enron mentions - 11 / 30 / 01 enron to fire 95 % of staff after bankruptcy filing , cnbc says
bloomberg , 11 / 30 / 01
enron says cnbc report of layoffs is incorrect ( updatel )
bloomberg , 11 / 30 / 01
andersen ' s enron audit prompts tighter ` peer review ' of quality
bloomberg , 11 / 30 / 01
enron ' s fall to spark legal wrangles over derivatives ( updatel )
bloomberg , 11 / 30 / 01
enron ' s legal woes to make bankruptcy case complex ,
bloomberg , 11 / 30 / 01
enron might raise $ 610 mln in brazil asset sale , analysts say
bloomberg , 11 / 30 / 01
bush spokesman fleischer comments on enron corp . ' s collapse
bloomberg , 11 / 30 / 01
enron ' s board was compromised by financial ties ( correct )
bloomberg , 11 / 30 / 01
enrononline resumes some commodity product trading ( updatel )
bloomberg , 11 / 30 / 01
agl resources ends services contract with enron ( updatel )
bloomberg , 11 / 30 / 01
arthur andersen ' s enron audit is under review by sec ( updatel )
bloomberg , 11 / 30 / 01
enron fires u . k . workers , plans bankruptcy soon ( updatel )
bloomberg , 11 / 30 / 01
enron creditors list potential losses from energy trader ' s fall
bloomberg , 11 / 30 / 01
dynegy says pipeline option not dependent on enron ( update 8 )
bloomberg , 11 / 30 / 01
enron bankruptcy case would take years to resolve ( update 2 )
bloomberg , 11 / 30 / 01
chairman says dynegy ' s right to enron pipeline indisputable
bloomberg , 11 / 30 / 01
williams has withdrawn pipeline capacity from enron ( updatel )
bloomberg , 11 / 30 / 01
new jersey has limited exposure to enron decline , treasury says
bloomberg , 11 / 30 / 01
wall street firms , pension funds face enron losses ( update 6 )
bloomberg , 11 / 30 / 01
s & p says credit derivative exposure to enron totals $ 6 . 3 bln
bloomberg , 11 / 30 / 01
enron ' s fall to spark legal wrangles over derivatives ( updatel )
bloomberg , 11 / 30 / 01
enron to fire 95 % of staff after bankruptcy filing , cnbc says
2001 - 11 - 30 17 : 40 ( new york )
houston , nov . 30 ( bloomberg ) - - enron corp . will file for
bankruptcy monday or tuesday and fire 95 percent of its staff ,
financial news network cnbc reported , citing an unnamed employee .
the employee said a vice president told his workers that
enron would take the steps next week and give the employees two
weeks of severance pay for every year of service at the company ,
cnbc said .
enron says cnbc report of layoffs is incorrect ( updatel )
2001 - 11 - 30 17 : 59 ( new york )
( adds in third paragraph that enron says cnbc report is
false . )
houston , nov . 30 ( bloomberg ) - - enron corp . will file for
bankruptcy monday or tuesday and fire 95 percent of its staff ,
financial news network cnbc reported , citing an unnamed employee .
the employee said a vice president told his workers that
enron would take the steps next week and give the employees two
weeks of severance pay for every year of service at the company ,
cnbc said .
enron will not fire 95 percent of its workforce and has made
no announcement to workers on layoffs , company spokesman vance
meyer said . no decision has been made on whether the company will
make a bankruptcy filing , meyer said .
andersen ' s enron audit prompts tighter ` peer review ' of quality
2001 - 11 - 30 17 : 27 ( new york )
andersen ' s enron audit prompts tighter ` peer review ' of quality
washington , nov . 30 ( bloomberg ) - - enron corp . ' s accounting
firm , arthur andersen llp , will undergo tougher scrutiny in the
` ` peer review ' ' process in which u . s . audit firms police one
another ' s quality - control standards .
andersen , the fifth - largest accounting firm , said it asked
its peer reviewer , deloitte & touche llp , for the additional
scrutiny in light of financial reporting issues at enron ,
according to an andersen press release . deloitte & touche had
independently determined that it wanted to conduct additional
procedures , the release said .
` ` in light of recent developments , we believe that extending
the peer review to include work done in other offices , including
houston , and other procedures that deloitte & touche deems
appropriate and necessary is the right thing to do , ' ' andersen
chief executive joseph berardino said in the release .
the peer review is due on dec . 31 . andersen ' s last review by
deloitte & touche , the third - largest accounting and consulting
firm , was in 1998 . the review did not report any significant
problems .
the sec is examining whether andersen acted properly in
audits of energy provider enron , which is also under investigation
by the sec . andersen has acknowledged that the sec has subpoenaed
documents related to houston - based enron , which is on the brink of
bankruptcy after saying it had overstated earnings .
andersen ' s announcement comes as the public oversight board ,
an accounting industry oversight group , plans to look at the
adequacy of the peer review system amid concerns about the failed
enron audits . the system calls for audit firms to periodically
submit their reports on public companies for examination by other
accounting firms , in an effort to assure investors the firm ' s
methods comply with professional standards .
enron , the largest energy trader , this month said it
overstated earnings by $ 586 million over four - and - a - half years ,
inflated shareholder equity by $ 1 . 2 billion because of an
accounting error , and failed to consolidate results of three
affiliated partnerships into its balance sheet .
andersen was enron ' s outside auditor for more than a decade ,
assuring investors that the company ' s financial statements
conformed with generally accepted accounting principles
u . s . representative john dingell , a michigan democrat ,
questioned the peer review process recently in a letter to the
public oversight board . none of the five biggest international
accounting firms has ever issued a negative peer - review report
against another , dingell said . the so - called big five also include
 llc , kpmg llp , and ernst & young lp .
` ` there appears to be little reason for the public to have
faith in andersen or the peer review process , ' ' dingell wrote .
andersen responded that it has faith in the accounting
profession ' s self - regulatory process , which the pob oversees .
a spokeswoman at deloitte & touche didn ' t return a telephone
call seeking comment .
enron ' s fall to spark legal wrangles over derivatives ( updatel )
2001 - 11 - 30 11 : 24 ( new york )
enron ' s fall to spark legal wrangles over derivatives ( updatel )
( rewrites 2 nd paragraph . )
london , nov . 30 ( bloomberg ) - - enron corp . ' s plunge toward
bankruptcy may spark legal wrangles over how to unravel the web of
derivatives contracts tied to the energy company .
enron is set to file for protection in the biggest chapter 11
reorganization ever . that ' s likely to mean the energy trader can ' t
pay on derivatives it sold as insurance against default by other
borrowers , as well as defaulting on its own debts and triggering
similar contracts bought by its creditors .
` ` if i traded with joe bloggs down the road , and enron owed
him a lot of money and he couldn ' t get it so he went into
bankruptcy , then he wouldn ' t fulfill his obligations under my
contract , ' ' said brian senior , head of trading at innogy holdings
plc , the u . k . ' s top electricity supplier . ` ` i don ' t think the
major risk is market liquidity , i think it ' s the domino effect . ' '
enron used derivatives - - financial instruments such as
futures and options whose value is based on other assets - - to
insure against price swings or take bets on a price ' s direction .
the houston - based company had revenue of $ 1 . 9 billion from
derivatives trading last year , more than double the $ 765 million
in 1999 , making it one of the largest traders , according to swaps
monitor publications inc .
by comparison , williams cos . , the no . 2 u . s . natural - gas
pipeline owner , had revenue of $ 1 . 29 billion on derivatives
trading in 2000 .
paul spraos , president of swaps monitor , a research company
that compiles trading figures , said enron only posts derivatives
statistics once a year so there are no figures for 2001 .
dynegy inc . abandoned its planned merger with enron on
wednesday , leaving it with more than $ 15 billion of debt and the
possibility of bankruptcy . as well as oil and gas futures , enron
trades derivatives based on such things as weather and information -
transmission capacity , known as bandwidth .
banned from trading
spraos estimates that as of sept . 30 , enron owed $ 18 . 7
billion on derivatives trades that went sour , though he said that
doesn ' t take into account the collateral enron probably posted to
back up the trades .
the european energy exchange today banned enron from trading
its products , while australian regulators barred the company ' s
finance unit , enron australia pty , from trading electricity
futures because its funding wasn ' t assured .
u . s . senate and house committees will investigate enron ' s
decline and consider new regulations for electricity and natural -
gas trading . the securities and exchange commission is also
examining the company .
enron had $ 201 billion worth of derivatives on oil , gas and
electricity at the end of last year , swaps monitor has reported .
that ' s measuring the notional amount , the face value of the
securities on which the derivatives are based .
