enron mentions - 11 / 28 / 01 u . s . treasury comment on monitoring enron and credit markets
bloomberg , 11 / 28 / 01
enron bonds may be good buy for patient investors , analysts say
bloomberg , 11 / 28 / 01
raymond james ' cartwright comments on enron corp . ' s future
bloomberg , 11 / 28 / 01
fraud attorney aguirre comments on possible enron bankruptcy
bloomberg , 11 / 28 / 01
enron ' s 401 ( k ) plan was set up for fall : david wilson ( update 2 )
bloomberg , 11 / 28 / 01
dynegy ends enron takeover ; credit ratings lowered ( update 8 )
bloomberg , 11 / 28 / 01
enron ' s ratings cut to junk by s & p , moody ' s , fitch ( update 6 )
bloomberg , 11 / 28 / 01
creditsights ' reynolds comments on downgrade of enron to junk
bloomberg , 11 / 28 / 01
spaeth communications president comments on enron corp . outlook
bloomberg , 11 / 28 / 01
houston astros president says enron ' s name will stay on stadium
bloomberg , 11 / 28 / 01
california power authority ' s freeman comments on enron , dynegy
bloomberg , 11 / 28 / 01
enron corp . has busiest day ever for a u . s . stock : table
bloomberg , 11 / 28 / 01
enron appoints troubh to board to lead litigation committee
bloomberg , 11 / 28 / 01
enron ' s problems may spark demand for treasuries , analysts say
bloomberg , 11 / 28 / 01
ifr pegasus ' s evans comments on enron ' s impact on energy market
bloomberg , 11 / 28 / 01
alliance , janus , putnam among biggest enron owners before drop
bloomberg , 11 / 28 / 01
nvidia to replace enron in s & p 500 at end of trading tomorrow
bloomberg , 11 / 28 / 01
intercontinental exchange ' s ceo sprecher comments on enron
bloomberg , 11 / 28 / 01
enron to continue utility sale to northwest natural ( update 3 )
bloomberg , 11 / 28 / 01
enron breached responsibility to employees , lawyer says on cnbc
bloomberg , 11 / 28 / 01
j . p . morgan , citigroup stumble advising enron on sale to dynegy
bloomberg , 11 / 28 / 01
enron online trading unit stops operating , users say ( update 5 )
bloomberg , 11 / 28 / 01
sempra energy interested in buying some enron assets ( update 4 )
bloomberg , 11 / 28 / 01
u . s . treasury comment on monitoring enron and credit markets
2001 - 11 - 28 16 : 04 ( new york )
washington , nov . 28 ( bloomberg ) - - the following is a comment
from michele davis , assistant treasury secretary for public
affairs , on enron corp . dynegy inc . abandoned a takeover bid for
enron today , leaving the country ' s largest energy trader without
enough cash to pay its $ 15 billion in debt . treasury securities
rose after the decision was announced as investors dumped stocks
and moved money into the safety of government debt :
` ` we are monitoring credit markets as we always do
everyday , ' ' davis said . ` ` the markets always fluctuate . we haven ' t
seen anything extraordinary . ' '
enron bonds may be good buy for patient investors , analysts say
2001 - 11 - 28 16 : 18 ( new york )
enron bonds may be good buy for patient investors , analysts say
new york , nov . 28 ( bloomberg ) - - enron corp . debt , which
plunged by half today after its credit rating was cut to junk and
rival dynegy inc . abandoned a planned buyout of the company , may
reward investors willing to hold the bonds while enron sells
assets through a bankruptcy proceeding , analysts said .
enron ' s notes and bonds dipped to as low as 15 cents on the
dollar today after standard & poor ' s cut enron ' s rating six levels
to ` ` b - . ' ' the firm ' s debt issues , which have a combined face
value of more than $ 15 billion according to bloomberg data , traded
mostly between 20 cents and 25 cents this afternoon .
analysts expect enron to file for bankruptcy protection ,
which would put bondholders in line with banks and other creditors
for enron ' s cash and any proceeds from asset sales . under that
scenario , bondholders could get back between 50 cents and 60 cents
on the dollar within three years , said stephen ardizzoni , junk -
bond portfolio manager at smh capital advisors .
` ` you should have a pretty decent return at these purchase
prices , ' ' said ardizzoni , who said he bought some enron notes
maturing in 2003 and bonds maturing in 2019 for between 15 cents
and 20 cents on the dollar today .
bondholders may end up with less if it turns out there are
fewer assets or more liabilities than the company ' s balance sheet
now shows , ardizzoni said . enron has drawn fire for its disclosure
practices , which in recent weeks included revelations of a $ 1 . 2
billion reduction in shareholder equity and an early repayment
date on a $ 690 million note .
like a broker
owners of enron debt may recover 30 cents on the dollar
within two years , mostly from proceeds of sales of enron ' s
pipelines , international assets , and real estate , said jon kyle
cartwright , who follows enron ' s debt for raymond james &
associates inc .
enron , once the biggest energy trader , made most of its money
buying and selling electricity and natural gas . the company can be
likened to a broker because hiring and retaining high - performing
employees and developing relationships is more important than
owning physical assets , cartwright said .
` ` the real value of a broker is with their clients and
personnel . there typically is minimal post - bankruptcy value , ' '
said cartwright . enron ' s trading business doesn ' t have much more
to offer than ` ` office space and the artwork on the walls ' ' in a
bankruptcy proceeding , he said .
marty whitman will consider enron bonds for the $ 4 billion he
helps manage at third avenue funds in new york . still , the 77 - year -
old investor , who specializes in analyzing distressed securities ,
prefers to invest in debt that ' s secured by assets .
said whitman , ` ` i never did understand their trading . ' '
raymond james ' cartwright comments on enron corp . ' s future
2001 - 11 - 28 16 : 22 ( new york )
new york , nov . 28 ( bloomberg ) - - jon kyle cartwright , a
senior vice president and senior energy analyst who follows enron
corp . for raymond james & associates inc . in st . petersburg ,
florida , comments on enron ' s outlook after the company ' s credit
ratings were cut to junk status and dynegy inc . abandoned a
takeover bid for the company .
` ` this is a disaster , ' ' cartwright said . ` ` i don ' t know how
they can ' t file ' ' for protection from creditors . ` ` enron isn ' t a
going concern .
` ` it is difficult , if not impossible , for anyone to do trades
with enron ' s trading operations in light of junk ratings across
the board and dynegy walking away from the deal .
` ` no trading , no cash flow . no cash flow , no enron . ' '
cartwright said he thought the company had two months to sort
out its problems and had a buy on the debt when it initially
` ` blew up .
` ` it was a credibility crisis the company could manage in two
months . i ' m sure they are in talks with their bankers right now ,
but i doubt if their bankers could even help them , ' ' he said .
` ` if any ( energy ) trader does business with enron right now ,
it is a career decision .
` ` it will be hard for energy traders to re - adjust to a world
without enron .
` ` this was a self - fulfilling prophecy . it doesn ' t often
happen that a company has a credibility crisis during a recession ,
in a bear market , ' ' cartwright said .
` ` hopefully , what comes out of the ashes of this is an
entirely new group of analysts that will follow what will now be a
bigger growth business - - energy trading .
` ` all of the smaller energy traders are about to become much
bigger , and the market has to learn how to analyze these things as
brokerage firms . ' '
fraud attorney aguirre comments on possible enron bankruptcy
2001 - 11 - 28 16 : 28 ( new york )
sacramento , california , nov . 28 ( bloomberg ) - - following are
comments made today by michael aguirre , a partner with san diego -
based law firm aguirre in both 1998
and 1999 , it had been less than a majority .
participants in the plan , which had $ 2 . 14 billion in assets
available for benefits , could only do so much to diversify their
investments . enron , like many other companies , used stock rather
than cash to match employee contributions and restricted sales of
the shares .
and they could only guess at the year - end makeup of the plan ' s
assets until the end of june , reflecting sec disclosure standards
for savings plans . by that time , the stock ' s drop - - which reached
99 percent today - - was already well under way .
trio of lawsuits
enron later reported $ 1 . 01 billion in third - quarter charges ;
ousted chief financial officer andrew fastow , who ran partnerships
that accounted for some of the charges ; restated its results since
1997 ; became the target of an sec accounting investigation ; and
accepted a takeover bid from dynegy inc . , its biggest rival .
the company ' s shares , which ended last year at $ 83 . 13 , closed
at just 61 cents today as enron ' s debt was downgraded to junk - bond
status and dynegy abandoned its offer .
in response to the plunge , employees in the 401 ( k ) plan - -
which allows workers to defer part of their pay and build tax - free
savings , and takes its name from a section of the internal revenue
service code - - have filed three lawsuits against enron .
the suits allege , among other things , that the houston - based
company prevented employees from shifting investments within the
plan between oct . 17 , the day after its disclosure of the charges ,
and nov . 19 as the company made administrative changes .
all three seek class - action status on behalf of the plan ' s
participants . the most recent filing came from the gottesdiener law
firm , based in washington , on monday . it covers the longest time
period : november 1995 to now .
falling percentages
enron shares accounted for 64 percent of the savings plan ' s
assets at the end of 1994 , the year before the period associated
with the gottesdiener suit began . the figure reflected a one - time
company contribution of preferred stock , and rose from 62 percent
in 1993 .
each preferred share has a face value of $ 100 and is
convertible into 27 . 304 common shares . this translates into a
conversion price of $ 3 . 66 a share , a bargain before the common
tumbled 85 percent today .
the plan also owned a stake in enron ' s former oil and gas unit ,
which became eog resources inc . after gaining independence in 1999 .
add in those shares , and company stock represented about two - thirds
of the 1994 assets .
enron ' s common and preferred shares fell to 60 percent of
401 ( k ) assets available for benefits in 1995 , 58 percent in 1996
and 53 percent in 1997 as the u . s . stock market rallied , lifting
the value of participants ' investments in equity mutual funds .
the shares represented 49 percent of the plan ' s assets in
1998 . the proportion hit bottom at 46 percent in 1999 , when the
assets more than doubled - - exceeding the 56 percent increase in
enron ' s share price that year - - to $ 1 . 62 billion .
how much choice ?
then came last year , when the common shares recorded their
best performance in more than two decades even as u . s . stocks
stumbled . enron rallied 87 percent amid soaring electricity and
natural gas prices , while the standard credit ratings lowered ( update 8 )
2001 - 11 - 28 16 : 46 ( new york )
dynegy ends enron takeover ; credit ratings lowered ( update 8 )
( updates to add watson comment . )
new york , nov . 28 ( bloomberg ) - - dynegy inc . abandoned a
takeover for enron corp . , leaving the country ' s largest energy
trader facing bankruptcy .
enron shares plunged 85 percent to below $ 1 on concern the
company can ' t repay its $ 15 billion in debt . dynegy withdrew after
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the acquisition was completed . credit rating companies lowered
enron ' s rating to junk .
` ` the reality is enron ' s going bankrupt , ' ' said michael
willingham , a risk manager at itochu international inc . , a unit of
a japanese trading firm . ` ` enron touted themselves as the king of
risk management , but it doesn ' t look like they ' ve managed their
risk very well . ' '
enron ' s sudden collapse - - $ 26 billion of market value
evaporated in seven weeks - - deals a blow to alliance capital
management holdings llp and other big mutual funds , wall street
lenders , such as j . p . morgan chase & co . and citigroup inc . , and
the 21 , 000 employees , many of whom were relying on shares of the
houston - based company for their retirement .
bankers led by j . p . morgan chase vice chairman james b . lee
tried for two weeks to raise the cash enron needed . investors
including saudi prince alwaleed bin talal , the blackstone group lp
and the carlyle group inc . turned them down because of concern
enron would default . that concern was heightened after enron
disclosed it had a $ 690 million payment due this week .
enron shares declined $ 3 . 50 to 61 cents in trading of more
than 342 million shares , the most traded ever for a u . s . stock .
the company ' s 6 . 4 percent bonds , which mature in 2006 , were quoted
as low as 20 cents on the dollar , down from 53 yesterday . at that
price the bonds yield 57 percent .
termination
dynegy said it abandoned the takeover ` ` due to breaches by
enron of representations , warrants , and covenants . ' ' chief
executive officer chuck watson said dynegy invoked its right to
purchase enron ' s northern natural gas pipeline . dynegy received
the right to do so in exchange for an investment of $ 1 . 5 billion
in enron by chevrontexaco corp . , which owns one quarter of dynegy .
the unit operates 16 , 500 miles of natural gas pipeline .
` ` sometimes the best deals are the ones you do not do , ' ' said
watson , who two weeks earlier had sealed the acquisition over
coffee and muffins in the kitchen of enron ceo ken lay ' s houston
home . ` ` we felt we had no choice but to act to protect our
shareholders ' interest , ' ' watson said .
as the news of dynegy ' s rejection flashed across computer
screens on enron ' s trading floor in houston , some employees
started to abandon their desks and leave the office , an enron
trader said . several workers said they expect the company to begin
firing workers tomorrow to prepare for bankruptcy .
