Bob, many butterfly ballot voters down in FL wish to change their vote too, but sorry, no can do <g>.
More financing for ENE to come. There's hope.
December 5, 2001
Potential Backers of Enron Wager
Firm's Former Clients Will Return
By JATHON SAPSFORD and ALEXEI BARRIONUEVO
Staff Reporters of THE WALL STREET JOURNAL
As Enron Corp. inches closer to securing fresh
capital for its faltering trading operations, potential
partners are lining up to gamble that Enron's clients
will bring their business back to the troubled energy
trader.
It is far from a sure bet.
Enron's flagship energy-trading business has largely
ground to a halt in recent days, with virtually the only
trades coming as dozens of Enron clients unwind their
positions with the company. Energy analysts have
begun to question whether any new deal can restore
confidence in a company whose future now rests
largely in U.S. bankruptcy court. Enron filed Sunday
for Chapter 11 bankruptcy-court protection, which
temporarily shields the company from creditors to provide it time to reorganize.
"For Enron to be viable they'll need more than an infusion of cash," said Art Gelber, a principal at Gelber
& Associates, a Houston consulting and asset-management company. "They will need a significant
presence to stand beside them, a white knight of impeccable stature to not only restore confidence but
reverse the ill will that has been created." Mr. Gelber said he expects the trading industry would respond
better if Enron partnered with a major energy firm such as Exxon Mobil Corp. or BP PLC.
The current plan to revitalize Enron's energy trading operation involves setting up a new venture that
includes Enron traders and infrastructure -- including the innovative EnronOnline electronic-trading system
-- along with the capital and balance sheet of the new partner, most likely a large money-center bank. A
handful of big banks have expressed interest in the business, including J.P. Morgan Chase & Co. and
UBS AG, say people familiar with the matter. Goldman Sachs Group and Citigroup Inc. also have
considered the deal, but have recently backed off, these people said.
J.P. Morgan Chase, UBS and Goldman Sachs declined to comment on the negotiations to find Enron a
partner. Citigroup has said that it isn't interested in the deal. Enron on Monday secured $1.5 billion in
debtor-in-possession financing from J.P. Morgan Chase and Citigroup. Those funds, which are separate
from the money being sought to back the trading operation, will be used to fund a broad restructuring
effort by the Houston company.
For the banking industry, the move to shore up Enron's trading operations
would help support the value of billions of dollars in outstanding Enron
loans owed to banks. The thinking is that despite its woes, Enron remains
a potent force in the energy-trading world and could well be revived if clients regain the confidence
needed to continue trading with the company.
Analysts said the company better move fast. Every day Enron remains sidelined, these experts said, rivals
are making progress filling the void left by the demise of the nation's biggest energy trader.
"The longer this thing drags out, the risk of [customers] not coming back increases," said Harry Quarls,
senior vice president of Booz-Allen Hamilton, a consultancy.
A failure to seal the deal quickly also would fuel disgruntlement among the thousands of Enron creditors
who must sign off on the current restructuring plan. Should the deal even show signs of failing, some said,
the creditors could move to force Enron from a Chapter 11 bankruptcy reorganization into liquidation.
The banks interested in partnering with Enron see its core trading business as a natural fit. Most of the
money-center lenders vying for a piece of the Enron business also are intimately familiar with trading,
having their own huge operations that make markets in everything from currencies to bonds to derivative
contracts. Moreover, whichever bank might end up partnering with Enron would be adding an important
new line of business as it seeks to compete with traditional Wall Street brokerage firms, two of which --
Morgan Stanley and Goldman Sachs -- already have powerful energy-trading operations.
"There are some parts of this business that are new to our industry, like the physical delivery of gas or
electricity," said one banker familiar with the negotiations. "But we are not strangers to the basics of
making markets."
Mark Williams, vice president of global risk management for Edison International's Edison Mission
Marketing & Trading in Boston, said an infusion of bank capital would be a positive first step for restoring
confidence in Enron's trading operations. "J.P. Morgan and the others would like to see this franchise
succeed and they have an interest in trading," Mr. Williams said.
That optimistic case -- that Enron may be able to once again cobble together its trading empire -- was
backed up by a surge in the price of Enron's stock and bonds Tuesday. Enron bonds moved higher, to
trade at about 24 cents on the dollar, from about 19 cents on Monday. In 4 p.m. New York Stock
Exchange composite trading Tuesday, Enron rose 47 cents to 87 cents.
What isn't clear is whether any potential Enron partner would want to devote as much capital to trading as
Enron was used to employing. And without that financial muscle, Enron may have a hard time
resurrecting the market-making business it dominated, said Mr. Gelber, the consultant.
"They are no longer big enough in terms of their financial capability," Mr. Gelber said. "To regain that
presence they will have to rebuild from the bottom up."
A new infusion of capital may provide an incentive to Enron's traders to not jump ship. Analysts said one
key to Enron's success was its trading teams -- groups that the company is scrambling to keep intact as it
tries to resurrect itself. "The most important thing is to keep the trading group together. Those guys are
the heart and soul of the trading operation," said Tom Padrone, senior vice president of the energy division
at GFINet Inc., an institutional over-the-counter broker for energy and other assets. Mr. Gelber said that
his firm has received 118 resumes from Enron employees, mostly traders, since Nov. 18.
Regards,
Tom |