` quantifying it '
` ` everyone will be looking at their exposure , whether they ' ve
got collateral , and quantifying it , ' ' said robert g . pickel , chief
executive officer of the international swaps and derivatives
association .
isda , a new york - based trade association representing more
than 550 companies that trade derivatives , designed the legal
contracts typically used in derivatives transactions . pickel said
those contracts are designed to address such situations .
` ` there are two potential issues relating to isda
documentation , as a result of the situation regarding enron , ' '
pickel said . the first involves companies that have entered
derivatives trades with enron using isda ' s standard contract ,
known as the master agreement . the second concerns banks that have
provided credit protection on enron in the form of a credit -
default swap , also using isda documents .
credit - default swaps work like insurance on a company ' s bonds
or loans . they pay out if there ' s a bankruptcy , default , debt
restructuring or similar occurrence , known as a credit event .
` ` if there ' s a bankruptcy filing there ' s no question it would
be a credit event , ' ' pickel said .
` can ' t tell '
enron ' s u . k . units are in administration , which has triggered
what lawyers define as a credit event , said simon firth , head of
the credit derivatives practice at linklaters & alliance , which is
acting for , the accountant for enron ' s
european arm .
` ` the documents are fairly robust , and we ' ve been through
issues before , ' ' firth said . he said that while ` ` each time the
documentation gets strengthened , you can ' t tell what happens until
you look at the individual cases . ' '
enron owes almost two dozen energy companies about $ 700
million . j . p . morgan , the bank that advised enron in the failed
merger with dynegy , said it was owed $ 500 million for unsecured
loans . canadian imperial bank of commerce was owed $ 215 million in
loans and credit derivatives .
in europe , abn amro may set aside $ 97 . 5 million to cover its
enron exposure . the energy company owes abbey national plc $ 164
million , and dresdner bank ag said its exposure is about $ 100
million .
` ` this one has left every head shaking , and people are
wondering how to organize by class of creditor and how to hire
counsel , ' ' said glenn reynolds , an analyst at creditsights inc . in
new york . ` ` lawyers are high - fiving . ' '
enron ' s legal woes to make bankruptcy case complex ,
2001 - 11 - 30 12 : 41 ( new york )
enron ' s legal woes to make bankruptcy case complex ,
houston , nov . 30 ( bloomberg ) - - enron corp . ' s legal problems ,
one reason for the collapse of the world ' s largest energy trader ,
would add to the complexity of a bankruptcy filing and might take
years to resolve , experts say .
with dynegy inc . having withdrawn a proposed $ 23 billion
takeover offer , enron is weighing what would be the largest
bankruptcy in history and may go to court within a week . enron
shareholders , employees and business partners are lining up to sue
the houston - based company after its shares lost $ 26 billion in
value since mid - october .
enron restated $ 586 million in earnings because of accounting
irregularities , and questions surfaced about conflicts of interest
among some of the company ' s executives . the u . s . securities and
exchange commission is investigating the company , and that
wouldn ' t be affected by a bankruptcy filing .
` ` there are so many legal tentacles to this thing it ' s
scary , ' ' said chuck tatelbaum , former vice president for research
at the american bankruptcy institute . ` ` we could be talking about
a six - year bankruptcy case here . ' '
lawsuits seeking damages from a company under chapter 11 are
pulled into the bankruptcy case and judgments or settlements are
converted into bankruptcy claims .
fraud claims
among the suits likely to be included in a bankruptcy case
are claims by shareholders that the company misled investors about
its financial health . another category would be allegations that
enron executives improperly prevented workers from moving 401 ( k )
investments out of the company ' s stock .
enron probably would face accusations it broke energy trading
contracts . the agreements , known as derivatives , were used as
insurance against price swings in the energy market . with the
company poised to file for chapter 11 , it is expected to miss
payments under the contracts .
there ' s also the developing battle between enron and dynegy
over the failed buyout bid that might end up in bankruptcy court .
that might lead a bankruptcy judge to take a look at the
recent court case involving tyson foods inc . and ibp inc . , a beef
producer . a judge in delaware ordered tyson to complete its buyout
of ibp after their proposed combination collapse . tyson , like
dynegy , had said it wasn ' t fully informed about ibp ' s financial
problems when it negotiated to acquire the beef producer .
dynegy said today it plans to take over enron ' s northern
natural gas co . pipeline unit next month . dynegy said it ' s
entitled to the pipeline under the terms of its nov . 9 merger
agreement that gave it $ 1 . 5 billion in preferred stock in northern
natural gas .
enron could sue as part of the bankruptcy case to stop dynegy
from walking away from the buyout and claiming ownership to the
pipeline .
complications
any chapter 11 cases would be ` ` inordinately complicated , ' '
said lynn lopucki , a law professor at the university of california
at los angeles .
the largest bankruptcy on record is texaco ' s $ 35 . 9 billion
filing in 1987 . enron lists $ 61 billion in assets .
other big companies , like w . r . grace & co . and sgl carbon
inc . , used bankruptcy filings to manage lawsuits , said ken
eckstein , a new york attorney who handles bankruptcy litigation .
w . r . grace , a financially healthy chemical maker , filed for
chapter 11 protection in april to cope with asbestos - related
lawsuits . sgl carbon is the u . s . unit of a german company with a
market value of more than $ 1 . 2 billion that makes products used in
steel production . sgl filed bankruptcy papers in 1999 to dispose
of customers ' suits over price - fixing claims .
what sets enron apart are the questions about its financial
viability , eckstein said . he represented customers suing sgl as
part of the bankruptcy case .
` ` here , you have a fundamentally broken company , ' ' eckstein
said . ` ` it may never emerge from bankruptcy . ' '
that makes it tougher to gauge how much other creditors
might recover , he said .
` makes me mad '
enron investors aren ' t optimistic about the future of the
company ' s shares .
` ` i took at least a 60 percent hit on them , ' ' said jim
anders , a columbia , south carolina , lawyer who has sold shares .
` ` it really makes me mad . i ' d like to get my hands on some of
those executives who were doing the insider deals . that really
shook people ' s confidence in the company . ' '
enron ' s fall was accelerated by questions about some
partnerships the company used to move assets and debt off the
company ' s books . many investors had complained enron ' s financial
reports hid the significance of the partnerships .
enron ' s former chief financial officer andrew fastow led some
of the partnerships and earned more than $ 30 million through their
dealings with enron , the company disclosed . fastow and other
executives later were fired over their connection to the
partnerships .
anders acknowledged that bankruptcy law puts shareholders and
litigants at the back of the repayment line .
` ` i know we ' ve had it and aren ' t going to get squat back , ' '
anders said . ` ` the company led us to believe enron was as solid as
ge or one of the big banks . now the bank is busted . ' '
enron might raise $ 610 mln in brazil asset sale , analysts say
2001 - 11 - 30 13 : 24 ( new york )
enron might raise $ 610 mln in brazil asset sale , analysts say
sao paulo , nov . 30 ( bloomberg ) - - enron corp . may be able to
raise as much as $ 610 million from the sale of assets in brazil ,
including two power plants and stakes in two gas distributors ,
analysts and investors said .
the u . s . energy trader , which is on the brink of bankruptcy ,
also might reduce the $ 700 million price tag on its 99 percent
stake in power distributor elektro - eletricidade e servicos sa that
it has tried to sell for more than a year , analysts said .