` ` we will work to retain the employees necessary to the
continuing operations of our trading and other core energy
businesses , ' ' said lay in a statement . lay was a big backer of
george w . bush ' s campaign for presidency and said he had held
discussions about a job in administration at one point .
enron said in a statement it would halt all payments other
than those required to continue trading operations and would
review dynegy ' s ` ` assertion ' ' that it is entitled to the pipeline
unit .
pipeline company
from its start as natural gas pipeline company in the 1930 s ,
enron was transformed by then ceo jeffrey skilling into the
largest competitor in the business of trading energy , mainly
natural gas and electric power . under skilling , the company also
sought to expand into internet trading for products ranging from
metals to weather derivatives . skilling resigned in august .
enron shares tripled in the two years ended december 2000 ,
peaking at a market value of more than $ 70 billion , as the company
snared $ 16 . 1 billion in long - term energy management contracts from
companies such as international business machines corp . and
starwood hotels & resorts worldwide inc . in the first quarter of
2001 , enron ' s profit from operations rose 20 percent to $ 406
million and revenue quadrupled to $ 50 billion .
enron began to unravel in october after it said shareholders
equity was reduced by $ 1 . 2 billion because it used stock to pay
off debt of a partnership run by then chief financial officer
andrew fastow . the announcement led to lawsuits and a probe by the
securities and exchange commission . the writedown also raised
questions about how enron accounted for debt and losses of similar
affiliated partnerships . on nov . 8 , it restated earnings back to
1997 , lowering them by $ 580 million .
as its shares plunged , enron faced a cash crunch because
lenders and some trading partners lost confidence the company
would have the cash to pay bills . citigroup and j . p . morgan chase
offered to pony up $ 250 million each out $ 2 billion the company
sought . trading partners such as mirant corp . were less
forgiving , demanding more collateral or restricting trading .
enrononline , enron corp . ' s online trading system , stopped
allowing trades and quit posting bids and offers for natural gas
this morning , say traders who use the web site . enron said
yesterday that enrononline handled about 60 percent of its trading
business , or about $ 2 . 8 billion a day .
` ` we can log in , but there is nothing there , nothing to buy
and nothing to sell , ' ' said juha laiho , an energy trader at
finland - based fortum oyj in houston . ` ` it went down some time this
morning . ' '
lower credit ratings
s & p cut its rating on enron to ` ` b - ' ' from ` ` bbb - ' ' and
moody ' s lowered its rating to ` ` b 2 ' ' from ` ` baa 3 . ' ' both ratings
are below investment grade . the downgrade is significant because
the reduction to junk may require enron to repay $ 3 . 9 billion .
andre meade , an analyst at commerzbank securities , said that
enron ' s junk credit rating would ` ` effectively shut down the bulk
of their trading and marketing operations . ' '
` ` it ' s not likely enron will be able to raise the capital to
settle those payments and continue its business , ' ' said meade .
the large debts make it unlikely that investors will receive
much should the company file for bankruptcy , said investors .
` ` this will be a traditional bankruptcy in which equity
holders get nothing , ' ' said edward paik , who has 1 . 6 million enron
shares among $ 7 billion in assets he helps manage for liberty
funds group . ` ` this company doesn ' t have the safety net in terms
of assets that other companies do . ' '
enron ' s ratings cut to junk by s & p , moody ' s , fitch ( update 6 )
2001 - 11 - 28 16 : 51 ( new york )
enron ' s ratings cut to junk by s & p , moody ' s , fitch ( update 6 )
( adds bond prices in 14 th paragraph . )
new york , nov . 28 ( bloomberg ) - - standard & poor ' s , moody ' s
investors service and fitch inc . slashed enron corp . ' s credit
rating to junk status today , raising the prospect of chapter 11
bankruptcy as rival energy trader dynegy inc . rescinded its buyout
bid for the company .
the company is struggling with a cash crunch as at least $ 3 . 9
billion in debt comes due immediately because of the rating cut ,
and is suspending its online trading unit and some ` ` non - core ' '
payments . enron ' s trading business is also faltering as trading
partners lose faith in the company ' s ability to meet its
obligations .
` ` this is a disaster , ' ' said jon kyle cartwright , a debt
analyst at raymond james & associates . ` ` it is difficult , if not
impossible , for anyone to do trades with enron ' s trading
operations in light of junk ratings across the board and dynegy
walking away from the deal . ' '
s & p cut enron ' s long - term credit rating this morning six
levels to ` ` b - ' ' from ` ` bbb - ' ' and withdrew its ` ` a ' ' short - term
grade .
s & p analyst todd shipman , the author of the rating report ,
said the rating could be lowered if enron ' s cash situation isn ' t
resolved , and that a move to a chapter 11 bankruptcy filing and
the lowest ` ` d ' ' rating were both possibilities .
` ` we saw the deterioration in the trading operations , and
that threw the merger in doubt , ' ' he said . he said s & p may change
the rating soon .
following suit
moody ' s followed s & p with a five - level cut in enron ' s credit
rating to ` ` b 2 ' ' from ` ` baa 3 . ' ' moody ' s affirmed its ` ` not - prime ' '
rating on enron ' s commercial paper .
fitch lowered enron ' s senior unsecured rating 10 levels , to
` ` cc ' ' from ` ` bbb - , ' ' and its short - term rating to its second -
lowest ` ` c ' ' from ` ` f 3 . ' ' fitch said in its report that a
` ` default of some kind appears probable . ' '
egan - jones ratings co . cut enron ' s credit rating to junk on
oct . 26 , when it lowered it one level to ` ` bb + ' ' from ` ` bbb - . ' '
the rating company downgraded the credit several times since then ,
and cut it to ` ` c ' ' today .
s & p , moody ' s and fitch all had enron ' s credit rating three
levels above junk in january , while egan - jones rated it four
levels higher .
the companies cut the ratings several times since october ,
amid news that enron ' s dealings with partnerships run by former
chief financial officer andy fastow contributed to trading losses .
enron reported $ 1 . 01 billion in third - quarter losses from failed
investments .
pressure
the acquisition by dynegy promised to alleviate the ensuing
cash crunch . enron ' s stock fell by more than 50 percent since nov .
19 amid growing skepticism that the dynegy would complete the
acquisition .
` ` we became a lot more concerned when the stock didn ' t
stabilize , ' ' said john diaz , moody ' s managing director for energy
and one of the authors of the downgrade report . ` ` the drop in the
stock price put pressure on dynegy to renegotiate the deal . ' '
enron has $ 15 . 5 billion of debt outstanding , according to
bloomberg data . its shares , which have fallen 99 percent this
year , lost $ 3 . 50 today to 61 cents . the company ' s bonds dropped by
about half to 26 cents on the dollar from 53 cents .
s & p ' s shipman said in his report that ` ` the willingness of
dynegy to complete its planned acquisition of enron has been
compromised by the continued drop in confidence in the capital
markets that the transaction would hold . ' '
credit analysts also focused on enron ' s cash flow levels ,
diaz said . enron said in its most recent filing last week that it
had $ 1 billion in cash , which was a lot less than the market had
expected , diaz said .
` ` it came as a surprise to us and to others , ' ' he said . ` ` we
expected at least $ 2 . 5 billion so they would have staying power . ' '
creditsights ' reynolds comments on downgrade of enron to junk
2001 - 11 - 28 16 : 52 ( new york )
new york , nov . 28 ( bloomberg ) - - glenn reynolds , an analyst
at fixed - income research firm creditsights inc . , comments on the
slide in enron corp . ' s debt ratings to junk levels :
` ` the likely bankruptcy will generate material losses for a
number of banks , wall street firms and institutional investors - -
including a number who did not face the daily pressures of marking
their book to market , ' ' reynolds said .
` ` some counterparty credit defaults will also have some
follow - on effects in the commodity markets , foreign exchange and
on swap desks . many of these counterparties could delay or manage
their loss recognition , but this one is now one you cannot hide
from . the most interesting issue will be to see the fallout in the
default swap market if - - more likely when - - that brutal step is
taken and they file chapter 11 . ' '
spaeth communications president comments on enron corp . outlook
2001 - 11 - 28 16 : 53 ( new york )
new york , nov . 28 ( bloomberg ) - - merrie spaeth , president of
spaeth communications , comments on enron corp . ' s options after the
company ' s credit ratings were cut to junk status and dynegy inc .
abandoned a takeover bid for the company . dallas - based spaeth is a
communications consultant to dynegy .
` ` a chapter 11 reorganization would be the only way that
enron could resolve the lawsuits it faces and the other issues
surrounding the partnerships .
` ` chapter 11 carries a whole set of risks on its own , but it
gives the company a chance to manage perceptions . it puts a
premium on communication , quick , concise and targeted
communication - - the antithesis of what enron has developed in its
culture .
` ` the benefit of a chapter 11 is that it gives you the
opportunity to revamp how you do business . ' '
houston astros president says enron ' s name will stay on stadium
2001 - 11 - 28 17 : 03 ( new york )
houston , nov . 28 ( bloomberg ) - - enron corp . , left at the
brink of bankruptcy after losing potential buyer dynegy inc . and
having its credit rating cut to junk , has a friend in the houston
astros .
team president tal smith said the club isn ' t abandoning the
company , which is paying $ 3 . 3 million annually for 30 years to
have its name on the astros ' home ballpark , enron field .
` ` we identify with enron , and they identify with us , ' ' smith
said . ` ` there ' s no negative association because of their
difficulties . ' '
enron , the u . s . ' s biggest energy trader , entered into the
agreement with the major league baseball team just before the new
stadium opened for the 2000 season . the company ' s shares were on
the way to tripling their value from 1998 , and the astros had just
won their third straight national league central division title .
since then , the company ' s fortunes have plummeted . the
company has $ 15 billion in debt and not enough cash to pay it .
dynegy abandoned its plan to buy its houston neighbor for at least
$ 23 billion in stock and assumed debt today .
enron also has a contract to supply and manage energy for the
baseball stadium for the next 30 years , said dean bonham , a denver -
based consultant who analyzes and sells naming rights agreements .
` ` this is more than a naming rights deal , ' ' bonham said .
` ` they ' re going to eventually have to find another company to
supply that service as well as put their name on the ballpark . ' '
meantime , the name of the astros ' home won ' t change , smith
said . ` ` until there ' s no longer a company , it ' ll still be enron
field , ' ' he said .
california power authority ' s freeman comments on enron , dynegy
2001 - 11 - 28 17 : 03 ( new york )
sacramento , california , nov . 28 ( bloomberg ) - - the following
are comments by california power authority chairman s . david
freeman on dynegy inc . ' s decision to abandon its purchase of enron
corp . and the possibility of enron filing for chapter 11
bankruptcy protection .
` ` i don ' t think that trading of energy in the spot market is
going to be materially affected by this . there are a lot of other
people who will take up the slack . ' '
` ` i see this as an indication that a very volatile market can
kill the consumer , but it can also kill one of the companies . ' '
` ` it ' s a fascinating footnote that a year ago it was the
state of california that appeared to be on the verge of
bankruptcy , at least some of the utilities were . and now the shoe
has kind of dropped on the other foot . ' '
` ` i take no pleasure in this at all . i don ' t view this as a
happy or good thing , but when you live by the sword , sometimes you
die by the sword . ' '
enron corp . has busiest day ever for a u . s . stock : table
2001 - 11 - 28 17 : 19 ( new york )
enron corp . has busiest day ever for a u . s . stock : table
new york , nov . 28 ( bloomberg ) - - enron corp . had the most -
active day for a u . s . stock , with 343 million shares trading ,
according to preliminary figures from the new york stock exchange .
enron plunged $ 3 . 50 , or 85 percent , to 61 cents a share after
dynegy inc . abandoned a takeover bid for enron , leaving the
largest energy trader without enough cash to pay its $ 15 billion
in debt .
standard & poor ' s corp . cut enron ' s credit rating to junk as
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the sale was completed .
the following is a list of stocks with the 10 highest one - day
trading volumes in u . s . market history , according to data from the
nyse and the nasdaq stock market .
* t
stock date volume ( in millions )
enron corp . nov . 28 , 2001 343 . 2
intel corp . sept . 22 , 2000 308 . 7
cisco systems inc . feb . 7 , 2001 281 . 6
oracle corp . march 2 , 2001 224 . 0
cisco systems jan . 10 , 2001 213 . 0
jds uniphase corp . july 26 , 2000 200 . 4
cisco systems oct . 3 , 2001 196 . 5
worldcom inc . nov . 1 , 2000 195 . 5
exodus communications sept . 25 , 2001 193 . 1
exodus communications june 21 , 2001 186 . 4
* t
enron appoints troubh to board to lead litigation committee
2001 - 11 - 28 17 : 28 ( new york )
enron appoints troubh to board to lead litigation committee
houston , nov . 28 ( bloomberg ) - - enron corp . , whose shares
dropped 85 percent today after dynegy inc . walked away from its
takeover bid , appointed financial consultant raymond s . troubh to
the board and to lead a new litigation committee .
enron , the top energy trader whose shares have fallen 99
percent this year , said the committee will evaluate claims from
shareholder and other lawsuits filed against the company since
the u . s . securities and exchange commission began investigating
the company ' s finances .
enron board member william c . powers jr . , dean of the
university of texas school of law , who was appointed last month ,
will also serve on the litigation committee .
troubh serves on the boards of starwood hotels & resorts ,
healthnet inc . diamond offshore drilling , triarc cos . and gentiva
health services inc . , among others . he holds degrees from bowdoin
college and yale law school and is a former general partner at
investment bank lazard freres & co .
shares of houston - based enron fell $ 3 . 50 to 61 cents .
enron ' s problems may spark demand for treasuries , analysts say
2001 - 11 - 28 17 : 36 ( new york )
new york , nov . 28 ( bloomberg ) - - enron corp . ' s fall to junk
credit ratings may benefit treasury securities as traders and
investors worry about what firms have exposure to the houston ,
texas - based energy trader .
gains would add to u . s . government debt that has returned
more than 6 percent this year . it benefited from falling stocks
and disappointing corporate earnings as well as from the federal
reserve ' s 4 . 5 percentage points of rate cuts aimed at reviving an
economy that has been in recession since march .
dynegy inc . , which had agreed to purchase enron , terminated
that agreement following the downgrade .
