QUESTIONING THE BOOKS
Enron's Acting CEO Outlines Plan to Demoralized Workers
By MITCHELL PACELLE
Staff Reporter of THE WALL STREET JOURNAL
Updated April 12, 2002
In his first address to the company's demoralized employees, Enron Corp.'s acting chief executive officer, Stephen F. Cooper, laid out plans for restructuring as a smaller firm and for digging out from under a mountain of claims that he estimated at between $60 billion and $100 billion.
Mr. Cooper painted a picture that showed just how far the once-powerful firm had fallen, and how gloomy its once-bustling Houston headquarters had become. "You go onto some floors, and it looks like a hurricane swept through, and there's maybe two people," he marveled. Recently, someone moved through the building and repossessed all the water coolers, a situation he promised to rectify, prompting a burst of applause from his audience. "It's crazy," he exclaimed. "We're not prisoners of war."
In a 1 1/2-hour talk laced with gallows humor, Mr. Cooper, a corporate-turnaround specialist, tried to reassure employees that the company would not disintegrate completely, while acknowledging that its collapse had left it badly tainted.
"Enron has been in the unfortunate position of being the poster child or the whipping boy or the flash point for much of what has gone wrong with Corporate America," he told more than 1,000 employees gathered in a Houston hotel auditorium, and others listening from satellite offices. "I think we're just going to have to behave differently. We can't pretend that it didn't happen, because it did. The only way that we're going to be credible again is by showing everyone that we're credible."
"I'm going to keep nothing hidden," he said. "We're going to make any and all disclosures we have to make. We're not going to have shell games." He added that he had reached out to local congressmen with a message that Enron would cooperate with all investigations. Enron is being investigated by the Department of Justice and the Securities and Exchange Commission for possible securities fraud in connection with questionable financings that brought down the company.
Mr. Cooper mixed cautious optimism about the prospects for salvaging something from Enron's collapse with cold reality about what the company's remaining employees would likely face in coming months. There would be more layoffs ahead, he warned, that would be "not insubstantial." World-wide employment has already fallen from about 31,000 prior to its Dec. 2 bankruptcy-law filing to about 23,000 today.
Go to Questioning the Books
Enron's existing stock, he warned, would likely end up worthless, buried under claims by creditors and shareholders that he estimated at between $60 billion and $70 billion, but said could go as high as $100 billion. The company has reported about $40 billion of debt, including off-balance-sheet project financing.
"There was just an unbelievable amount of debt that was accumulated all around the company," he explained. "I just don't see how we ever get close to getting through the unsecured claims." Under bankruptcy law, creditors have to be paid before shareholders are entitled to collect anything.
Mr. Cooper walked employees through his plan for reorganizing the company as a far smaller producer and distributor of energy, elaborating on a plan first presented to creditors in skeleton form in December. Mr. Cooper said the new company -- whatever it is called -- would reach from Canada to South America, but focus primarily on markets in California, Florida and Brazil.
Mr. Cooper faces considerable obstacles to carrying out such a restructuring, which depends in part on regaining control of some assets that have already partially slipped out of Enron's control. The company, he explained, is weighing an option to repurchase the Northern Natural Gas pipeline from Dynegy Inc., though he did not explain how it would finance such a move. He also held out the possibility of regaining control of the Portland General Electric utility from Northwest Natural Gas Co., which he said hasn't yet closed on a purchase agreed to last fall.
In addition, Mr. Cooper must gain the approval of creditors of the bankrupt company, who must be convinced that they would recoup more of what they are owed than they would if they force Enron to sell all its assets through bankruptcy court.
"This is not a Chapter 7, which is liquidation, and it is not conceivable to me that it will ever become a Chapter 7," Mr. Cooper insisted. By keeping a limited number of energy production and distribution assets intact, Mr. Cooper told employees, "over time, we could deliver [creditors] substantially more value" than through a piecemeal sale of assets. "I'm relatively confident that we can persuade them."
Enron intends to present formally its restructuring plan to creditors in early May, after which it will attempt to secure their support. He said he had "absolutely no idea" when the plan would be filed with the bankruptcy court.
Mr. Cooper said the new company may be set up through the mechanism of a bankruptcy-court sales provision, which would "allow us to see who might want to make a run for our assets." Asked by an employee about the likelihood that a competitor might try to buy all of Enron, Mr. Cooper said, "at this time, it's close to zero. There's too much confusion and dust in the air."
Write to Mitchell Pacelle at mitchell.pacelle@wsj.com |