` ` they would sell those assets to make a quick buck , ' ' said
marcos severine , a power utility analyst at sudameris corretora .
about 56 percent of enron ' s $ 6 . 5 billion of overseas assets
were in south america , most in brazil , as of june 30 . enron said
it currently plans no change to its operations in the country .
the u . s . company is expected to file for bankruptcy
protection in the biggest chapter 11 reorganization in history ,
which may force the company to sell assets to pay about $ 15
billion of debt . dynegy inc . this week abandoned its proposed
merger with enron . enron , which had less than $ 2 billion of cash
as of last week , has more than $ 61 billion in assets .
enron may fetch as much as $ 190 million from the sale of
eletrobolt , a 380 - megawatt power plant , and $ 220 million from
riogen , another power plant , severine said . both are based in rio
de janeiro .
gas companies
enron also may be able to raise $ 200 million from the sale of
stakes in two natural gas distributors , said a spokesman for
petros , the employee pension fund of petroleo brasileiro , which is
bidding for one of the companies . brazilian energy regulators
already have approved the sale , though it still requires backing
from antitrust regulators .
if enron tries again to sell elektro , it may be required to
offer the company to the federal government at a discount or to
another private company , analysts said . the country ' s regulations
aren ' t clear , they said .
regulatory approval may delay any sale of assets in brazil .
in addition , price controls in brazil ' s power industry will limit
the amount of money enron will be able to raise from the sales ,
analysts said .
investors are demanding lower prices for power companies in
brazil after electricity rationing and price controls over the
past two years cut earnings of power distributors and generators ,
analysts said . elektro has posted losses for six quarters .
venezuela , mexico
a bankruptcy filing by enron would probably result in the
cancellation of its investment plans in venezuela , latin
america ' s largest oil and natural gas producer , analysts said .
enron had been slated to invest three - quarters of the $ 700
million needed to build a liquid natural gas processing plant with
state oil company petroleos de venezuela sa .
pdvsa officials declined to comment on whether the plant ,
which would cool natural gas until it liquefies , would go on with
a new partner .
enron , which also owns a small venezuelan power company ,
pulled out of exploration in 2000 from an offshore block in the
gulf of paria between venezuela and trinidad and tobago .
enron also has smaller investments in mexico , argentina and
colombia . enron holds 20 percent of a joint venture building a
$ 189 million power plant in monterrey , mexico .
tractebel sa took an 80 percent share in the project in
november .
colombia
enron and promigas sa , a colombian natural gas pipeline
operator , each have a 50 percent stake in centrogas sa , a natural
gas pipeline that transports about 400 million cubic feet of gas a
day about 900 kilometers from the northern guajira peninsula to
barrancabermeja , the main oil refining city in central colombia .
the gas is produced at an offshore field operated by texaco .
officials at promigas weren ' t available for comment .
enron closed its administrative office in colombia about
three months ago , leaving an attorney to represent it in colombia .
enron ' s argentine assets include azurix buenos aires sa , a
natural gas and water utility , and shares in transportadora de gas
del sur sa .
perez companc , which owns shares in transportadora , is
prohibited by law from increasing its stake in the distribution
company .
` ` if the law is modified , then yes , we would consider it , ' '
said mario grandinetti , head of perez companc ' s institutional
relations . ` ` but there are also economic issues to consider . '
bush spokesman fleischer comments on enron corp . ' s collapse
2001 - 11 - 30 14 : 48 ( new york )
washington , nov . 30 ( bloomberg ) - - following are comments
from white house press secretary ari fleischer on the collapse of
enron corp . , which faces the biggest bankruptcy ever . the energy
committees in the senate and house have said they ' ll investigate
the collapse and consider new regulations for electricity and
natural - gas trading .
` ` the president understands that congress at all times should
exercise its proper oversight roles . that includes anything that ,
in a case like this , the senate sees fit , in terms of an
investigation into the collapse of a company . that ' s the purview
of the congress , ' ' fleischer said .
` ` as i indicated , the federal government , the administration ,
is already doing that . the department of treasury and other
entities are monitoring it . so i think we ' re all looking with the
same cause of concern . ' '
enron ' s board was compromised by financial ties ( correct )
2001 - 11 - 30 15 : 01 ( new york )
enron ' s board was compromised by financial ties ( correct )
( corrects percentage of natco group sales that went to enron
to 0 . 16 percent in 25 th paragraph , and adds that sales are within
council of institutional investors standards in 26 th paragraph . )
new york , nov . 29 ( bloomberg ) - - enron corp . plunged from the
largest energy trader to the verge of bankruptcy under a board of
directors whose independence was undercut by financial ties to
management , according to corporate governance experts .
enron gave seven of its 14 directors consulting contracts ,
sales to their business or donations to their non - profit
institutions , according to company and public records . the
recipients include three members of enron ' s audit committee , which
is responsible for financial oversight .
lord john wakeham , for example , a former leader of the
british house of commons , sits on the audit committee . enron gave
him a $ 72 , 000 - a - year consulting contract . john mendelsohn ,
president of the md anderson cancer center in houston , is also on
the audit committee . in the last five years , enron and its
chairman kenneth lay have donated $ 567 , 900 to the cancer center .
` ` to get on a board you have to be ` clubbable , ' but this
looks like collegiality turning to cronyism , ' ' said allan
cleveland , counsel to the new hampshire retirement system , an
enron shareholder .
enron , based in houston handled almost a quarter of all
natural gas and electricity trades . during the past seven weeks ,
its board has presided over a $ 26 billion drop in market value
that began after the company wrote down $ 1 . 2 billion in
shareholder equity and reported it had overstated earnings by $ 586
million since 1997 .
responsibility
as enron ' s shares fell , the company suffered a cash crunch .
it sought an infusion of capital and agreed to be acquired by
dynegy inc . , a houston - based rival . that plan collapsed yesterday
as investors balked at investing $ 1 . 5 billion , prompting dynegy to
withdraw its offer . enron shares today fell another 39 percent , or
24 cents , to 37 cents per share . the stock began the year trading
at $ 83 . 125 .
corporate boards are responsible for protecting shareholder
interests by reviewing the work of top executives . to accomplish
that , two - thirds of a board should be ` ` independent ' ' from
management , according to the council of institutional investors ,
which represents pension funds .
independence
the council defines an independent director as ` ` a person
whose directorship constitutes his or her only connection to the
corporation . ' '
` ` consulting contracts , donations to non - profit organizations
linked to directors , this eats away at independence , ' ' said ann
yergen , the council ' s director of research .
corporate governance standards established by the new york
and nasdaq stock exchanges say all audit committee members should
be independent .
enron board members , including wakeham and mendelsohn ,
declined repeated requests for interviews . vance meyer , a company
spokesman , said enron could not immediately respond to questions
regarding the board .
enron ' s board met nine times in 2000 , with each member
receiving annual compensation of $ 79 , 000 in cash and stock . every
member attended at least 75 percent of the meetings , except ronnie
chan , chief executive of the hang lung group , a hong kong
development business , according to company filings .
relationships
based on enron proxy statements and other documents , the
following relationships existed between enron and board members :
- - robert a . belfer , 65 , has been on the board since 1983 and
sits on the executive committee . he is enron ' s largest individual
shareholder , with 8 . 5 million shares , and is chairman and chief
executive of belco oil & gas corp . , which operates from an office
overlooking new york ' s central park . in 2000 , belco had $ 32
million in trade settlements and $ 1 million in option premiums
with enron trade resources corp . , an enron subsidiary .
- - john urquhart , 72 , a former general electric co .
executive , sat on the board until last may . he received an annual
consulting fee from enron of almost $ 200 , 000 a year as a special
adviser to the enron chairman .
- - mendelsohn , 64 , is a physician who was formerly head of
medicine at memorial sloan - kettering cancer center in new york . he
pioneered research in controlling cancer through the chemistry of
a tumor ' s growth and was on president george w . bush ' s short list
to head the national institutes of health . since 1996 , mendelsohn
has been president of the m . d . anderson cancer center , part of the
university of texas health system .
donations
mendelsohn joined enron ' s board in 1999 . enron has donated
$ 221 , 650 to the cancer center . lay and a foundation he established
with his wife , the linda and ken lay family foundation , have
donated $ 346 , 250 in the last five years . the enron foundation
pledged $ 1 . 5 million for a new clinic .
- - charles lemaistre , 77 , headed the anderson cancer center
for 18 years until retiring in 1996 . he has been an enron board
member for 16 years , is a member of the executive committee and
chairs the compensation committee . that panel awarded lay a $ 20
million - a - year severance package that he renounced two weeks ago .