` ` anything with a negative connotation like this , investors
get spooked and the first thing they think of is to jump into
something safe like treasuries , ' ' said brian cothran , who helps
manage $ 15 billion in fixed income at fifth third bank in
cincinnati . he said he plans to hold on to the enron bonds in his
portfolio .
treasuries jumped following standard & poor ' s downgrade of
enron corp . as investors sought the relative safety of debt backed
by the u . s . the most - widely traded 10 - year note rose to 101 6 / 32
from 100 25 / 32 in the 10 minutes after the announcement .
the downgrades of enron by s & p and moody ' s investors service
to junk bond status raised concern about credit ratings of firms
that have exposure to the energy trader , especially if it files
for bankruptcy protection . the downgrades also triggered enron ' s
need to repay about $ 3 . 9 billion in notes sold by two trusts - -
marlin water trust and osprey trust .
enron has more than $ 15 billion in debt and preferred stock
and about $ 4 billion in bank loans , of which $ 3 billion is
unsecured . swaps , options , and derivative risk aren ' t included in
those figures . banks and wall street dealers hold unsecured enron
loans and some sold credit default swaps , which provide insurance
to debt holders in case enron defaults .
interest rate futures
eurodollar futures , indications of three - month interest
rates , which are used to hedge risk , rose ` ` after the announcement
that s & p downgraded enron to junk on a flight to quality bid as
traders tried to figure out just how big a calamity this may be , ' '
said scott gelling , an assistant vice president at carr futures
inc . in chicago .
` ` on a scale of one to 10 , with long - term capital management
being a 10 , they are wondering where this will fall . ' '
swap spreads , a gauge of investors ' willingness to buy
riskier assets , rose for the fourth day in five after the
downgrade , and as major u . s . stock indexes declined . at 72 basis
points above the 10 - year treasury yield , the 10 - year swap spread
has risen 14 basis points from a three year low two weeks ago .
today ' s move was , in part , a reaction to concerns about exposure
some u . s . - based banks may have to enron , including j . p . morgan
chase & co . and citigroup , which arranged the company ' s fully
drawn $ 3 billion unsecured credit line , traders said .
seeking yield
the fed ' s ten interest - rate cuts this year helped encourage
investors to seek higher yields from top investment - grade
borrowers including at & t corp . and american express co . the fed ' s
cuts also depressed already - low rates on money - market funds and
certificates of deposit .
the price on enron ' s 6 . 4 percent notes maturing in 2006
tumbled to 20 cents on the dollar from 53 cents yesterday . at that
price , the bonds yield 57 percent . enron ' s tumble pulled prices
down on other corporate bonds as investors worried the recession
is eroding companies ' ability to repay debts . corporate yield
spreads widened as much as 4 basis points , according to fidelity
capital markets .
still , the flight to quality may be short - lived , said kevin
cronin , who oversees $ 45 billion at putnam investments in boston ,
who owns enron debt . enron ` ` is just one credit and i don ' t think
it ' s indicative of a financial crisis , ' ' he said .
erasing gains
treasuries erased gains after the government sold a record
amount of two - year debt , and on expectations that sales will
increase to pay for the nation ' s war on terrorism and fiscal
spending and tax cuts . investors selling debt they purchased
expecting a flight - to - quality on the enron news that didn ' t
materialize , exacerbated the sell - off , traders said .
the 10 - year note lost almost a half point in a half hour , its
yield rising to 4 . 91 percent from 4 . 87 percent . the note , which
has a 5 percent coupon and matures in august 2011 , ended the day
little changed , yielding 4 . 92 percent .
` ` nobody has a terrific handle on why the market is acting
this violently , ' ' said brad stone , director of u . s . market
strategy at barclays capital . volatility is increasing into year -
end and ` ` no one wants to take a lot of risk , ' ' he said .
ifr pegasus ' s evans comments on enron ' s impact on energy market
2001 - 11 - 28 17 : 36 ( new york )
new york , nov . 28 ( bloomberg ) - - tim evans , senior energy
analyst at ifr pegasus in new york , comments on the impact on
energy trading from the credit crisis that has left enron corp .
facing bankruptcy .
the company ' s enrononline internet - based platform for trading
natural gas , power and oil stopped functioning this morning , at
about the same time dynegy inc . pulled out of a planned buyout of
enron . that decision came moments after standard janus capital corp . , a unit of stilwell financial
inc . ; putnam investment management inc . , which is owned by marsh barclays global investors , a unit of barclays plc ;
and fidelity investments , the world ' s largest money manager .
enron shares have fallen 99 percent this year , wiping out
about $ 77 . 1 billion in market value . investors lost $ 2 . 61 billion
today alone as the stock plunged $ 3 . 50 , or 85 percent , to 61 cents
a share .
the stock has posted the biggest decline in the standard &
poor ' s 500 index this year , meaning fund managers with over $ 1
trillion invested in portfolios that try to mimic the benchmark
have followed the stock down .
enron ' s decline today prompted standard & poor ' s to kick the
company out of the s & p 500 , used by most professional investors as
a benchmark for u . s . stocks . the company will be removed when the
market closes tomorrow .
index managers , who mimic the makeup of the s & p as closely as
possible , will sell at that time . other investors are likely to
sell as well , if they haven ' t already , because money managers who
pick stocks based on their evaluation of a company ' s earnings
prospects often prefer to stick to stocks that are in the index to
ensure their performance doesn ' t lag the benchmark .
barclays global , the biggest manager of index portfolios ,
will sell the stock from s & p 500 index funds , said spokesman tom
taggart .
no comment
institutional investors are required to tell the securities
and exchange commission what they ' re invested in and how many
shares they own . the biggest investors may have sold or bought
shares since the last filings sept . 30 .
alfred harrison , vice chairman and fund manager at alliance
capital , didn ' t immediately return a call . john meyers , a
spokesman , declined to comment , as did janus spokeswoman shelley
peterson and fidelity spokesman vin loporchio . a call to putnam
spokeswoman nancy fisher wasn ' t immediately returned .
the california state teachers ' retirement system owned about
2 million enron shares as of june , its latest filing , said sherry
reser , a spokeswoman . about 88 percent of that stake was in index
or index - like funds , she said . ` ` we would follow whatever
rebalancing is done in the index , ' ' she said .
the california public employees ' retirement system , the
biggest u . s . employee pension fund with about $ 144 billion in
assets , owns about 3 million enron shares , most of them in an
index fund , said spokesman brad pacheco . he said the losses won ' t
hurt calpers overall .
` ` you ' re going to have winners and losers , ' ' pacheco said .
` ` it ' s minimal compared to our entire portfolio . ' '
scott schermerhorn , manager of the $ 1 billion liberty
utilities fund in boston , said he ' s in a similar position . he
bought shares in the largest energy trader at $ 10 each this year .
he wouldn ' t say if he had sold his stake , or when .
still , his utilities fund is down 8 . 7 percent in 2001 versus
a 14 . 5 percent decline in the s & p 500 . ` ` it knocked me for a good
loop , but it didn ' t knock me down , ' ' he said .
the three largest sellers of enron stock since the end of the
third quarter were rorer asset management , goldman sachs group
inc . and american express financial . goldman spokeswoman kathleen
baum declined to comment . edward rorer , chairman of philadelphia -
based rorer asset management , didn ' t immediately return a call .
spokeswoman terri dresen of american express said the firm
has sold shares over the last several months . she said she didn ' t
know how many .
time to sell
the three largest buyers were alliance , rittenhouse and
fidelity .
the pain extends beyond the stockholders . enron ' s 6 . 4 percent
bonds , which mature in 2006 , were quoted at 20 cents on the
dollar , down from 53 yesterday .
enron exchange notes , which are traded on the new york stock
exchange and are convertible into shares of eog resources inc . ,
fell $ 11 . 76 to $ 6 . 15 . the notes are tied to enron ' s stake in eog ,
said eog spokeswoman maire baldwin . eog is a former enron unit .
shares of newpower holdings inc . fell 26 cents to 90 cents ,
giving them a loss for the year of 90 percent . enron is newpower ' s
largest shareholder as well as a major creditor . newpower markets
power to homeowners nationwide .
in canada , the ontario teachers ' pension plan , which oversees
about c $ 70 billion ( us $ 44 billion ) , hasn ' t sold its stake in
newpower , according to senior vice president of merchant banking
james leech . the plan owned 2 . 5 million shares and 5 . 6 million
class a warrants .
standard & poor ' s cut enron ' s credit rating to junk today as
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the deal was done . the lack of funds and the prospect of a
downgrade contributed to dynegy ' s decision to cancel the buyout ,
which was valued at $ 23 billion on nov . 9 .
` ` we ' ve obviously lost money like any other shareholder
has , ' ' pacheco said . calpers has the ` ` same tools in our toolbox -
- corporate governance measures , lawsuits like you ' ve seen already
filed against enron - - that any shareholder has in trying to
recover any losses , but decisions about using those are going to
be made by the board . ' '
pacheco said it ' s likely calpers won ' t take any action until
the pension fund ' s board has a chance to talk at a planned meeting
on dec . 17 in sacramento .
` ` we would certainly be a member of a class action suit , ' '
said taggart of barclays global .
schermerhorn said he could sue , though he ' s not sure if it ' s
worth the trouble , in part because bondholders are typically paid
first when a company goes bankrupt .
` ` it ' s like suing the guy washing windows outside the lincoln
tunnel , ' ' schermerhorn said . ` ` you could win , but what would you
get ? ' '
largest enron shareholders as of sept . 30
* t
name shares
axa financial 43 . 01 million
janus capital 41 . 36 million
putnam investment 23 . 12 million
barclays global 23 . 04 million
fidelity management 20 . 79 million
citigroup inc . 20 . 79 million
state street global 16 . 14 million
aim advisors inc . 13 . 99 million
taunus corp . 12 . 45 million
vanguard group 11 . 45 million
* t
source : sec filings
nvidia to replace enron in s & p 500 at end of trading tomorrow
2001 - 11 - 28 17 : 40 ( new york )
nvidia to replace enron in s & p 500 at end of trading tomorrow
new york , nov . 28 ( bloomberg ) - - enron corp . will be dropped
from the standard & poor ' s 500 index and replaced with nvidia
corp . at the close of trading tomorrow , standard & poor ' s said .
shares of enron , the largest energy trader , plunged 85
percent to 61 cents today , and the company may go bankrupt . rival
dynegy inc . abandoned a takeover of the company after enron failed
to raise enough cash to keep operating until the purchase could be
completed .
nvidia , which makes computer - graphics chips , is the best -
performing stock in the nasdaq 100 index this year , gaining 214
percent .
anheuser - busch cos . will replace enron in the s & p 100 ,
standard & poor ' s said . the largest brewer already is a member of
the s & p 500 .
intercontinental exchange ' s ceo sprecher comments on enron
2001 - 11 - 28 18 : 01 ( new york )
atlanta , nov . 28 ( bloomberg ) - - jeffrey sprecher , chief
executive officer of intercontinental exchange inc . , comments on
how the downgrade today of enron corp . ' s credit rating to junk
status affected intercontinental ' s online energy - trading system .
atlanta - based intercontinental is owned by a consortium of
banks and energy companies , including bp plc , duke energy corp .
and goldman sachs group inc .
` ` we had about 3 , 600 bids and offers ' ' logged into the
intercontinental system at about 11 a . m . , sprecher said .
within 15 minutes of the credit downgrade by standard &
poor ' s , which left enron ' s rating at junk status , ` ` that number
dropped to 2 , 100 . so about 40 percent of the people in the market
pulled out momentarily to assess what was going on . ' '
` ` it was a very big trading day on ice . if not a record day ,
it was one of the top five busiest days we ' ve had . we ' re up about
65 percent in terms of our trading volumes over the last 30 days ,
and the number of new users has gone up by about 30 percent . so
there ' s a lot of growth we ' ve been trying to digest in the last 30
days , much of which is attributable to problems at enron . ' '
enron to continue utility sale to northwest natural ( update 3 )
2001 - 11 - 28 17 : 40 ( new york )
enron to continue utility sale to northwest natural ( update 3 )
( adds northwest natural comment in fourth , fifth paragraphs . )
portland , oregon , nov . 28 ( bloomberg ) - - enron corp . , the
nearly bankrupt energy trader , plans to go through with the sale
of its portland general electric co . utility unit to northwest
natural gas co . , both companies said .
enron last month agreed to sell pge to northwest natural for
$ 2 . 9 billion in cash , stock and assumed debt . dynegy inc . today
called off its planned purchase of enron , saying the energy trader
breached covenants in the merger agreement . dynegy had supported
the pge sale .
northwest natural filed its application to buy pge with the
oregon public utility commission today . in the application ,
northwest natural said combining its operations with pge would
eventually result in savings of as much as $ 30 million a year .
northwest natural will ` ` have to study ' ' the potential impact
of enron ' s latest problems , northwest chairman and chief executive
officer richard g . reiten said . he said he expects the acquisition
to move forward .
` ` we believe it only underscores the merits of the
acquisition of pge by northwest natural , ' ' reiten said in a
conference call with analysts .
enron spokeswoman karen denne said her company has no plans
to call off the sale .
` ` we are proceeding with our previously announced asset
sales , including portland general , ' ' denne said .
northwest natural shares fell 47 cents to $ 23 . 87 . enron
shares fell $ 3 . 50 to 61 cents . enron shares have dropped 99
percent since the first of the year .
commission ' s role
marc hellman , the administrator responsible for mergers and
acquisitions at the oregon public utility commission , said he is
unsure what would happen if enron were to file for bankruptcy
protection .
