said Judah Kraushaar, bank analyst at Merrill Lynch & Co. Citigroup, the biggest U.S. financial-services company, may have as much as $1 billion.
J.P. Morgan Chase said it has $500 million of unsecured exposure to the energy trader, and $400 million of loans with pipelines as collateral.
`We lost money,'' said John Waterman, chief investment officer at Rittenhouse Financial Services Inc., which sold all its Enron shares at the end of October. ``We're glad we got out when we did. When we started selling, it wasn't clear at all that things would unravel in the way they did.''
California Funds
The California Public Employees' Retirement System, or CalPERS, the biggest U.S. public pension fund, held 3 million shares as of Wednesday of this week. The California State Teachers Retirement Fund owned about 2 million shares.
The New York State Common Retirement System said it lost as much as $60 million. The New Jersey Pension Fund faces losing as much as $61 million. The Ohio Public Employees Retirement System, the 10th-largest U.S. public pension system, will lose about $68.8 million on its investments. The Illinois State Retirement System stands to lose about $15 million.
Among energy companies that do business with Enron, Duke Energy and Williams Cos. said they may lose $100 million each if Enron is unable to pay them back.
Energen Corp., an oil and natural-gas explorer and gas distributor, said it has an $18.3 million exposure with the company, and cut its 2002 earnings by 20 cents to 25 cents a share.
Below is a list of some banks and their estimated exposure to Enron:
U.S. electricity firms $700 Million
J.P. Morgan Chase $500 Million
Credit Lyonnais $250 Million
Canadian Imperial Bank $215 Million
ING Groep $195 Million
Abbey National $164 Million
Australia & New Zealand Banking $120 Million
National Australia Bank $104 Million
Dresdner Bank Less Than $100 Million
ABN Amro $97.5 Million
Deutsche Bank Less Than $90 Million
Bear Stearns $69 Million
Commerzbank Less Than $45 Million
HVB Group $100 Million
New York State Common Retirement Fund $50-$60 Million
Chubb $220 Million
Energen 20-25 Cents/Shr
New York State Common Retirement Fund $50-$60 Million
Aegon $300 Million
Energen 20-25 Cents/Shr |