- - wendy gramm , 56 , has held positions at the federal trade
commission and the u . s . office of management and budget and was
chairman of the u . s . commodity futures trading commission . she is
director of regulatory studies at the mercatus center of george
mason university in fairfax , virginia . she is married to phil
gramm , a u . s . republican senator from texas .
in the last three years , enron and the ken and linda lay
family foundation have donated more than $ 50 , 000 to the university
and the mercatus center , according to university records .
consulting fee
- - wakeham , 68 , a chartered accountant and self - made
millionaire , became a force in the government of former u . k . prime
minister margaret thatcher . he was known as her ` ` mr . fix - it . ' ' he
was the target of an irish republican army bomb in 1984 that
killed his wife and left him buried under rubble for seven hours .
enron pays wakeham $ 6 , 000 a month to advise the company on
european business .
- - herbert s . winokur jr . , 57 , is the managing partner of
capricorn investors lp , a holding company that owns natco group
inc . , a maker of oil and gas production equipment .
an enron board member since 1985 , winokur serves on the
executive committee , chairs the finance committee and was
appointed to a special committee created to look into how enron
was managed .
in 2000 , natco had $ 370 , 294 in sales to enron subsidiaries ,
0 . 16 percent of sales .
` ` business between companies linked to board members ought to
be discouraged , ' ' said yergen of the council of institutional
investors . still , natco ' s sales fall within the group ' s
recommended standards . ` ` we think that anything over 1 percent is
compromising , ' ' yergen said .
enron said in a proxy statement it believes the terms of the
sales were ` ` no less favorable than the terms of similar
arrangements with third parties . ' '
audit committee
enron ' s audit committee poses particular problems , according
to corporate governance experts . the committee is composed of
wakeham , mendelsohn , gramm , chan , robert jaedicke , a retired
stanford university business school dean , and paulo ferraz
pereira , a brazilian banker .
wakeham , gramm and mendelsohn are not independent , according
to corporate governance experts and standards .
` ` for the audit committee , you don ' t even want the appearance
of a conflict , ' ' said charles drott , a forensic accountant who has
testified as an expert witness in bankruptcy and business fraud
cases involving companies such as delorean motor co . and lincoln
savings & loan association .
the committee is spread across the globe , with wakeham in
london , ferraz in rio de janeiro and chan in hong kong .
` ` the question is why this committee ? ' ' drott asked . ` ` for a
big sophisticated company like enron , why did they choose these
people ? ' '
swift descent
enron ' s rapid decline - - standard & poor ' s corp . slashed its
credit rating eight levels this month to junk status - - centered
on its dealings with partnerships the company used to move assets
and debt off the company ' s books . many investors had complained
enron ' s financial reports obscured the partnerships ' businesses to
the point they were impossible to understand . enron ' s former chief
financial officer andrew fastow led some of the partnerships and
earned more than $ 30 million through their dealings with enron ,
the company disclosed .
enron documents filed with the u . s . securities and exchange
commission state that the board determined that fastow ' s
participation in the partnerships would ` ` not adversely affect the
interests of enron . ' ' the documents also say the board approved
all transactions involving partnerships that were brought to it by
lay and other enron executives .
` ` what went wrong at enron ? ' ' said patrick mcgurn , a vice
president at institutional investor services , which evaluates
board candidates for institutional investors . ` ` a lot of it goes
back to the board . ' '
enrononline resumes some commodity product trading ( updatel )
2001 - 11 - 30 15 : 58 ( new york )
enrononline resumes some commodity product trading ( updatel )
( updates with trader comment in fourth paragraph , today ' s
halt in enrononline system in sixth and seventh paragraphs ,
trading at other exchanges in 10 th and 11 th paragraphs . )
new york , nov . 30 ( bloomberg ) - - enron corp . resumed internet
trading in almost one - third of the commodity products it normally
offers , as buyers and sellers sought to unwind positions following
a shutdown of the web site wednesday .
enrononline offered 472 products today , including natural
gas , power , metals and forest products , compared with 65
yesterday , spokesman mark palmer said . the marketplace normally
offers about 1 , 600 products for which enron is a buyer or seller
in each transaction .
the web site , which used to handle about $ 2 . 8 billion a day
in trades , shut for several hours wednesday when dynegy inc .
pulled out of a planned merger with enron , which is now poised to
file for bankruptcy . trading with enron has plunged on concern
that the company wouldn ' t be able to meet its obligations .
` ` people are only making selective trades , unwinding their
positions ' ' with enron , said david chang , vice president of energy
trading at bank of america in new york . ` ` people are adding no new
net exposure . ' '
trading has shifted to other marketplaces such as the
intercontinental exchange , dynegy direct and the new york
mercantile exchange , traders said .
trading disrupted ?
users of the system reported that enrononline stopped
functioning at 2 p . m . for about 15 minutes today , shortly after
enron announced that it was dismissing 1 , 100 of its u . k .
employees . the companied denied service was interrupted .
enron still isn ' t offering its full spectrum of products ,
said kyle cooper , an analyst at salomon smith barney in houston .
enron recorded about 825 transactions on the system
yesterday , down from an average of about 5 , 000 a day , palmer said .
houston - based enron is the counter - party for every trade at
enrononline . some of its rivals , such as the intercontinental
exchange and the nymex , are intermediaries for transactions that
are backed by funds from clearinghouses or banks .
the nymex traded a record 79 , 701 natural gas options
contracts yesterday and a record 228 , 728 natural gas futures
contracts on wednesday . by 2 : 49 p . m . today , it had traded about
133 , 000 futures .
the intercontinental exchange inc . , an internet - based system
in atlanta , said trading activity so far this month was up 65
percent from october levels .
enrononline had accounted for about 60 percent of enron ' s
energy trading volume . it also trades commodities by telephone .
` ` traders we speak to are still working on their enron
exposure , doing what they can to minimize that , ' ' said justin
fohsz , an oil broker at starsupply petroleum inc . in englewood ,
new jersey . ` ` trading has taken a back seat for the past few days
and i don ' t think this is going to change any time soon . ' '
shares of enron were down 8 cents at 28 cents in late
trading , compared with $ 70 a year ago .
agl resources ends services contract with enron ( updatel )
2001 - 11 - 30 16 : 15 ( new york )
agl resources ends services contract with enron ( updatel )
( updates with agl comment in second paragraph , closing share
prices in fifth paragraph . )
atlanta , nov . 30 ( bloomberg ) - - agl resources inc . , which
owns natural - gas utilities in the southeastern u . s . , ended a
contract for energy services provided by cash - strapped enron corp .
to its virginia natural gas unit .
the two - year contract for gas , transmission and other
services began in december and was ended without penalties , agl
spokesman russ williams said . he said he didn ' t know the value of
the pact .
enron , facing the disintegration of its energy - trading
business and saddled with $ 15 billion in debt , probably will file
for bankruptcy , analysts say . rival dynegy inc . withdrew a buyout
bid wednesday after standard & poor ' s cut enron ' s debt rating to
junk status .
atlanta - based agl said its business exposure to enron was
` ` minimal , ' ' and the end of the contract eliminates the prospect
of losses tied to enron . agl has 1 . 8 million customers in georgia ,
southeast virginia and chattanooga , tennessee .
shares of enron , which reached $ 84 . 88 just 11 months ago ,
fell 10 cents to 26 cents . agl fell 57 cents to $ 21 . 43 .
arthur andersen ' s enron audit is under review by sec ( updatel )
2001 - 11 - 30 15 : 17 ( new york )
arthur andersen ' s enron audit is under review by sec ( updatel )
( adds sec no - comment in fifth paragraph , accounting board
review in 12 th paragraph . )
chicago , nov . 30 ( bloomberg ) - - the securities and exchange
commission is investigating whether arthur andersen llp acted
properly in audits of enron corp . , which already is being examined
by the sec , a person with knowledge of the probe said .
andersen , the fifth - largest accounting firm , acknowledged the
sec has subpoenaed documents related to audits of houston - based
enron , which is on the brink of bankruptcy after saying it had
overstated earnings for four and a half years .
` ` as is customary when the sec investigates a financial
reporting matter of a company we audit , they ' ve asked for our
cooperation , ' ' said david tabolt , an andersen partner and
spokesman . ` ` the sec is reviewing our work as part of their
process . ' ' enron shares have plummeted to 30 cents from a high of
$ 37 . 50 as recently as sept . 11 .
enron ' s collapse has focused government attention on the
company ' s bookkeeping practices and the audits by andersen , which
last june agreed to pay $ 7 million to settle sec charges it issued
false and misleading audit reports about trash - hauler waste
management inc . u . s . attorneys in houston and manhattan , who would
prosecute individuals or companies if criminal wrongdoing is
found , are monitoring the sec ' s enron probe , the person with
knowledge of the investigation said .