` ` i can ' t recall it ever happening , and i ' ve been here for
22 years , ' ' hellman said . ` ` if it went all the way to the end ,
where they ' re liquidating assets , you can ' t sell utility property
without commission approval . there are probably some issues where
our attorney general ' s office may look into it . ' '
hellman said he has heard nothing to indicate northwest
natural ' s purchase of pge wouldn ' t go forward .
` ` enron was getting cash from northwest natural for the
purchase , as well as shares , ' ' hellman said . ` ` that aspect of the
transaction becomes a little curious if enron is going through
bankruptcy . ' '
debt downgrades
moody ' s investors service today downgraded pge ' s senior
secured debt to ` ` a 3 ' ' from ` ` a 2 . ' ' moody ' s also downgraded pge ' s
unsecured debt , its junior subordinated debt and its preferred
stock . moody ' s , standard & poor ' s and fitch inc . cut enron ' s
credit rating to junk status today .
the ratings service said it had expected to downgrade pge ' s
ratings once northwest natural completed its acquisition of the
utility .
` ` however , today ' s rating action is being taken in advance of
the expected closing of that transaction to reflect moody ' s
concerns surrounding portland general ' s ability to remain fully
insulated from the many financial challenges currently being faced
by its parent , enron corp . , due in large part to lost investor
confidence in enron , ' ' moody ' s said in a statement .
enron breached responsibility to employees , lawyer says on cnbc
2001 - 11 - 28 17 : 38 ( new york )
houston , nov . 28 ( bloomberg ) - - enron corp . breached its
fiduciary responsibilities to its employees by allowing them to
continue to invest in company stock for their retirement plans ,
enron employees ' lawyer eli gottesdiener said in an interview with
financial news network cnbc .
the company should have stopped its program that encouraged
employees to invest in its shares as part of its 401 ( k ) plan ,
gottesdiener said in the interview . the company should have known
its stock was artificially inflated , he told cnbc .
j . p . morgan , citigroup stumble advising enron on sale to dynegy
2001 - 11 - 28 18 : 32 ( new york )
j . p . morgan , citigroup stumble advising enron on sale to dynegy
new york , nov . 28 ( bloomberg ) - - j . p . morgan chase & co . and
citigroup inc . bet their reputations backing enron corp . ' s sale to
dynegy inc . - - and the failed merger left the investment firms
with black eyes and hundreds of millions in possible losses .
with dynegy abandoning its proposed takeover today , the banks
could lose $ 800 million each , according to goldman sachs group
inc . financial services analyst richard strauss . the banks also
stand to forfeit $ 45 million apiece in advisory fees .
` ` i ' d be surprised if no heads rolled from this , ' ' said david
gilmore , who manages the $ 1 . 1 billion federated capital
appreciation fund , which owns j . p . morgan and citigroup shares .
j . p . morgan shares lost $ 2 . 30 , or 5 . 8 percent , to $ 37 . 50 ,
after the transaction fell apart . citigroup dropped $ 2 . 75 , or 5 . 4
percent , to $ 47 . 80 .
j . p . morgan spokeswoman kristin lemkau declined to comment ,
as did citigroup ' s salomon smith barney investment banking unit .
dynegy withdrew its bid , initially valued at $ 23 billion ,
after standard & poor ' s corp . downgraded enron debt to junk . for
both banks , the takeover would have been the year ' s third largest .
it ranked eighth among all announced takeovers this year .
` ` sometimes the best deals are the ones you do not do , ' '
dynegy chairman charles watson said in a conference call . ` ` we
know how to say no , and we did that . ' '
the deal ' s implosion today , with enron shares at 61 cents ,
capped an epic that saw the houston - based company turn itself from
a natural gas pipeline carrier into the largest u . s . energy trader
into an outfit with debts of $ 15 billion it couldn ' t pay .
enron ' s plunge
enron stock began plunging in october - - after falling from
its $ 90 . 75 peak - - with the disclosure of a securities and
exchange commission probe into how the company accounted for
outside partnerships it created .
even before dynegy made its bid on nov . 9 , citigroup and j . p .
morgan tried to shore up enron , agreeing to lend the company $ 1
billion . j . p . morgan also enlisted chairman william harrison to
make calls to keep the energy trader ' s credit above junk rating .
salomon smith barney drafted chief executive officer michael
carpenter in a similar effort .
when the takeover was formally proposed , the banks not only
made good on their loan commitment : they agreed to invest another
$ 250 million each if other investors could be found . j . p . morgan
vice chairman james b . lee headed a team that tried , and failed ,
to raise another $ 1 . 5 billion .
failed strategy
among those who turned down enron and its bankers were saudi
prince alwaleed bin talal , the carlyle group inc . and blackstone
group lp .
the collapsed transaction may tarnish citigroup and j . p .
morgan over a questionable strategy of extending commercial
lending power to clients to gain higher - margin investment banking
business , analysts said . each bank was formed when a commercial
bank took over an investment bank .
behind the formation of the larger banks was the notion they
could attract investment banking business from stand - alone
investment banks such as goldman sachs group inc . and morgan
stanley dean witter & co . that are limited in what they can lend .
it was a strategy that failed , at great cost , when the enron -
dynegy merger fell apart .
as the purchase was still taking shape , goldman sachs
refused to lend to enron , a client whose credit rating was now
falling and who was making less frequent use of goldman ' s
investment banking services , according to people familiar with the
matter .
bankruptcy is ` inevitable '
morgan stanley avoided enron because it was perceived as too
demanding a client and one that played investment banks off each
other to reduce fees , a person familiar with the matter said .
lehman brothers holdings inc . advised dynegy and negotiated a
fee of about $ 15 million .
enron , the worst performer this year in the standard & poor ' s
index of 500 large u . s . companies , fell $ 3 . 50 or 85 percent , to 61
cents . its 52 - week high , reached dec . 28 , was $ 84 . 88 .
now , with dynegy backing out and no ready savior , enron may
quickly wind up in bankruptcy court , analysts and investors said .
` ` bankruptcy is all but inevitable , ' ' said michael heim , an
analyst with a . g . edwards & sons , who has a ` ` sell ' ' rating on
enron shares .
enron online trading unit stops operating , users say ( update 5 )
2001 - 11 - 28 18 : 37 ( new york )
enron online trading unit stops operating , users say ( update 5 )
( adds nymex chairman ' s comment in 26 th paragraph . )
new york , nov . 28 ( bloomberg ) - - enrononline , which handled
$ 2 . 8 billion a day in energy trading for parent enron corp . ,
halted internet transactions and quit posting prices for natural
gas , electricity and oil products , said users of the web site .
trading screens became useless about 11 a . m . new york time ,
around when dynegy inc . canceled plans to buy enron . the decision
may force enron , once the country ' s largest energy trader , to file
for chapter 11 bankruptcy protection , analysts said . enron was the
buyer or seller of all transactions over enrononline .
the company said yesterday that enrononline handled about 60
percent of its trading business , or about $ 2 . 8 billion a day in
trading on average over the past 30 days . the halt in service left
users unable to value or make trades . some switched to competitors
such as atlanta - based intercontinental exchange inc . , an online
exchange run by a consortium of banks and energy companies .
` ` we can log in , but there is nothing there , nothing to buy
and nothing to sell ' ' at enrononline , said juha laiho , an energy
trader at finland - based fortum oyj in houston .
leslie vandagriff , manager of natural gas trading at highland
energy co . , was sitting at her desk in dallas when ` ` everything
went blank . ' ' vandagriff was using enrononline prices to compare
the value of trades she was making with other companies . she
switched to prices published by the intercontinental exchange .
no future ?
enron temporarily suspended ` ` all payments other than those
necessary to maintain core operations , ' ' the company said in a
statement . enron officials didn ' t return numerous phone calls
seeking comment on the status of enrononline .
when the news of the collapse of the acquisition reached
enron traders , many left the trading floor saying that without
dynegy , they had no future , an enron trader said .
traders outside the company had already been wary of making
new contracts with enron because of concern about its credit
rating , which today was slashed to junk status by standard &
poor ' s and moody ' s investors service .
` ` i don ' t think anybody is trading with enron right now , ' '
fortum oyj ' s laiho said . ` ` even late last week , people were not
making new positions with them . it was an unstable situation . ' '
small exposure
some of enron ' s biggest trading partners said their exposure
to losses from an enron bankruptcy is small .
el paso corp . , owner of the biggest u . s pipeline network , and
american electric power co . , the biggest electricity generator ,
and aquila inc . , an energy trader , said each faced a possible loss
of $ 50 million . mirant corp . said it wouldn ' t lose more than $ 60
million , and dynegy said its exposure was limited to $ 75 million .
` ` i don ' t anticipate a string of bankruptcies to follow this
one , ' ' said tim evans , senior energy analyst at ifr pegasus in new
york .
` ` the energy markets are bigger than any one company ,
including enron , ' ' american electric spokesman pat hemlepp said .
` ` we don ' t expect any disruption . ' '
energy buyers and sellers have been concerned for weeks that
enron ' s financial problems may disrupt markets such as the new
york mercantile exchange , the largest energy marketplace . enron is
the largest trader of natural gas .
` ` if they have to go to bankruptcy protection now , which may
even happen by the end of the day , then nymex positions will have
to be liquidated , ' ' said ed silliere , vice president of risk
management at energy merchant llc in new york .
the nymex is ` ` very comfortable that all of our customers are
safe from any financial losses suffered by a single entity , ' '
spokeswoman nachamah jacobovits said when asked about enron .
cover for losses
enron ' s positions in futures markets are guaranteed first by
the member , or members , that clear its trades on the exchange . if
the clearing member couldn ' t cover losses , the exchange has a $ 70
million guarantee fund , followed by another $ 425 million that it
could draw on from other members .
while natural gas futures surged as much as 8 percent after
the news of dynegy ' s pullout , prices later declined 11 percent on
the nymex . gas for december delivery fell 29 cents to $ 2 . 316 per
million british thermal units .
financial safeguards like those on the nymex aren ' t available
in most over - the - counter energy markets , including forward and
swaps transactions . few transactions have the backing of an
intermediary .
` ` this will have a near - term chilling effect on forward
energy trading business , ' ' said tom knight , director of trading at
truman arnold cos . , a wholesale fuel supplier in texarkana , texas .
` ` if you ' re not willing to trade with a company that was the size
of enron , then who are the companies you are going to be willing
to deal with ? ' '
other exchanges
other online energy exchanges benefited as traders avoided
doing business with enron .
ngx canada inc . , an internet exchange for natural gas in
canada , has traded about 300 , 000 terajoules of gas so far this
month , worth about $ 750 million at current prices . trading is
about 50 percent higher than in october .
` ` yesterday was our third or fourth best day ever , ' ' said dan
zaftawny , a spokesman for ngx , which is owned by om gruppen ab ,
parent of the stockholm stock exchange .
another beneficiary has been atlanta - based intercontinental
exchange , which is owned by a consortium that includes aep , bp
plc , duke energy corp . and goldman sachs group inc .
` ` it was a very big trading day on ice , ' ' said jeffrey
sprecher , intercontinental ' s chief executive officer . ` ` we ' re up
about 65 percent in terms of our trading volumes over the last 30
days , and the number of new users has gone up by about 30 percent .
so there ' s a lot of growth we ' ve been trying to digest in the last
30 days , much of which is attributable to problems at enron . ' '
the new york mercantile exchange is expected to approve
expanded and extended trading of natural gas tomorrow morning , and
nymex will accelerate introduction of an electronic trading
platform designed to compete with enrononline , exchange chairman
vincent viola said in an interview on cnbc .
sempra energy interested in buying some enron assets ( update 4 )
2001 - 11 - 28 18 : 45 ( new york )
sempra energy interested in buying some enron assets ( update 4 )
( adds sempra ' s exposure to enron in ninth , 10 th paragraphs . )
san diego , nov . 28 ( bloomberg ) - - sempra energy , an owner of
electric and natural - gas utilities , is interested in buying some
of enron corp . ' s assets now that the energy trader ' s planned
merger with dynegy inc . has failed , a sempra spokesman said .
` ` we are interested in some of enron ' s hard assets and our
interest would lie in those assets that would have synergies with
our own operations , ' ' sempra spokesman doug kline said . ` ` beyond
that i couldn ' t give you more specifics . ' '
dynegy today called off its purchase of enron , saying the
energy trader breached covenants in the merger agreement . dynegy
had agreed to buy enron for at least $ 23 billion in stock and
assumed debt this month . a federal investigation of accounting
irregularities at enron had limited its ability to finance
operations and sent its shares plunging .
sempra shares fell 35 cents to $ 22 . 70 . enron shares fell
$ 3 . 50 to 61 cents . enron shares have dropped 99 percent since the
first of the year .
houston - based enron has an ownership interest in argentina ' s
4 , 104 - mile natural - gas pipeline system , the largest pipeline
system in south america . sempra energy international owns a 43
percent stake in two natural - gas utility holding companies in
argentina . sempra also is the owner of the san diego gas &
electric and southern california gas co . utilities .
asset - sale program
` ` we are looking at selling our global assets that are not
core to our business , and so we ' ll be continuing with an asset -
sale program , ' ' enron spokeswoman karen denne said . ` ` we are not
going to comment on who we ' ve had discussions with or what the
status of those is . ' '
in addition to its interest in enron assets , san diego - based
sempra has had discussions with enron employees who want to leave
the company , kline said .
` ` a number of enron employees have approached us , as we ' re
aware they ' ve approached other firms , ' ' kline said .
also , sempra said today that its overall financial exposure
related to transactions with enron and its affiliates is less than
$ 15 million .