` ` we don ' t confirm or deny the existence of investigations , ' '
sec spokesman michael robinson said .
enron restatement
andersen worked as enron ' s outside auditor for more than a
decade , assuring investors the company ' s financial statements
conformed with generally accepted accounting principles . tabolt
declined to say when the sec subpoena was received , or what
documents were requested .
earlier this month , enron said it overstated earnings by $ 586
million over four - and - a - half years , inflated shareholder equity by
$ 1 . 2 billion because of an ` ` accounting error , ' ' and failed to
consolidate results of three affiliated partnerships into its
balance sheet . last month , enron said it was the subject of a
formal investigation by the sec .
enron restated its financial reports as the company suffered
a cash crisis triggered by disclosure of the cut in shareholder
equity and the start of an sec investigation .
the prospect of dual investigations by the sec and the
justice department ' s u . s . attorneys arises because the sec only
has authority to file civil lawsuits alleging securities law
violations . the justice department has jurisdiction on criminal
securities law prosecutions .
parallel probes
the agencies often conduct parallel probes , such as the
current investigations of initial public offering practices at
some of wall street ' s biggest underwriters . yesterday , credit
suisse first boston said the manhattan u . s . attorney has dropped a
criminal probe of how it allocated ipo shares , while the sec is
continuing to investigate .
last year , the sec and justice department prosecutors both
filed charges against executives accused of inflating revenue at
hbo & co . before its 1999 acquisition by mckesson corp .
citing concerns raised by andersen ' s audits of enron , public
oversight board chairman charles bowsher last week said that
accounting industry oversight group plans to examine the adequacy
of its peer - review system for ensuring proper audit procedures .
under that system , each of the five biggest international
accounting firms is reviewed periodically by another firm in the
so - called big five .
non - audit work
enron paid andersen $ 52 million last year , $ 25 million for
auditing and $ 27 million for services including business and tax
consulting , due diligence procedures and help in preparing sec
filings , according the company ' s proxy statement . enron and
andersen declined to provide further detail .
asked if the sec request includes documents relating to
andersen ' s consulting work for enron , tabolt said , ` ` questions
about the nature of the investigation should be directed to the
sec . ' '
earlier this year , andersen paid $ 130 million to settle
private lawsuits alleging the firm allowed waste management and
sunbeam corp . to file false financial reports that cost investors
billions of dollars in losses .
in april , andersen agreed to pay $ 110 million to settle a
securities fraud class - action suit filed over its accounting work
for appliance maker sunbeam corp . the appliance maker filed for
bankruptcy protection in february . earlier this month the firm
agreed to pay $ 20 million to settle a class - action lawsuit about
its work with waste management .
enron fires u . k . workers , plans bankruptcy soon ( updatel )
2001 - 11 - 30 15 : 49 ( new york )
enron fires u . k . workers , plans bankruptcy soon ( updatel )
( updating share change . )
new york , nov . 30 ( bloomberg ) - - enron corp . fired 1 , 100
employees in the u . k . as the energy trader sought to line up
financing for the largest u . s . bankruptcy reorganization .
enron ' s bankers , led by j . p . morgan chase & co . and salomon
smith barney inc . , sought to arrange more than $ 1 billion of loans
to help enron trade while in bankruptcy , said people familiar with
the situation . the debtor - in - possession financing may be secured
in part by $ 1 . 8 billion in proceeds enron expects to receive by
selling its portland general electric co . unit .
enron is also considering using its northern natural gas co .
pipeline , which analysts estimate is worth $ 2 . 7 billion , as
collateral for new loans . dynegy inc . said it would seek to block
such a move by exercising an option to purchase the pipelines .
` ` this whole thing is going to be in the courts , ' ' said
kathleen vuchetich , who helps manage $ 1 . 4 billion in assets . the
firm owns dynegy shares in the strong american utilities fund that
vuchetich helps run .
enron will have 250 u . k . workers after the dismissals ,
according to a statement by , which is
overseeing the company ' s british operations . enron has 6 , 800
workers in europe and 21 , 000 total .
more firings are likely in the u . s . after its $ 23 billion
acquisition by dynegy collapsed earlier this week . that failure ,
and a credit - rating downgrade to junk , left the company short of
cash needed to pay its $ 15 billion of debt .
enron , with less than $ 2 billion in cash as of last week ,
needs to pay $ 690 million to lenders by mid - december and is
responsible for another $ 3 . 9 billion in debt owed by affiliated
partnerships .
pipeline debate
dynegy said it plans to take over enron ' s northern natural
gas pipeline on dec . 12 , even if enron files for bankruptcy .
dynegy invested $ 1 . 5 billion in enron as part of the merger plan ,
giving it preferred stock in northern natural gas . dynegy backed
out of the takeover wednesday .
enron likely will go to court to argue that dynegy didn ' t
have the right to end the merger , so it shouldn ' t get the
pipeline , new york bankruptcy lawyer robert christmas said . enron
needs collateral for loans to stay in business .
enron pledged assets of northern natural gas and transwestern
pipeline as collateral for $ 1 billion in loans from j . p . morgan
and salomon this month . the banks may not back enron ' s claim , as
they are more likely to be repaid by dynegy , said fahnestock & co .
analyst fadel gheit .
` ` i expect to see enron , j . p . morgan , citibank and dynegy all
in court fighting over who owns the pipeline , ' ' said jon kyle
cartwright , a fixed - income senior analyst at raymond james &
associates . ` ` at this point we put our chips on dynegy . we suspect
they had the time and expertise to perfect their purchase . ' '
biggest pipeline
dynegy will assume $ 950 million of northern natural debt with
the purchase . enron can buy the pipeline back if it pays dynegy
$ 1 . 5 billion , plus interest , within 180 days of the merger ' s
collapse , dynegy chairman chuck watson said yesterday . watson said
he would rather get the pipeline than recoup the investment .
northern natural gas , the biggest of enron ' s four gas
pipelines , stretches from the permian basin in texas to the great
lakes . dynegy ' s right to buy it ` ` is not dependent on enron ' s
agreement to our right to terminate the merger , ' ' dynegy chief
financial officer rob doty said today in a statement .
shares of enron fell 9 cents to 27 cents in early afternoon
trading . they had fallen 99 percent since mid - october . dynegy fell
$ 2 . 34 , or 7 percent , to $ 31 . 31 . enron ' s unsecured bonds were bid
at 18 cents on the dollar this morning , down about 3 cents from
yesterday , traders said .
enron , which got its start as a natural - gas pipeline company ,
was transformed in the past decade into the biggest competitor in
the business of trading energy . as part of the company ' s strategy ,
it shifted its focus from developing assets such as pipelines and
power plants to developing markets for commodities . as a result ,
enron has few assets it can use as collateral for loans .
on the brink
enron has been unable to raise enough cash to ensure it can
pay debts and is having trouble financing daily operations .
dynegy ' s decision to back out of the acquisition left enron on the
brink of bankruptcy .
northern natural gas can ' t take any action , including filing
for bankruptcy , without the consent of dynegy as a preferred
stockholder , dynegy said in the statement .
` ` from what i understand , dynegy has as strong a legal claim
to the pipeline as they can have , ' ' said commerzbank securities
analyst andre meade . ` ` they structured the deal in a way , with
bankruptcy as a likely scenario , to have good legal standing . ' '
meade rates enron ` ` sell ' ' and dynegy ` ` buy ' ' and doesn ' t own
shares of either company . he values northern natural at $ 2 . 7
billion , more than the $ 2 . 47 billion that dynegy is paying ,
including debt .
` ` dynegy paid fair market value ( for the pipeline ) , and they
have the law and the facts on their side , ' ' said john olson ,
research director for sanders , morris , harris group inc . , a
houston financial - services firm .
watson said yesterday he hopes that northern natural
employees won ' t quit after the takeover . enron and dynegy are both
based in houston .
` ` dynegy has contacted enron to begin a transition of the
pipeline ' s management and expect enron ' s full cooperation , ' ' doty
said today .
enron creditors list potential losses from energy trader ' s fall
2001 - 11 - 30 15 : 54 ( new york )
enron creditors list potential losses from energy trader ' s fall
new york , nov . 30 ( bloomberg ) - - enron corp . ' s creditors ,
companies spanning the energy , financial and banking industries ,
stand to lose billions of dollars from the collapse of the energy
trader . the following list shows how much each might lose .
* t
company description amount ( $ mil )
j . p . morgan chase & co . u . s . securities company 500
john hancock financial services u . s . life insurer 320
credit lyonnais sa french bank 250
canadian imperial bank canadian bank 215
ing groep nv dutch financial - services co . 195
principal financial group u . s . insurer 172
abbey national plc british bank 164
daiwa asset management co . japanese financial - services co . 140
australia & new zealand bnk grp australian bank 120
national australia bank ltd . australian bank 104
dresdner bank ag german bank 100
hvb group german bank 100
duke energy corp . u . s . energy company 100
williams cos . u . s . energy company 100
abn amro holding nv dutch bank 97 . 5
lincoln national corp . u . s . insurer 95
deutsche bank ag german bank < 90
reliant resources inc . u . s . energy company 80
dynegy inc . u . s . energy company 75
bear stearns & co . u . s . securities company 69
metlife inc . u . s . insurer 62 . 6
mirant corp . u . s . energy company 60
aquila inc . unit of u . s . - based utilicorp < 50
american electric power co . u . s . energy company 50
el paso corp . u . s . energy company 50
commerzbank german bank < 45
centrica plc u . k . energy company 43
exelon corp . u . s . energy company < 20
energen corp . u . s . energy company 18 . 3
sempra energy u . s . energy company < 15
dominion resources inc . u . s . energy company 11
nrg energy inc . u . s . energy company 10
rwe ag german energy company < 8 . 9
peoples energy corp . u . s . energy company 8 . 0
st . mary land & exploration u . s . energy company 4 . 17
keyspan corp . u . s . energy company < 4 . 0
houston exploration co . u . s . energy company 3 . 9
western gas resources inc . u . s . energy company 2 . 6
fpl group inc . u . s . energy company < 2 . 0
xl capital ltd . bermudan insurer ` ` limited ' '
< is ` ` less than ' '
* t
dynegy says pipeline option not dependent on enron ( update 8 )
2001 - 11 - 30 16 : 06 ( new york )
dynegy says pipeline option not dependent on enron ( update 8 )
( updates with closing share prices in 12 th paragraph . )
houston , nov . 30 ( bloomberg ) - - dynegy inc . said it plans to
take over enron corp . ' s northern natural gas co . pipeline unit on
dec . 12 , even if enron seeks chapter 11 bankruptcy protection or
challenges dynegy ' s decision to call off their merger .
dynegy invested $ 1 . 5 billion in enron as part of the merger
agreement , giving it preferred stock in northern natural and the
right to buy the business for about $ 23 million . dynegy backed out
of the $ 23 billion buyout of enron on wednesday and said it would
exercise the right to acquire the 16 , 500 - mile pipeline .
enron said it ' s reviewing options for northern natural , which
analysts estimate is worth $ 2 . 7 billion . enron likely will go to
court to argue that dynegy didn ' t have the right to end the
merger , so it shouldn ' t get the pipeline , new york bankruptcy
lawyer robert christmas said . enron needs collateral for loans to
stay in business .
` ` this whole thing is going to be in the courts , regardless
of whether dynegy wants this asset , ' ' said kathleen vuchetich , who
helps manage $ 1 . 4 billion in assets , 4 . 2 percent of them dynegy
shares , in the strong american utilities fund . ` ` dynegy may as
well be fighting for something worthwhile . ' '
j . p . morgan chase & co . and citigroup inc . ' s salomon smith
barney inc . may join the dispute . enron pledged assets of northern
natural and the transwestern pipeline as collateral for $ 1 billion
in loans from the banks this month . the banks may not back enron ' s
claim , as they are more likely to be repaid by dynegy , said
fahnestock & co . analyst fadel gheit .
` ` i expect to see enron , j . p . morgan , citibank and dynegy all
in court fighting over who owns the pipeline , ' ' said jon kyle
cartwright , a fixed - income senior analyst at raymond james &
associates . ` ` at this point we put our chips on dynegy . we suspect
they had the time and expertise to perfect their purchase . ' '
biggest pipeline
dynegy will assume $ 950 million of northern natural debt with
the purchase . enron can buy the pipeline back if it pays dynegy
$ 1 . 5 billion , plus interest , within six months of the nov . 9
merger agreement date , dynegy chairman chuck watson said today in
an interview .
` ` i ' d rather have the pipe than the $ 1 . 5 billion , but they
absolutely have the right to do that , ' ' watson said . ` ` that was
the deal from day one . ' '
northern natural , the biggest of enron ' s four gas pipelines ,
stretches from the permian basin in texas to the great lakes .
dynegy ' s right to buy it ` ` is not dependent on enron ' s agreement
to our right to terminate the merger , ' ' dynegy chief financial
officer rob doty said today in a statement .
after dynegy canceled the buyout , enron said in a statement
it was reviewing dynegy ' s claim to the pipeline . enron has
suffered from a crisis of credibility , integrity and leadership
for months , watson said . questioning the pipeline agreement ` ` is
not helping , ' ' he said .
` ` i find it out of balance that ( enron is ) questioning
this , ' ' watson said . ` ` to throw this out in the press that this
might be challenged is irresponsible and disingenuous . ' '
shares of enron fell 11 cents to 25 cents . they have fallen
99 percent since mid - october . dynegy fell $ 3 . 30 , or 9 . 8 percent ,
to $ 30 . 35 . both companies are based in houston .
enron ' s 6 . 4 percent notes maturing in 2006 fell as much as 4
cents to 17 cents on the dollar today , traders said .
few assets
enron , which got its start as a natural - gas pipeline company ,
was transformed in the past decade into the biggest competitor in
the business of trading energy . as part of the company ' s strategy ,
it shifted its focus from adding assets such as pipelines and
power plants to developing markets for commodities . as a result ,
enron has few assets it can use as collateral for loans .
enron has been unable to raise enough cash to ensure it can
pay debts and is having trouble financing daily operations .
dynegy ' s decision to back out of the acquisition left enron on the
brink of bankruptcy .
northern natural can ' t take any action , including filing for
bankruptcy , without the consent of dynegy as a preferred
stockholder , dynegy said in the statement .
` ` from what i understand , dynegy has as strong a legal claim
to the pipeline as they can have , ' ' said commerzbank securities
analyst andre meade . ` ` they structured the deal in a way , with
bankruptcy as a likely scenario , to have good legal standing . ' '
meade rates enron ` ` sell ' ' and dynegy ` ` buy ' ' and doesn ' t own
shares of either company . he values northern natural gas at
$ 2 . 7 billion , more than the $ 2 . 47 billion that dynegy is paying ,
including debt .
` ` dynegy paid fair market value ( for the pipeline ) , and they
have the law and the facts on their side , ' ' said john olson ,
research director for sanders , morris , harris group inc . , a
houston financial - services firm .
watson said yesterday he hopes that northern natural
employees won ' t quit after the takeover . the unit has 1 , 100
employees .
` ` dynegy has contacted enron to begin a transition of the
pipeline ' s management and expect enron ' s full cooperation , ' ' doty
said .
enron bankruptcy case would take years to resolve ( update 2 )
2001 - 11 - 30 16 : 20 ( new york )
enron bankruptcy case would take years to resolve ( update 2 )
( updates enron shares in 12 th paragraph . )
houston , nov . 30 ( bloomberg ) - - enron corp . is likely to face
a maze of lawsuits that would complicate a bankruptcy filing and
take years to resolve , experts say .
with dynegy inc . having withdrawn a proposed $ 23 billion
takeover offer , enron is weighing what would be the largest
bankruptcy in history and may go to court within a week . enron
shareholders , employees and business partners are lining up to sue
the houston - based company after its shares lost $ 26 billion in
value since mid - october .
enron restated $ 586 million in earnings because of accounting
irregularities , and there are potential conflicts of interest
among some of the company ' s executives . the u . s . securities and
exchange commission is investigating the company , and that
wouldn ' t be affected by a bankruptcy filing .