` ` it would not be material to our earnings , ' ' kline said .
enron mentions - 11 / 28 / 01
u . s . treasury comment on monitoring enron and credit markets
bloomberg , 11 / 28 / 01
enron bonds may be good buy for patient investors , analysts say
bloomberg , 11 / 28 / 01
raymond james ' cartwright comments on enron corp . ' s future
bloomberg , 11 / 28 / 01
fraud attorney aguirre comments on possible enron bankruptcy
bloomberg , 11 / 28 / 01
enron ' s 401 ( k ) plan was set up for fall : david wilson ( update 2 )
bloomberg , 11 / 28 / 01
dynegy ends enron takeover ; credit ratings lowered ( update 8 )
bloomberg , 11 / 28 / 01
enron ' s ratings cut to junk by s & p , moody ' s , fitch ( update 6 )
bloomberg , 11 / 28 / 01
creditsights ' reynolds comments on downgrade of enron to junk
bloomberg , 11 / 28 / 01
spaeth communications president comments on enron corp . outlook
bloomberg , 11 / 28 / 01
houston astros president says enron ' s name will stay on stadium
bloomberg , 11 / 28 / 01
california power authority ' s freeman comments on enron , dynegy
bloomberg , 11 / 28 / 01
enron corp . has busiest day ever for a u . s . stock : table
bloomberg , 11 / 28 / 01
enron appoints troubh to board to lead litigation committee
bloomberg , 11 / 28 / 01
enron ' s problems may spark demand for treasuries , analysts say
bloomberg , 11 / 28 / 01
ifr pegasus ' s evans comments on enron ' s impact on energy market
bloomberg , 11 / 28 / 01
alliance , janus , putnam among biggest enron owners before drop
bloomberg , 11 / 28 / 01
nvidia to replace enron in s & p 500 at end of trading tomorrow
bloomberg , 11 / 28 / 01
intercontinental exchange ' s ceo sprecher comments on enron
bloomberg , 11 / 28 / 01
enron to continue utility sale to northwest natural ( update 3 )
bloomberg , 11 / 28 / 01
enron breached responsibility to employees , lawyer says on cnbc
bloomberg , 11 / 28 / 01
j . p . morgan , citigroup stumble advising enron on sale to dynegy
bloomberg , 11 / 28 / 01
enron online trading unit stops operating , users say ( update 5 )
bloomberg , 11 / 28 / 01
sempra energy interested in buying some enron assets ( update 4 )
bloomberg , 11 / 28 / 01
u . s . treasury comment on monitoring enron and credit markets
2001 - 11 - 28 16 : 04 ( new york )
washington , nov . 28 ( bloomberg ) - - the following is a comment
from michele davis , assistant treasury secretary for public
affairs , on enron corp . dynegy inc . abandoned a takeover bid for
enron today , leaving the country ' s largest energy trader without
enough cash to pay its $ 15 billion in debt . treasury securities
rose after the decision was announced as investors dumped stocks
and moved money into the safety of government debt :
` ` we are monitoring credit markets as we always do
everyday , ' ' davis said . ` ` the markets always fluctuate . we haven ' t
seen anything extraordinary . ' '
enron bonds may be good buy for patient investors , analysts say
2001 - 11 - 28 16 : 18 ( new york )
enron bonds may be good buy for patient investors , analysts say
new york , nov . 28 ( bloomberg ) - - enron corp . debt , which
plunged by half today after its credit rating was cut to junk and
rival dynegy inc . abandoned a planned buyout of the company , may
reward investors willing to hold the bonds while enron sells
assets through a bankruptcy proceeding , analysts said .
enron ' s notes and bonds dipped to as low as 15 cents on the
dollar today after standard & poor ' s cut enron ' s rating six levels
to ` ` b - . ' ' the firm ' s debt issues , which have a combined face
value of more than $ 15 billion according to bloomberg data , traded
mostly between 20 cents and 25 cents this afternoon .
analysts expect enron to file for bankruptcy protection ,
which would put bondholders in line with banks and other creditors
for enron ' s cash and any proceeds from asset sales . under that
scenario , bondholders could get back between 50 cents and 60 cents
on the dollar within three years , said stephen ardizzoni , junk -
bond portfolio manager at smh capital advisors .
` ` you should have a pretty decent return at these purchase
prices , ' ' said ardizzoni , who said he bought some enron notes
maturing in 2003 and bonds maturing in 2019 for between 15 cents
and 20 cents on the dollar today .
bondholders may end up with less if it turns out there are
fewer assets or more liabilities than the company ' s balance sheet
now shows , ardizzoni said . enron has drawn fire for its disclosure
practices , which in recent weeks included revelations of a $ 1 . 2
billion reduction in shareholder equity and an early repayment
date on a $ 690 million note .
like a broker
owners of enron debt may recover 30 cents on the dollar
within two years , mostly from proceeds of sales of enron ' s
pipelines , international assets , and real estate , said jon kyle
cartwright , who follows enron ' s debt for raymond james &
associates inc .
enron , once the biggest energy trader , made most of its money
buying and selling electricity and natural gas . the company can be
likened to a broker because hiring and retaining high - performing
employees and developing relationships is more important than
owning physical assets , cartwright said .
` ` the real value of a broker is with their clients and
personnel . there typically is minimal post - bankruptcy value , ' '
said cartwright . enron ' s trading business doesn ' t have much more
to offer than ` ` office space and the artwork on the walls ' ' in a
bankruptcy proceeding , he said .
marty whitman will consider enron bonds for the $ 4 billion he
helps manage at third avenue funds in new york . still , the 77 - year -
old investor , who specializes in analyzing distressed securities ,
prefers to invest in debt that ' s secured by assets .
said whitman , ` ` i never did understand their trading . ' '
raymond james ' cartwright comments on enron corp . ' s future
2001 - 11 - 28 16 : 22 ( new york )
new york , nov . 28 ( bloomberg ) - - jon kyle cartwright , a
senior vice president and senior energy analyst who follows enron
corp . for raymond james & associates inc . in st . petersburg ,
florida , comments on enron ' s outlook after the company ' s credit
ratings were cut to junk status and dynegy inc . abandoned a
takeover bid for the company .
` ` this is a disaster , ' ' cartwright said . ` ` i don ' t know how
they can ' t file ' ' for protection from creditors . ` ` enron isn ' t a
going concern .
` ` it is difficult , if not impossible , for anyone to do trades
with enron ' s trading operations in light of junk ratings across
the board and dynegy walking away from the deal .
` ` no trading , no cash flow . no cash flow , no enron . ' '
cartwright said he thought the company had two months to sort
out its problems and had a buy on the debt when it initially
` ` blew up .
` ` it was a credibility crisis the company could manage in two
months . i ' m sure they are in talks with their bankers right now ,
but i doubt if their bankers could even help them , ' ' he said .
` ` if any ( energy ) trader does business with enron right now ,
it is a career decision .
` ` it will be hard for energy traders to re - adjust to a world
without enron .
` ` this was a self - fulfilling prophecy . it doesn ' t often
happen that a company has a credibility crisis during a recession ,
in a bear market , ' ' cartwright said .
` ` hopefully , what comes out of the ashes of this is an
entirely new group of analysts that will follow what will now be a
bigger growth business - - energy trading .
` ` all of the smaller energy traders are about to become much
bigger , and the market has to learn how to analyze these things as
brokerage firms . ' '
fraud attorney aguirre comments on possible enron bankruptcy
2001 - 11 - 28 16 : 28 ( new york )
sacramento , california , nov . 28 ( bloomberg ) - - following are
comments made today by michael aguirre , a partner with san diego -
based law firm aguirre in both 1998
and 1999 , it had been less than a majority .
participants in the plan , which had $ 2 . 14 billion in assets
available for benefits , could only do so much to diversify their
investments . enron , like many other companies , used stock rather
than cash to match employee contributions and restricted sales of
the shares .
and they could only guess at the year - end makeup of the plan ' s
assets until the end of june , reflecting sec disclosure standards
for savings plans . by that time , the stock ' s drop - - which reached
99 percent today - - was already well under way .
trio of lawsuits
enron later reported $ 1 . 01 billion in third - quarter charges ;
ousted chief financial officer andrew fastow , who ran partnerships
that accounted for some of the charges ; restated its results since
1997 ; became the target of an sec accounting investigation ; and
accepted a takeover bid from dynegy inc . , its biggest rival .
the company ' s shares , which ended last year at $ 83 . 13 , closed
at just 61 cents today as enron ' s debt was downgraded to junk - bond
status and dynegy abandoned its offer .
in response to the plunge , employees in the 401 ( k ) plan - -
which allows workers to defer part of their pay and build tax - free
savings , and takes its name from a section of the internal revenue
service code - - have filed three lawsuits against enron .
the suits allege , among other things , that the houston - based
company prevented employees from shifting investments within the
plan between oct . 17 , the day after its disclosure of the charges ,
and nov . 19 as the company made administrative changes .
all three seek class - action status on behalf of the plan ' s
participants . the most recent filing came from the gottesdiener law
firm , based in washington , on monday . it covers the longest time
period : november 1995 to now .
falling percentages
enron shares accounted for 64 percent of the savings plan ' s
assets at the end of 1994 , the year before the period associated
with the gottesdiener suit began . the figure reflected a one - time
company contribution of preferred stock , and rose from 62 percent
in 1993 .
each preferred share has a face value of $ 100 and is
convertible into 27 . 304 common shares . this translates into a
conversion price of $ 3 . 66 a share , a bargain before the common
tumbled 85 percent today .
the plan also owned a stake in enron ' s former oil and gas unit ,
which became eog resources inc . after gaining independence in 1999 .
add in those shares , and company stock represented about two - thirds
of the 1994 assets .
enron ' s common and preferred shares fell to 60 percent of
401 ( k ) assets available for benefits in 1995 , 58 percent in 1996
and 53 percent in 1997 as the u . s . stock market rallied , lifting
the value of participants ' investments in equity mutual funds .
the shares represented 49 percent of the plan ' s assets in
1998 . the proportion hit bottom at 46 percent in 1999 , when the
assets more than doubled - - exceeding the 56 percent increase in
enron ' s share price that year - - to $ 1 . 62 billion .
how much choice ?
then came last year , when the common shares recorded their
best performance in more than two decades even as u . s . stocks
stumbled . enron rallied 87 percent amid soaring electricity and
natural gas prices , while the standard credit ratings lowered ( update 8 )
2001 - 11 - 28 16 : 46 ( new york )
dynegy ends enron takeover ; credit ratings lowered ( update 8 )
( updates to add watson comment . )
new york , nov . 28 ( bloomberg ) - - dynegy inc . abandoned a
takeover for enron corp . , leaving the country ' s largest energy
trader facing bankruptcy .
enron shares plunged 85 percent to below $ 1 on concern the
company can ' t repay its $ 15 billion in debt . dynegy withdrew after
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the acquisition was completed . credit rating companies lowered
enron ' s rating to junk .
` ` the reality is enron ' s going bankrupt , ' ' said michael
willingham , a risk manager at itochu international inc . , a unit of
a japanese trading firm . ` ` enron touted themselves as the king of
risk management , but it doesn ' t look like they ' ve managed their
risk very well . ' '
enron ' s sudden collapse - - $ 26 billion of market value
evaporated in seven weeks - - deals a blow to alliance capital
management holdings llp and other big mutual funds , wall street
lenders , such as j . p . morgan chase & co . and citigroup inc . , and
the 21 , 000 employees , many of whom were relying on shares of the
houston - based company for their retirement .
bankers led by j . p . morgan chase vice chairman james b . lee
tried for two weeks to raise the cash enron needed . investors
including saudi prince alwaleed bin talal , the blackstone group lp
and the carlyle group inc . turned them down because of concern
enron would default . that concern was heightened after enron
disclosed it had a $ 690 million payment due this week .
enron shares declined $ 3 . 50 to 61 cents in trading of more
than 342 million shares , the most traded ever for a u . s . stock .
the company ' s 6 . 4 percent bonds , which mature in 2006 , were quoted
as low as 20 cents on the dollar , down from 53 yesterday . at that
price the bonds yield 57 percent .
termination
dynegy said it abandoned the takeover ` ` due to breaches by
enron of representations , warrants , and covenants . ' ' chief
executive officer chuck watson said dynegy invoked its right to
purchase enron ' s northern natural gas pipeline . dynegy received
the right to do so in exchange for an investment of $ 1 . 5 billion
in enron by chevrontexaco corp . , which owns one quarter of dynegy .
the unit operates 16 , 500 miles of natural gas pipeline .
` ` sometimes the best deals are the ones you do not do , ' ' said
watson , who two weeks earlier had sealed the acquisition over
coffee and muffins in the kitchen of enron ceo ken lay ' s houston
home . ` ` we felt we had no choice but to act to protect our
shareholders ' interest , ' ' watson said .
as the news of dynegy ' s rejection flashed across computer
screens on enron ' s trading floor in houston , some employees
started to abandon their desks and leave the office , an enron
trader said . several workers said they expect the company to begin
firing workers tomorrow to prepare for bankruptcy .