` ` there are so many legal tentacles to this thing it ' s
scary , ' ' said chuck tatelbaum , former vice president for research
at the american bankruptcy institute . ` ` we could be talking about
a six - year bankruptcy case here . ' '
lawsuits seeking damages from a company under chapter 11 are
pulled into the bankruptcy case and judgments or settlements are
converted into bankruptcy claims .
fraud claims
among the suits likely to be included in a bankruptcy case
are claims by shareholders that the company misled investors about
its financial health . another category would be allegations that
enron executives improperly prevented workers from moving 401 ( k )
investments out of the company ' s stock .
enron probably would face accusations it broke energy trading
contracts . the agreements , known as derivatives , were used as
insurance against price swings in the energy market . with the
company poised to file for chapter 11 , it is expected to miss
payments under the contracts .
there ' s also the developing battle between enron and dynegy
over the failed buyout bid that might end up in bankruptcy court .
that might lead a bankruptcy judge to take a look at the
recent court case involving tyson foods inc . and ibp inc . , a beef
producer . a judge in delaware ordered tyson to complete its buyout
of ibp after their proposed combination collapse . tyson , like
dynegy , had said it wasn ' t fully informed about ibp ' s financial
problems when it negotiated to acquire the beef producer .
dynegy said today it plans to take over enron ' s northern
natural gas co . pipeline unit next month . dynegy said it ' s
entitled to the pipeline under the terms of its nov . 9 merger
agreement that gave it $ 1 . 5 billion in preferred stock in northern
natural gas .
enron could sue as part of the bankruptcy case to stop dynegy
from walking away from the buyout and claiming ownership to the
pipeline .
enron shares fell 10 cents to 26 cents . they have lost 99
percent of their value in the last seven weeks .
complications
any chapter 11 cases would be ` ` inordinately complicated , ' '
said lynn lopucki , a law professor at the university of california
at los angeles .
the largest bankruptcy on record is texaco ' s $ 35 . 9 billion
filing in 1987 . enron lists $ 61 billion in assets .
other big companies , like w . r . grace & co . and sgl carbon
inc . , used bankruptcy filings to manage lawsuits , said ken
eckstein , a new york attorney who handles bankruptcy litigation .
w . r . grace , a financially healthy chemical maker , filed for
chapter 11 protection in april to cope with asbestos - related
lawsuits . sgl carbon is the u . s . unit of a german company with a
market value of more than $ 1 . 2 billion that makes products used in
steel production . sgl filed bankruptcy papers in 1999 to dispose
of customers ' suits over price - fixing claims .
what sets enron apart are the questions about its financial
viability , eckstein said . he represented customers suing sgl as
part of the bankruptcy case .
` ` here , you have a fundamentally broken company , ' ' eckstein
said . ` ` it may never emerge from bankruptcy . ' '
that makes it tougher to gauge how much other creditors
might recover , he said .
` makes me mad '
enron investors aren ' t optimistic about the future of the
company ' s shares .
` ` i took at least a 60 percent hit on them , ' ' said jim
anders , a columbia , south carolina , lawyer who has sold shares .
` ` it really makes me mad . i ' d like to get my hands on some of
those executives who were doing the insider deals . that really
shook people ' s confidence in the company . ' '
enron ' s fall was accelerated by questions about some
partnerships the company used to move assets and debt off the
company ' s books . many investors had complained enron ' s financial
reports hid the significance of the partnerships .
enron ' s former chief financial officer andrew fastow led some
of the partnerships and earned more than $ 30 million through their
dealings with enron , the company disclosed . fastow and other
executives later were fired over their connection to the
partnerships .
anders acknowledged that bankruptcy law puts shareholders and
litigants at the back of the repayment line .
` ` i know we ' ve had it and aren ' t going to get squat back , ' '
anders said . ` ` the company led us to believe enron was as solid as
ge or one of the big banks . now the bank is busted . ' '
chairman says dynegy ' s right to enron pipeline indisputable
2001 - 11 - 30 16 : 21 ( new york )
chairman says dynegy ' s right to enron pipeline indisputable
houston , nov . 30 , ( bloomberg ) - - enron corp . negotiated an
agreement that gives dynegy inc . the right to take over the
northern natural gas co . pipeline , and arguments to the contrary
are ` ` irresponsible ' ' and ` ` disingenuous , ' ' dynegy inc . chairman
chuck watson said .
on nov . 9 , dynegy announced it would buy enron in a
transaction valued at about $ 23 billion in stock and assumed debt .
that buyout collapsed wednesday after enron failed to get
financing to run daily operations , its stock price plunged and
credit rating companies lowered its debt below junk , triggering
$ 3 . 9 billion in debt payments .
as part of the buyout , chevrontexaco corp . , owner of 26
percent of dynegy , gave enron $ 1 . 5 billion in return for the right
to take over the 16 , 500 - mile line even if the merger collapsed ,
watson said . watson said someone is telling reporters that enron
might challenge the takeover of the pipeline . enron doesn ' t have a
case , watson said .
` ` chevrontexaco is not going to give dynegy ( $ 1 . 5 billion )
which they know dynegy is going to give to enron - - a company that
has lost $ 90 billion in net worth - - without a pretty damn good
assurance that dynegy can get the pipeline or the money back , ' '
watson said .
enron said it ' s reviewing options for northern natural gas ,
which analysts estimate is worth $ 2 . 7 billion . enron likely will
go to court to argue that dynegy didn ' t have the right to end the
merger , so it shouldn ' t get the pipeline , new york bankruptcy
lawyer robert christmas said . enron needs collateral for loans to
stay in business .
` ` this whole thing is going to be in the courts , regardless
of whether dynegy wants this asset , ' ' said kathleen vuchetich , who
helps manage $ 1 . 4 billion in assets , 4 . 2 percent of them dynegy
shares , in the strong american utilities fund .
dynegy has notified enron by letter that it plans to go
forward , and he plans to take possession by dec . 19 , watson said .
enron has the right to buy back the pipelines if it gives dynegy
$ 1 . 5 billion plus interest in the next six months , he said .
` ` if the banks want to keep the pipe because they need
collateral to loan enron money , then do it , ' ' watson said . ` ` but
don ' t go out in the press and make it look like a big fight . tell
me what you want to do . ' '
watson said he would prefer to keep the pipeline system
rather than get the $ 1 . 5 billion back .
enron has suffered from a crisis of credibility , integrity
and leadership for months . ` ` this is not helping , ' ' he said .
dynegy shares fell $ 3 . 30 to $ 30 . 35 . enron shares fell 10
cents to 26 cents .
williams has withdrawn pipeline capacity from enron ( updatel )
2001 - 11 - 30 16 : 54 ( new york )
williams has withdrawn pipeline capacity from enron ( updatel )
( updates with closing share prices in fifth paragraph . )
tulsa , oklahoma , nov . 30 ( bloomberg ) - - williams cos . , the
second - biggest u . s . natural - gas pipeline owner , won ' t let cash -
strapped enron corp . use its lines because of credit concerns ,
williams spokesman jim gipson said .
other gas shippers have taken enron ' s share of capacity on
williams ' s 27 , 000 - mile network , gipson said . he said he hadn ' t
heard of interruptions of supplies to customers .
williams competes with houston - based enron in energy trading .
the tulsa , oklahoma - based company continues limited business with
enron to reduce the amount of money owed by enron to williams , he
said .
enron ' s potential debt to williams is less than $ 100 million ,
williams said yesterday . williams negotiated with enron , the
biggest energy trader , for several weeks on reducing that amount ,
gipson said .
shares of williams fell 28 cents to $ 26 . 72 . enron shares fell
10 cents to 26 cents . they fell 85 percent wednesday after dynegy
inc . abandoned a takeover offer for enron after standard & poor ' s
corp . cut enron ' s debt rating to junk status .
williams ' s third - quarter net income rose 83 percent to
$ 221 . 3 million as trading profit more than doubled .
el paso corp . is the biggest u . s . pipeline company .
new jersey has limited exposure to enron decline , treasury says
2001 - 11 - 30 17 : 06 ( new york )
new jersey has limited exposure to enron decline , treasury says
trenton , new jersey , nov . 30 ( bloomberg ) - - the new jersey
pension fund , which covers 665 , 750 state and local government
workers and retirees , holds 2 . 65 million shares of collapsed
energy - trader enron corp . , a fraction of the state ' s total
investment portfolio , the treasury department said .