` ` we will work to retain the employees necessary to the
continuing operations of our trading and other core energy
businesses , ' ' said lay in a statement . lay was a big backer of
george w . bush ' s campaign for presidency and said he had held
discussions about a job in administration at one point .
enron said in a statement it would halt all payments other
than those required to continue trading operations and would
review dynegy ' s ` ` assertion ' ' that it is entitled to the pipeline
unit .
pipeline company
from its start as natural gas pipeline company in the 1930 s ,
enron was transformed by then ceo jeffrey skilling into the
largest competitor in the business of trading energy , mainly
natural gas and electric power . under skilling , the company also
sought to expand into internet trading for products ranging from
metals to weather derivatives . skilling resigned in august .
enron shares tripled in the two years ended december 2000 ,
peaking at a market value of more than $ 70 billion , as the company
snared $ 16 . 1 billion in long - term energy management contracts from
companies such as international business machines corp . and
starwood hotels & resorts worldwide inc . in the first quarter of
2001 , enron ' s profit from operations rose 20 percent to $ 406
million and revenue quadrupled to $ 50 billion .
enron began to unravel in october after it said shareholders
equity was reduced by $ 1 . 2 billion because it used stock to pay
off debt of a partnership run by then chief financial officer
andrew fastow . the announcement led to lawsuits and a probe by the
securities and exchange commission . the writedown also raised
questions about how enron accounted for debt and losses of similar
affiliated partnerships . on nov . 8 , it restated earnings back to
1997 , lowering them by $ 580 million .
as its shares plunged , enron faced a cash crunch because
lenders and some trading partners lost confidence the company
would have the cash to pay bills . citigroup and j . p . morgan chase
offered to pony up $ 250 million each out $ 2 billion the company
sought . trading partners such as mirant corp . were less
forgiving , demanding more collateral or restricting trading .
enrononline , enron corp . ' s online trading system , stopped
allowing trades and quit posting bids and offers for natural gas
this morning , say traders who use the web site . enron said
yesterday that enrononline handled about 60 percent of its trading
business , or about $ 2 . 8 billion a day .
` ` we can log in , but there is nothing there , nothing to buy
and nothing to sell , ' ' said juha laiho , an energy trader at
finland - based fortum oyj in houston . ` ` it went down some time this
morning . ' '
lower credit ratings
s & p cut its rating on enron to ` ` b - ' ' from ` ` bbb - ' ' and
moody ' s lowered its rating to ` ` b 2 ' ' from ` ` baa 3 . ' ' both ratings
are below investment grade . the downgrade is significant because
the reduction to junk may require enron to repay $ 3 . 9 billion .
andre meade , an analyst at commerzbank securities , said that
enron ' s junk credit rating would ` ` effectively shut down the bulk
of their trading and marketing operations . ' '
` ` it ' s not likely enron will be able to raise the capital to
settle those payments and continue its business , ' ' said meade .
the large debts make it unlikely that investors will receive
much should the company file for bankruptcy , said investors .
` ` this will be a traditional bankruptcy in which equity
holders get nothing , ' ' said edward paik , who has 1 . 6 million enron
shares among $ 7 billion in assets he helps manage for liberty
funds group . ` ` this company doesn ' t have the safety net in terms
of assets that other companies do . ' '
enron ' s ratings cut to junk by s & p , moody ' s , fitch ( update 6 )
2001 - 11 - 28 16 : 51 ( new york )
enron ' s ratings cut to junk by s & p , moody ' s , fitch ( update 6 )
( adds bond prices in 14 th paragraph . )
new york , nov . 28 ( bloomberg ) - - standard & poor ' s , moody ' s
investors service and fitch inc . slashed enron corp . ' s credit
rating to junk status today , raising the prospect of chapter 11
bankruptcy as rival energy trader dynegy inc . rescinded its buyout
bid for the company .
the company is struggling with a cash crunch as at least $ 3 . 9
billion in debt comes due immediately because of the rating cut ,
and is suspending its online trading unit and some ` ` non - core ' '
payments . enron ' s trading business is also faltering as trading
partners lose faith in the company ' s ability to meet its
obligations .
` ` this is a disaster , ' ' said jon kyle cartwright , a debt
analyst at raymond james & associates . ` ` it is difficult , if not
impossible , for anyone to do trades with enron ' s trading
operations in light of junk ratings across the board and dynegy
walking away from the deal . ' '
s & p cut enron ' s long - term credit rating this morning six
levels to ` ` b - ' ' from ` ` bbb - ' ' and withdrew its ` ` a ' ' short - term
grade .
s & p analyst todd shipman , the author of the rating report ,
said the rating could be lowered if enron ' s cash situation isn ' t
resolved , and that a move to a chapter 11 bankruptcy filing and
the lowest ` ` d ' ' rating were both possibilities .
` ` we saw the deterioration in the trading operations , and
that threw the merger in doubt , ' ' he said . he said s & p may change
the rating soon .
following suit
moody ' s followed s & p with a five - level cut in enron ' s credit
rating to ` ` b 2 ' ' from ` ` baa 3 . ' ' moody ' s affirmed its ` ` not - prime ' '
rating on enron ' s commercial paper .
fitch lowered enron ' s senior unsecured rating 10 levels , to
` ` cc ' ' from ` ` bbb - , ' ' and its short - term rating to its second -
lowest ` ` c ' ' from ` ` f 3 . ' ' fitch said in its report that a
` ` default of some kind appears probable . ' '
egan - jones ratings co . cut enron ' s credit rating to junk on
oct . 26 , when it lowered it one level to ` ` bb + ' ' from ` ` bbb - . ' '
the rating company downgraded the credit several times since then ,
and cut it to ` ` c ' ' today .
s & p , moody ' s and fitch all had enron ' s credit rating three
levels above junk in january , while egan - jones rated it four
levels higher .
the companies cut the ratings several times since october ,
amid news that enron ' s dealings with partnerships run by former
chief financial officer andy fastow contributed to trading losses .
enron reported $ 1 . 01 billion in third - quarter losses from failed
investments .
pressure
the acquisition by dynegy promised to alleviate the ensuing
cash crunch . enron ' s stock fell by more than 50 percent since nov .
19 amid growing skepticism that the dynegy would complete the
acquisition .
` ` we became a lot more concerned when the stock didn ' t
stabilize , ' ' said john diaz , moody ' s managing director for energy
and one of the authors of the downgrade report . ` ` the drop in the
stock price put pressure on dynegy to renegotiate the deal . ' '
enron has $ 15 . 5 billion of debt outstanding , according to
bloomberg data . its shares , which have fallen 99 percent this
year , lost $ 3 . 50 today to 61 cents . the company ' s bonds dropped by
about half to 26 cents on the dollar from 53 cents .
s & p ' s shipman said in his report that ` ` the willingness of
dynegy to complete its planned acquisition of enron has been
compromised by the continued drop in confidence in the capital
markets that the transaction would hold . ' '
credit analysts also focused on enron ' s cash flow levels ,
diaz said . enron said in its most recent filing last week that it
had $ 1 billion in cash , which was a lot less than the market had
expected , diaz said .
` ` it came as a surprise to us and to others , ' ' he said . ` ` we
expected at least $ 2 . 5 billion so they would have staying power . ' '
creditsights ' reynolds comments on downgrade of enron to junk
2001 - 11 - 28 16 : 52 ( new york )
new york , nov . 28 ( bloomberg ) - - glenn reynolds , an analyst
at fixed - income research firm creditsights inc . , comments on the
slide in enron corp . ' s debt ratings to junk levels :
` ` the likely bankruptcy will generate material losses for a
number of banks , wall street firms and institutional investors - -
including a number who did not face the daily pressures of marking
their book to market , ' ' reynolds said .
` ` some counterparty credit defaults will also have some
follow - on effects in the commodity markets , foreign exchange and
on swap desks . many of these counterparties could delay or manage
their loss recognition , but this one is now one you cannot hide
from . the most interesting issue will be to see the fallout in the
default swap market if - - more likely when - - that brutal step is
taken and they file chapter 11 . ' '
spaeth communications president comments on enron corp . outlook
2001 - 11 - 28 16 : 53 ( new york )
new york , nov . 28 ( bloomberg ) - - merrie spaeth , president of
spaeth communications , comments on enron corp . ' s options after the
company ' s credit ratings were cut to junk status and dynegy inc .
abandoned a takeover bid for the company . dallas - based spaeth is a
communications consultant to dynegy .
` ` a chapter 11 reorganization would be the only way that
enron could resolve the lawsuits it faces and the other issues
surrounding the partnerships .
` ` chapter 11 carries a whole set of risks on its own , but it
gives the company a chance to manage perceptions . it puts a
premium on communication , quick , concise and targeted
communication - - the antithesis of what enron has developed in its
culture .
` ` the benefit of a chapter 11 is that it gives you the
opportunity to revamp how you do business . ' '
houston astros president says enron ' s name will stay on stadium
2001 - 11 - 28 17 : 03 ( new york )
houston , nov . 28 ( bloomberg ) - - enron corp . , left at the
brink of bankruptcy after losing potential buyer dynegy inc . and
having its credit rating cut to junk , has a friend in the houston
astros .
team president tal smith said the club isn ' t abandoning the
company , which is paying $ 3 . 3 million annually for 30 years to
have its name on the astros ' home ballpark , enron field .
` ` we identify with enron , and they identify with us , ' ' smith
said . ` ` there ' s no negative association because of their
difficulties . ' '
enron , the u . s . ' s biggest energy trader , entered into the
agreement with the major league baseball team just before the new
stadium opened for the 2000 season . the company ' s shares were on
the way to tripling their value from 1998 , and the astros had just
won their third straight national league central division title .
since then , the company ' s fortunes have plummeted . the
company has $ 15 billion in debt and not enough cash to pay it .
dynegy abandoned its plan to buy its houston neighbor for at least
$ 23 billion in stock and assumed debt today .
enron also has a contract to supply and manage energy for the
baseball stadium for the next 30 years , said dean bonham , a denver -
based consultant who analyzes and sells naming rights agreements .
` ` this is more than a naming rights deal , ' ' bonham said .
` ` they ' re going to eventually have to find another company to
supply that service as well as put their name on the ballpark . ' '
meantime , the name of the astros ' home won ' t change , smith
said . ` ` until there ' s no longer a company , it ' ll still be enron
field , ' ' he said .
california power authority ' s freeman comments on enron , dynegy
2001 - 11 - 28 17 : 03 ( new york )
sacramento , california , nov . 28 ( bloomberg ) - - the following
are comments by california power authority chairman s . david
freeman on dynegy inc . ' s decision to abandon its purchase of enron
corp . and the possibility of enron filing for chapter 11
bankruptcy protection .
` ` i don ' t think that trading of energy in the spot market is
going to be materially affected by this . there are a lot of other
people who will take up the slack . ' '
` ` i see this as an indication that a very volatile market can
kill the consumer , but it can also kill one of the companies . ' '
` ` it ' s a fascinating footnote that a year ago it was the
state of california that appeared to be on the verge of
bankruptcy , at least some of the utilities were . and now the shoe
has kind of dropped on the other foot . ' '
` ` i take no pleasure in this at all . i don ' t view this as a
happy or good thing , but when you live by the sword , sometimes you
die by the sword . ' '
enron corp . has busiest day ever for a u . s . stock : table
2001 - 11 - 28 17 : 19 ( new york )
enron corp . has busiest day ever for a u . s . stock : table
new york , nov . 28 ( bloomberg ) - - enron corp . had the most -
active day for a u . s . stock , with 343 million shares trading ,
according to preliminary figures from the new york stock exchange .
enron plunged $ 3 . 50 , or 85 percent , to 61 cents a share after
dynegy inc . abandoned a takeover bid for enron , leaving the
largest energy trader without enough cash to pay its $ 15 billion
in debt .
standard & poor ' s corp . cut enron ' s credit rating to junk as
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the sale was completed .
the following is a list of stocks with the 10 highest one - day
trading volumes in u . s . market history , according to data from the
nyse and the nasdaq stock market .
* t
stock date volume ( in millions )
enron corp . nov . 28 , 2001 343 . 2
intel corp . sept . 22 , 2000 308 . 7
cisco systems inc . feb . 7 , 2001 281 . 6
oracle corp . march 2 , 2001 224 . 0
cisco systems jan . 10 , 2001 213 . 0
jds uniphase corp . july 26 , 2000 200 . 4
cisco systems oct . 3 , 2001 196 . 5
worldcom inc . nov . 1 , 2000 195 . 5
exodus communications sept . 25 , 2001 193 . 1
exodus communications june 21 , 2001 186 . 4
* t
enron appoints troubh to board to lead litigation committee
2001 - 11 - 28 17 : 28 ( new york )
enron appoints troubh to board to lead litigation committee
houston , nov . 28 ( bloomberg ) - - enron corp . , whose shares
dropped 85 percent today after dynegy inc . walked away from its
takeover bid , appointed financial consultant raymond s . troubh to
the board and to lead a new litigation committee .
enron , the top energy trader whose shares have fallen 99
percent this year , said the committee will evaluate claims from
shareholder and other lawsuits filed against the company since
the u . s . securities and exchange commission began investigating
the company ' s finances .
enron board member william c . powers jr . , dean of the
university of texas school of law , who was appointed last month ,
will also serve on the litigation committee .
troubh serves on the boards of starwood hotels & resorts ,
healthnet inc . diamond offshore drilling , triarc cos . and gentiva
health services inc . , among others . he holds degrees from bowdoin
college and yale law school and is a former general partner at
investment bank lazard freres & co .
shares of houston - based enron fell $ 3 . 50 to 61 cents .
enron ' s problems may spark demand for treasuries , analysts say
2001 - 11 - 28 17 : 36 ( new york )
new york , nov . 28 ( bloomberg ) - - enron corp . ' s fall to junk
credit ratings may benefit treasury securities as traders and
investors worry about what firms have exposure to the houston ,
texas - based energy trader .
gains would add to u . s . government debt that has returned
more than 6 percent this year . it benefited from falling stocks
and disappointing corporate earnings as well as from the federal
reserve ' s 4 . 5 percentage points of rate cuts aimed at reviving an
economy that has been in recession since march .
dynegy inc . , which had agreed to purchase enron , terminated
that agreement following the downgrade .
` ` anything with a negative connotation like this , investors
get spooked and the first thing they think of is to jump into
something safe like treasuries , ' ' said brian cothran , who helps
manage $ 15 billion in fixed income at fifth third bank in
cincinnati . he said he plans to hold on to the enron bonds in his
portfolio .
treasuries jumped following standard & poor ' s downgrade of
enron corp . as investors sought the relative safety of debt backed
by the u . s . the most - widely traded 10 - year note rose to 101 6 / 32
from 100 25 / 32 in the 10 minutes after the announcement .
the downgrades of enron by s & p and moody ' s investors service
to junk bond status raised concern about credit ratings of firms
that have exposure to the energy trader , especially if it files
for bankruptcy protection . the downgrades also triggered enron ' s
need to repay about $ 3 . 9 billion in notes sold by two trusts - -
marlin water trust and osprey trust .
enron has more than $ 15 billion in debt and preferred stock
and about $ 4 billion in bank loans , of which $ 3 billion is
unsecured . swaps , options , and derivative risk aren ' t included in
those figures . banks and wall street dealers hold unsecured enron
loans and some sold credit default swaps , which provide insurance
to debt holders in case enron defaults .
interest rate futures
eurodollar futures , indications of three - month interest
rates , which are used to hedge risk , rose ` ` after the announcement
that s & p downgraded enron to junk on a flight to quality bid as
traders tried to figure out just how big a calamity this may be , ' '
said scott gelling , an assistant vice president at carr futures
inc . in chicago .
` ` on a scale of one to 10 , with long - term capital management
being a 10 , they are wondering where this will fall . ' '
swap spreads , a gauge of investors ' willingness to buy
riskier assets , rose for the fourth day in five after the
downgrade , and as major u . s . stock indexes declined . at 72 basis
points above the 10 - year treasury yield , the 10 - year swap spread
has risen 14 basis points from a three year low two weeks ago .
today ' s move was , in part , a reaction to concerns about exposure
some u . s . - based banks may have to enron , including j . p . morgan
chase & co . and citigroup , which arranged the company ' s fully
drawn $ 3 billion unsecured credit line , traders said .
seeking yield
the fed ' s ten interest - rate cuts this year helped encourage
investors to seek higher yields from top investment - grade
borrowers including at & t corp . and american express co . the fed ' s
cuts also depressed already - low rates on money - market funds and
certificates of deposit .
the price on enron ' s 6 . 4 percent notes maturing in 2006
tumbled to 20 cents on the dollar from 53 cents yesterday . at that
price , the bonds yield 57 percent . enron ' s tumble pulled prices
down on other corporate bonds as investors worried the recession
is eroding companies ' ability to repay debts . corporate yield
spreads widened as much as 4 basis points , according to fidelity
capital markets .
still , the flight to quality may be short - lived , said kevin
cronin , who oversees $ 45 billion at putnam investments in boston ,
who owns enron debt . enron ` ` is just one credit and i don ' t think
it ' s indicative of a financial crisis , ' ' he said .
erasing gains
treasuries erased gains after the government sold a record
amount of two - year debt , and on expectations that sales will
increase to pay for the nation ' s war on terrorism and fiscal
spending and tax cuts . investors selling debt they purchased
expecting a flight - to - quality on the enron news that didn ' t
materialize , exacerbated the sell - off , traders said .
the 10 - year note lost almost a half point in a half hour , its
yield rising to 4 . 91 percent from 4 . 87 percent . the note , which
has a 5 percent coupon and matures in august 2011 , ended the day
little changed , yielding 4 . 92 percent .
` ` nobody has a terrific handle on why the market is acting
this violently , ' ' said brad stone , director of u . s . market
strategy at barclays capital . volatility is increasing into year -
end and ` ` no one wants to take a lot of risk , ' ' he said .
ifr pegasus ' s evans comments on enron ' s impact on energy market
2001 - 11 - 28 17 : 36 ( new york )
new york , nov . 28 ( bloomberg ) - - tim evans , senior energy
analyst at ifr pegasus in new york , comments on the impact on
energy trading from the credit crisis that has left enron corp .
facing bankruptcy .
the company ' s enrononline internet - based platform for trading
natural gas , power and oil stopped functioning this morning , at
about the same time dynegy inc . pulled out of a planned buyout of
enron . that decision came moments after standard janus capital corp . , a unit of stilwell financial
inc . ; putnam investment management inc . , which is owned by marsh barclays global investors , a unit of barclays plc ;
and fidelity investments , the world ' s largest money manager .
enron shares have fallen 99 percent this year , wiping out
about $ 77 . 1 billion in market value . investors lost $ 2 . 61 billion
today alone as the stock plunged $ 3 . 50 , or 85 percent , to 61 cents
a share .
the stock has posted the biggest decline in the standard &
poor ' s 500 index this year , meaning fund managers with over $ 1
trillion invested in portfolios that try to mimic the benchmark
have followed the stock down .
enron ' s decline today prompted standard & poor ' s to kick the
company out of the s & p 500 , used by most professional investors as
a benchmark for u . s . stocks . the company will be removed when the
market closes tomorrow .
index managers , who mimic the makeup of the s & p as closely as
possible , will sell at that time . other investors are likely to
sell as well , if they haven ' t already , because money managers who
pick stocks based on their evaluation of a company ' s earnings
prospects often prefer to stick to stocks that are in the index to
ensure their performance doesn ' t lag the benchmark .
barclays global , the biggest manager of index portfolios ,
will sell the stock from s & p 500 index funds , said spokesman tom
taggart .
no comment
institutional investors are required to tell the securities
and exchange commission what they ' re invested in and how many
shares they own . the biggest investors may have sold or bought
shares since the last filings sept . 30 .
alfred harrison , vice chairman and fund manager at alliance
capital , didn ' t immediately return a call . john meyers , a
spokesman , declined to comment , as did janus spokeswoman shelley
peterson and fidelity spokesman vin loporchio . a call to putnam
spokeswoman nancy fisher wasn ' t immediately returned .
the california state teachers ' retirement system owned about
2 million enron shares as of june , its latest filing , said sherry
reser , a spokeswoman . about 88 percent of that stake was in index
or index - like funds , she said . ` ` we would follow whatever
rebalancing is done in the index , ' ' she said .
the california public employees ' retirement system , the
biggest u . s . employee pension fund with about $ 144 billion in
assets , owns about 3 million enron shares , most of them in an
index fund , said spokesman brad pacheco . he said the losses won ' t
hurt calpers overall .
` ` you ' re going to have winners and losers , ' ' pacheco said .
` ` it ' s minimal compared to our entire portfolio . ' '
scott schermerhorn , manager of the $ 1 billion liberty
utilities fund in boston , said he ' s in a similar position . he
bought shares in the largest energy trader at $ 10 each this year .
he wouldn ' t say if he had sold his stake , or when .
still , his utilities fund is down 8 . 7 percent in 2001 versus
a 14 . 5 percent decline in the s & p 500 . ` ` it knocked me for a good
loop , but it didn ' t knock me down , ' ' he said .
the three largest sellers of enron stock since the end of the
third quarter were rorer asset management , goldman sachs group
inc . and american express financial . goldman spokeswoman kathleen
baum declined to comment . edward rorer , chairman of philadelphia -
based rorer asset management , didn ' t immediately return a call .
spokeswoman terri dresen of american express said the firm
has sold shares over the last several months . she said she didn ' t
know how many .
time to sell
the three largest buyers were alliance , rittenhouse and
fidelity .
the pain extends beyond the stockholders . enron ' s 6 . 4 percent
bonds , which mature in 2006 , were quoted at 20 cents on the
dollar , down from 53 yesterday .
enron exchange notes , which are traded on the new york stock
exchange and are convertible into shares of eog resources inc . ,
fell $ 11 . 76 to $ 6 . 15 . the notes are tied to enron ' s stake in eog ,
said eog spokeswoman maire baldwin . eog is a former enron unit .
shares of newpower holdings inc . fell 26 cents to 90 cents ,
giving them a loss for the year of 90 percent . enron is newpower ' s
largest shareholder as well as a major creditor . newpower markets
power to homeowners nationwide .
in canada , the ontario teachers ' pension plan , which oversees
about c $ 70 billion ( us $ 44 billion ) , hasn ' t sold its stake in
newpower , according to senior vice president of merchant banking
james leech . the plan owned 2 . 5 million shares and 5 . 6 million
class a warrants .
standard & poor ' s cut enron ' s credit rating to junk today as
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the deal was done . the lack of funds and the prospect of a
downgrade contributed to dynegy ' s decision to cancel the buyout ,
which was valued at $ 23 billion on nov . 9 .
` ` we ' ve obviously lost money like any other shareholder
has , ' ' pacheco said . calpers has the ` ` same tools in our toolbox -
- corporate governance measures , lawsuits like you ' ve seen already
filed against enron - - that any shareholder has in trying to
recover any losses , but decisions about using those are going to
be made by the board . ' '
pacheco said it ' s likely calpers won ' t take any action until
the pension fund ' s board has a chance to talk at a planned meeting
on dec . 17 in sacramento .
` ` we would certainly be a member of a class action suit , ' '
said taggart of barclays global .
schermerhorn said he could sue , though he ' s not sure if it ' s
worth the trouble , in part because bondholders are typically paid
first when a company goes bankrupt .
` ` it ' s like suing the guy washing windows outside the lincoln
tunnel , ' ' schermerhorn said . ` ` you could win , but what would you
get ? ' '
largest enron shareholders as of sept . 30
* t
name shares
axa financial 43 . 01 million
janus capital 41 . 36 million
putnam investment 23 . 12 million
barclays global 23 . 04 million
fidelity management 20 . 79 million
citigroup inc . 20 . 79 million
state street global 16 . 14 million
aim advisors inc . 13 . 99 million
taunus corp . 12 . 45 million
vanguard group 11 . 45 million
* t
source : sec filings
nvidia to replace enron in s & p 500 at end of trading tomorrow
2001 - 11 - 28 17 : 40 ( new york )
nvidia to replace enron in s & p 500 at end of trading tomorrow
new york , nov . 28 ( bloomberg ) - - enron corp . will be dropped
from the standard & poor ' s 500 index and replaced with nvidia
corp . at the close of trading tomorrow , standard & poor ' s said .
shares of enron , the largest energy trader , plunged 85
percent to 61 cents today , and the company may go bankrupt . rival
dynegy inc . abandoned a takeover of the company after enron failed
to raise enough cash to keep operating until the purchase could be
completed .
nvidia , which makes computer - graphics chips , is the best -
performing stock in the nasdaq 100 index this year , gaining 214
percent .
anheuser - busch cos . will replace enron in the s & p 100 ,
standard & poor ' s said . the largest brewer already is a member of
the s & p 500 .
intercontinental exchange ' s ceo sprecher comments on enron
2001 - 11 - 28 18 : 01 ( new york )
atlanta , nov . 28 ( bloomberg ) - - jeffrey sprecher , chief
executive officer of intercontinental exchange inc . , comments on
how the downgrade today of enron corp . ' s credit rating to junk
status affected intercontinental ' s online energy - trading system .
atlanta - based intercontinental is owned by a consortium of
banks and energy companies , including bp plc , duke energy corp .
and goldman sachs group inc .
` ` we had about 3 , 600 bids and offers ' ' logged into the
intercontinental system at about 11 a . m . , sprecher said .
within 15 minutes of the credit downgrade by standard &
poor ' s , which left enron ' s rating at junk status , ` ` that number
dropped to 2 , 100 . so about 40 percent of the people in the market
pulled out momentarily to assess what was going on . ' '
` ` it was a very big trading day on ice . if not a record day ,
it was one of the top five busiest days we ' ve had . we ' re up about
65 percent in terms of our trading volumes over the last 30 days ,
and the number of new users has gone up by about 30 percent . so
there ' s a lot of growth we ' ve been trying to digest in the last 30
days , much of which is attributable to problems at enron . ' '
enron to continue utility sale to northwest natural ( update 3 )
2001 - 11 - 28 17 : 40 ( new york )
enron to continue utility sale to northwest natural ( update 3 )
( adds northwest natural comment in fourth , fifth paragraphs . )
portland , oregon , nov . 28 ( bloomberg ) - - enron corp . , the
nearly bankrupt energy trader , plans to go through with the sale
of its portland general electric co . utility unit to northwest
natural gas co . , both companies said .
enron last month agreed to sell pge to northwest natural for
$ 2 . 9 billion in cash , stock and assumed debt . dynegy inc . today
called off its planned purchase of enron , saying the energy trader
breached covenants in the merger agreement . dynegy had supported
the pge sale .
northwest natural filed its application to buy pge with the
oregon public utility commission today . in the application ,
northwest natural said combining its operations with pge would
eventually result in savings of as much as $ 30 million a year .
northwest natural will ` ` have to study ' ' the potential impact
of enron ' s latest problems , northwest chairman and chief executive
officer richard g . reiten said . he said he expects the acquisition
to move forward .
` ` we believe it only underscores the merits of the
acquisition of pge by northwest natural , ' ' reiten said in a
conference call with analysts .
enron spokeswoman karen denne said her company has no plans
to call off the sale .
` ` we are proceeding with our previously announced asset
sales , including portland general , ' ' denne said .
northwest natural shares fell 47 cents to $ 23 . 87 . enron
shares fell $ 3 . 50 to 61 cents . enron shares have dropped 99
percent since the first of the year .
commission ' s role
marc hellman , the administrator responsible for mergers and
acquisitions at the oregon public utility commission , said he is
unsure what would happen if enron were to file for bankruptcy
protection .
` ` i can ' t recall it ever happening , and i ' ve been here for
22 years , ' ' hellman said . ` ` if it went all the way to the end ,
where they ' re liquidating assets , you can ' t sell utility property
without commission approval . there are probably some issues where
our attorney general ' s office may look into it . ' '
hellman said he has heard nothing to indicate northwest
natural ' s purchase of pge wouldn ' t go forward .
` ` enron was getting cash from northwest natural for the
purchase , as well as shares , ' ' hellman said . ` ` that aspect of the
transaction becomes a little curious if enron is going through
bankruptcy . ' '
debt downgrades
moody ' s investors service today downgraded pge ' s senior
secured debt to ` ` a 3 ' ' from ` ` a 2 . ' ' moody ' s also downgraded pge ' s
unsecured debt , its junior subordinated debt and its preferred
stock . moody ' s , standard & poor ' s and fitch inc . cut enron ' s
credit rating to junk status today .
the ratings service said it had expected to downgrade pge ' s
ratings once northwest natural completed its acquisition of the
utility .
` ` however , today ' s rating action is being taken in advance of
the expected closing of that transaction to reflect moody ' s
concerns surrounding portland general ' s ability to remain fully
insulated from the many financial challenges currently being faced
by its parent , enron corp . , due in large part to lost investor
confidence in enron , ' ' moody ' s said in a statement .
enron breached responsibility to employees , lawyer says on cnbc
2001 - 11 - 28 17 : 38 ( new york )
houston , nov . 28 ( bloomberg ) - - enron corp . breached its
fiduciary responsibilities to its employees by allowing them to
continue to invest in company stock for their retirement plans ,
enron employees ' lawyer eli gottesdiener said in an interview with
financial news network cnbc .
the company should have stopped its program that encouraged
employees to invest in its shares as part of its 401 ( k ) plan ,
gottesdiener said in the interview . the company should have known
its stock was artificially inflated , he told cnbc .
j . p . morgan , citigroup stumble advising enron on sale to dynegy
2001 - 11 - 28 18 : 32 ( new york )
j . p . morgan , citigroup stumble advising enron on sale to dynegy
new york , nov . 28 ( bloomberg ) - - j . p . morgan chase & co . and
citigroup inc . bet their reputations backing enron corp . ' s sale to
dynegy inc . - - and the failed merger left the investment firms
with black eyes and hundreds of millions in possible losses .
with dynegy abandoning its proposed takeover today , the banks
could lose $ 800 million each , according to goldman sachs group
inc . financial services analyst richard strauss . the banks also
stand to forfeit $ 45 million apiece in advisory fees .
` ` i ' d be surprised if no heads rolled from this , ' ' said david
gilmore , who manages the $ 1 . 1 billion federated capital
appreciation fund , which owns j . p . morgan and citigroup shares .
j . p . morgan shares lost $ 2 . 30 , or 5 . 8 percent , to $ 37 . 50 ,
after the transaction fell apart . citigroup dropped $ 2 . 75 , or 5 . 4
percent , to $ 47 . 80 .
j . p . morgan spokeswoman kristin lemkau declined to comment ,
as did citigroup ' s salomon smith barney investment banking unit .
dynegy withdrew its bid , initially valued at $ 23 billion ,
after standard & poor ' s corp . downgraded enron debt to junk . for
both banks , the takeover would have been the year ' s third largest .
it ranked eighth among all announced takeovers this year .
` ` sometimes the best deals are the ones you do not do , ' '
dynegy chairman charles watson said in a conference call . ` ` we
know how to say no , and we did that . ' '
the deal ' s implosion today , with enron shares at 61 cents ,
capped an epic that saw the houston - based company turn itself from
a natural gas pipeline carrier into the largest u . s . energy trader
into an outfit with debts of $ 15 billion it couldn ' t pay .
enron ' s plunge
enron stock began plunging in october - - after falling from
its $ 90 . 75 peak - - with the disclosure of a securities and
exchange commission probe into how the company accounted for
outside partnerships it created .
even before dynegy made its bid on nov . 9 , citigroup and j . p .
morgan tried to shore up enron , agreeing to lend the company $ 1
billion . j . p . morgan also enlisted chairman william harrison to
make calls to keep the energy trader ' s credit above junk rating .
salomon smith barney drafted chief executive officer michael
carpenter in a similar effort .
when the takeover was formally proposed , the banks not only
made good on their loan commitment : they agreed to invest another
$ 250 million each if other investors could be found . j . p . morgan
vice chairman james b . lee headed a team that tried , and failed ,
to raise another $ 1 . 5 billion .
failed strategy
among those who turned down enron and its bankers were saudi
prince alwaleed bin talal , the carlyle group inc . and blackstone
group lp .
the collapsed transaction may tarnish citigroup and j . p .
morgan over a questionable strategy of extending commercial
lending power to clients to gain higher - margin investment banking
business , analysts said . each bank was formed when a commercial
bank took over an investment bank .
behind the formation of the larger banks was the notion they
could attract investment banking business from stand - alone
investment banks such as goldman sachs group inc . and morgan
stanley dean witter & co . that are limited in what they can lend .
it was a strategy that failed , at great cost , when the enron -
dynegy merger fell apart .
as the purchase was still taking shape , goldman sachs
refused to lend to enron , a client whose credit rating was now
falling and who was making less frequent use of goldman ' s
investment banking services , according to people familiar with the
matter .
bankruptcy is ` inevitable '
morgan stanley avoided enron because it was perceived as too
demanding a client and one that played investment banks off each
other to reduce fees , a person familiar with the matter said .
lehman brothers holdings inc . advised dynegy and negotiated a
fee of about $ 15 million .
enron , the worst performer this year in the standard & poor ' s
index of 500 large u . s . companies , fell $ 3 . 50 or 85 percent , to 61
cents . its 52 - week high , reached dec . 28 , was $ 84 . 88 .
now , with dynegy backing out and no ready savior , enron may
quickly wind up in bankruptcy court , analysts and investors said .
` ` bankruptcy is all but inevitable , ' ' said michael heim , an
analyst with a . g . edwards & sons , who has a ` ` sell ' ' rating on
enron shares .
enron online trading unit stops operating , users say ( update 5 )
2001 - 11 - 28 18 : 37 ( new york )
enron online trading unit stops operating , users say ( update 5 )
( adds nymex chairman ' s comment in 26 th paragraph . )
new york , nov . 28 ( bloomberg ) - - enrononline , which handled
$ 2 . 8 billion a day in energy trading for parent enron corp . ,
halted internet transactions and quit posting prices for natural
gas , electricity and oil products , said users of the web site .
trading screens became useless about 11 a . m . new york time ,
around when dynegy inc . canceled plans to buy enron . the decision
may force enron , once the country ' s largest energy trader , to file
for chapter 11 bankruptcy protection , analysts said . enron was the
buyer or seller of all transactions over enrononline .
the company said yesterday that enrononline handled about 60
percent of its trading business , or about $ 2 . 8 billion a day in
trading on average over the past 30 days . the halt in service left
users unable to value or make trades . some switched to competitors
such as atlanta - based intercontinental exchange inc . , an online
exchange run by a consortium of banks and energy companies .
` ` we can log in , but there is nothing there , nothing to buy
and nothing to sell ' ' at enrononline , said juha laiho , an energy
trader at finland - based fortum oyj in houston .
leslie vandagriff , manager of natural gas trading at highland
energy co . , was sitting at her desk in dallas when ` ` everything
went blank . ' ' vandagriff was using enrononline prices to compare
the value of trades she was making with other companies . she
switched to prices published by the intercontinental exchange .
no future ?
enron temporarily suspended ` ` all payments other than those
necessary to maintain core operations , ' ' the company said in a
statement . enron officials didn ' t return numerous phone calls
seeking comment on the status of enrononline .
when the news of the collapse of the acquisition reached
enron traders , many left the trading floor saying that without
dynegy , they had no future , an enron trader said .
traders outside the company had already been wary of making
new contracts with enron because of concern about its credit
rating , which today was slashed to junk status by standard &
poor ' s and moody ' s investors service .
` ` i don ' t think anybody is trading with enron right now , ' '
fortum oyj ' s laiho said . ` ` even late last week , people were not
making new positions with them . it was an unstable situation . ' '
small exposure
some of enron ' s biggest trading partners said their exposure
to losses from an enron bankruptcy is small .
el paso corp . , owner of the biggest u . s pipeline network , and
american electric power co . , the biggest electricity generator ,
and aquila inc . , an energy trader , said each faced a possible loss
of $ 50 million . mirant corp . said it wouldn ' t lose more than $ 60
million , and dynegy said its exposure was limited to $ 75 million .
` ` i don ' t anticipate a string of bankruptcies to follow this
one , ' ' said tim evans , senior energy analyst at ifr pegasus in new
york .
` ` the energy markets are bigger than any one company ,
including enron , ' ' american electric spokesman pat hemlepp said .
` ` we don ' t expect any disruption . ' '
energy buyers and sellers have been concerned for weeks that
enron ' s financial problems may disrupt markets such as the new
york mercantile exchange , the largest energy marketplace . enron is
the largest trader of natural gas .
` ` if they have to go to bankruptcy protection now , which may
even happen by the end of the day , then nymex positions will have
to be liquidated , ' ' said ed silliere , vice president of risk
management at energy merchant llc in new york .
the nymex is ` ` very comfortable that all of our customers are
safe from any financial losses suffered by a single entity , ' '
spokeswoman nachamah jacobovits said when asked about enron .
cover for losses
enron ' s positions in futures markets are guaranteed first by
the member , or members , that clear its trades on the exchange . if
the clearing member couldn ' t cover losses , the exchange has a $ 70
million guarantee fund , followed by another $ 425 million that it
could draw on from other members .
while natural gas futures surged as much as 8 percent after
the news of dynegy ' s pullout , prices later declined 11 percent on
the nymex . gas for december delivery fell 29 cents to $ 2 . 316 per
million british thermal units .
financial safeguards like those on the nymex aren ' t available
in most over - the - counter energy markets , including forward and
swaps transactions . few transactions have the backing of an
intermediary .
` ` this will have a near - term chilling effect on forward
energy trading business , ' ' said tom knight , director of trading at
truman arnold cos . , a wholesale fuel supplier in texarkana , texas .
` ` if you ' re not willing to trade with a company that was the size
of enron , then who are the companies you are going to be willing
to deal with ? ' '
other exchanges
other online energy exchanges benefited as traders avoided
doing business with enron .
ngx canada inc . , an internet exchange for natural gas in
canada , has traded about 300 , 000 terajoules of gas so far this
month , worth about $ 750 million at current prices . trading is
about 50 percent higher than in october .
` ` yesterday was our third or fourth best day ever , ' ' said dan
zaftawny , a spokesman for ngx , which is owned by om gruppen ab ,
parent of the stockholm stock exchange .
another beneficiary has been atlanta - based intercontinental
exchange , which is owned by a consortium that includes aep , bp
plc , duke energy corp . and goldman sachs group inc .
` ` it was a very big trading day on ice , ' ' said jeffrey
sprecher , intercontinental ' s chief executive officer . ` ` we ' re up
about 65 percent in terms of our trading volumes over the last 30
days , and the number of new users has gone up by about 30 percent .
so there ' s a lot of growth we ' ve been trying to digest in the last
30 days , much of which is attributable to problems at enron . ' '
the new york mercantile exchange is expected to approve
expanded and extended trading of natural gas tomorrow morning , and
nymex will accelerate introduction of an electronic trading
platform designed to compete with enrononline , exchange chairman
vincent viola said in an interview on cnbc .
sempra energy interested in buying some enron assets ( update 4 )
2001 - 11 - 28 18 : 45 ( new york )
sempra energy interested in buying some enron assets ( update 4 )
( adds sempra ' s exposure to enron in ninth , 10 th paragraphs . )
san diego , nov . 28 ( bloomberg ) - - sempra energy , an owner of
electric and natural - gas utilities , is interested in buying some
of enron corp . ' s assets now that the energy trader ' s planned
merger with dynegy inc . has failed , a sempra spokesman said .
` ` we are interested in some of enron ' s hard assets and our
interest would lie in those assets that would have synergies with
our own operations , ' ' sempra spokesman doug kline said . ` ` beyond
that i couldn ' t give you more specifics . ' '
dynegy today called off its purchase of enron , saying the
energy trader breached covenants in the merger agreement . dynegy
had agreed to buy enron for at least $ 23 billion in stock and
assumed debt this month . a federal investigation of accounting
irregularities at enron had limited its ability to finance
operations and sent its shares plunging .
sempra shares fell 35 cents to $ 22 . 70 . enron shares fell
$ 3 . 50 to 61 cents . enron shares have dropped 99 percent since the
first of the year .
houston - based enron has an ownership interest in argentina ' s
4 , 104 - mile natural - gas pipeline system , the largest pipeline
system in south america . sempra energy international owns a 43
percent stake in two natural - gas utility holding companies in
argentina . sempra also is the owner of the san diego gas &
electric and southern california gas co . utilities .
asset - sale program
` ` we are looking at selling our global assets that are not
core to our business , and so we ' ll be continuing with an asset -
sale program , ' ' enron spokeswoman karen denne said . ` ` we are not
going to comment on who we ' ve had discussions with or what the
status of those is . ' '
in addition to its interest in enron assets , san diego - based
sempra has had discussions with enron employees who want to leave
the company , kline said .
` ` a number of enron employees have approached us , as we ' re
aware they ' ve approached other firms , ' ' kline said .
also , sempra said today that its overall financial exposure
related to transactions with enron and its affiliates is less than
$ 15 million .
` ` it would not be material to our earnings , ' ' kline said .