` ` the state has $ 70 billion in investments , ' ' said francis
rapa , spokesman for new jersey ' s treasury . the state paid an
average of $ 23 a share for its enron stake between june 1994 and
august 2001 , which translates into an investment of about $ 61
million in total . enron shares fell 10 cents to 26 cents today .
` ` that investment represents less than 1 / 10 of 1 percent of
our investment portfolio , ' ' rapa said . the state holds no enron
bonds , he said .
rapa said it ' s too early to tell if the state or localities
within the state would have to increase their pension
contributions because of the decline in enron shares but said
it ' s ` ` highly unlikely ' ' because of the size of the investment .
wall street firms , pension funds face enron losses ( update 6 )
2001 - 11 - 30 17 : 07 ( new york )
wall street firms , pension funds face enron losses ( update 6 )
( adds aegon exposure in ninth paragraph . )
new york , nov . 30 ( bloomberg ) - - wall street financial firms ,
banks in europe and asia , and pension funds from california to new
york stand to lose billions of dollars from the collapse of energy
trader enron corp .
` ` this is having a ripple effect across the world , ' ' said
robert penaloza , a fund manager at aberdeen asset management asia
in singapore .
analysts estimate companies that lent money to enron - - from
abn amro holding nv , the largest dutch bank , to national australia
bank ltd . - - may lose more than $ 5 billion . lenders , trying to
reassure clients and investors by disclosing how much they have at
stake have already revealed $ 3 billion in losses . investment
bankers such as citigroup inc . and j . p . morgan chase & co . are
working to line up financing for enron to operate under bankruptcy
protection .
the houston company ' s demise is also a blow to the mutual and
pension funds that invested in it , tripling the stock price in
1999 and 2000 . the shares , which started this year at more than
$ 83 . 13 , fell 6 cents to 30 cents today . enron had $ 15 billion of
debt and less than $ 2 billion of cash as of last week .
bear stearns cos . , the sixth - biggest u . s . securities firm by
capital , said its exposure to enron is $ 69 million . energy
companies , including duke energy corp . and williams cos . , and
banks such as j . p . morgan chase and abbey national plc said they
are on the hook for a total of $ 1 . 4 billion .
abn amro said it may set aside 110 million euros ( $ 97 . 5
million ) to cover its loans to enron . britain ' s abbey national
said it ' s owed almost $ 135 million . national australia and other
australian lenders said exposure totals about $ 350 million .
france ' s credit lyonnais sa said it has $ 250 million in loans
outstanding .
ing to j . p . morgan
ing groep nv , the biggest dutch financial - services company ,
said it holds about $ 195 million of enron unsecured loans and
bonds . canadian imperial bank of commerce , the country ' s third -
biggest bank , said enron owes it $ 215 million , more than half in
unsecured loans , letters of credit and derivatives .
almost two dozen electricity and natural gas companies said
enron owed them about $ 700 million as of wednesday , when dynegy
inc . abandoned a plan to buy enron , depriving it of the cash
needed to avoid insolvency .
john hancock financial services inc . , xl capital ltd . and
other insurers may absorb total losses of more than $ 3 billion
from the collapse , analysts said . chubb corp . , the sixth - biggest
u . s . business insurer , said its pretax exposure is about $ 220
million . aegon nv , the no . 2 dutch insurer , said it is owed about
$ 300 million in loans .
abn amro is one of the lenders behind enron ' s $ 3 billion
indian power plant . enron owns 65 percent of the dabhol power co .
project outside of mumbai , the city formerly known as bombay . the
plant has been hampered by cost over - runs , penalty claims for
undelivered power , and conflicts with its only client , the
maharashtra state electricity board .
` ` should there be a need to provide ( for a loss ) , we will do
so in the fourth quarter of this year , ' ' said abn amro spokesman
martin winn .
australia to germany
national australia said it has a $ 200 million ( $ 104 million )
in secured and unsecured exposure . ` ` we had already factored in
provisions for this kind of event , and it is consistent with our
bad debt outlook for this year , ' ' said majella allen , a
spokeswoman .
australia & new zealand banking group ltd . , the fourth -
largest australian bank , said its direct exposure is $ 69 million
and it has a further $ 51 million of indirect exposure . the bank
said it will more aside for bad loans this fiscal year .
` ` their exposures are a little surprising , but then again
enron is such a huge organization and spans the globe so it deals
with syndicates of banks for its facilities , ' ' said bill
chatterton , head of equities at abn amro morgans ltd . , the 50
percent - owned private client arm of abn amro australia ltd .
in germany , dresdner bank ag , which is owned by allianz ag ,
said its exposure is less than $ 100 million , while hvb group ,
germany ' s no . 2 bank , has about $ 100 million . deutsche bank ag
said its losses may be in the ` ` double - digit ' ' millions of
dollars . commerzbank ag said their exposure amounts to ` ` double -
digit ' ' millions of euros .
u . s . banks have as much as $ 2 . 6 billion of exposure , said
judah kraushaar , bank analyst at merrill lynch & co . for citigroup
the biggest u . s . financial services company , it may have as much
as $ 1 billion .
j . p . morgan chase said it has $ 500 million of unsecured
exposure to the energy trader , and $ 400 million of loans with
pipelines as collateral .
` we lost money , ' ' said john waterman , chief investment
officer at rittenhouse financial services inc . , which sold all its
enron shares at the end of october . ` ` we ' re glad we got out when
we did . when we started selling it wasn ' t clear at all that things
would unravel in the way they did . ' '
the california public employees ' retirement system , or
calpers , the biggest u . s . public pension fund , held 3 million
shares as of wednesday of this week . the california state teachers
retirement fund owned about 2 million shares . the new york state
common retirement system said it lost as much as $ 60 million .
among energy companies that do business with enron , duke
energy and williams cos . said they may lose $ 100 million each if
enron is unable to pay them back .
energen corp . , an oil and natural - gas explorer and gas
distributor , said it has an $ 18 . 3 million exposure with the
company , and cut its 2002 earnings by 20 cents to 25 cents a
share .
* t
below is a list of some banks and their estimated exposure to
enron :
u . s . electricity firms $ 700 million
j . p . morgan chase $ 500 million
credit lyonnais $ 250 million
canadian imperial bank $ 215 million
ing groep $ 195 million
abbey national $ 164 million
australia & new zealand banking $ 120 million
national australia bank $ 104 million
dresdner bank less than $ 100 million
abn amro $ 97 . 5 million
deutsche bank less than $ 90 million
bear stearns $ 69 million commerzbank
less than $ 45 million
hvb group $ 100 million
new york state common retirement fund $ 50 - $ 60 million
chubb $ 220 million
energen 20 - 25 cents / shr
new york state common retirement fund $ 50 - $ 60 million
chubb $ 220 million
aegon $ 300 million
energen 20 - 25 cents / shr
* t
s & p says credit derivative exposure to enron totals $ 6 . 3 bln
2001 - 11 - 30 17 : 18 ( new york )
new york , nov . 30 ( bloomberg ) - - standard & poor ' s said
credit derivative transactions in which enron corp . may total
$ 6 . 3 billion .
the credit rating agency said it has reviewed credit
derivative transactions in which enron appears and found that
there are $ 3 . 3 billion in credit default swaps directly on enron
debt . another $ 3 billion of credit swaps exist in which a
subsidiary of enron is a counterparty , but the credit default
swaps is not on enron debt , according to nik kahkee , director of
s & p ' s structured finance derivatives group .
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 .
enron ' s fall to spark legal wrangles over derivatives ( updatel )
2001 - 11 - 30 11 : 24 ( new york )
enron ' s fall to spark legal wrangles over derivatives ( updatel )
( rewrites 2 nd paragraph . )
london , nov . 30 ( bloomberg ) - - enron corp . ' s plunge toward
bankruptcy may spark legal wrangles over how to unravel the web of
derivatives contracts tied to the energy company .
enron is set to file for protection in the biggest chapter 11
reorganization ever . that ' s likely to mean the energy trader can ' t
pay on derivatives it sold as insurance against default by other
borrowers , as well as defaulting on its own debts and triggering
similar contracts bought by its creditors .
` ` if i traded with joe bloggs down the road , and enron owed
him a lot of money and he couldn ' t get it so he went into
bankruptcy , then he wouldn ' t fulfill his obligations under my
contract , ' ' said brian senior , head of trading at innogy holdings
plc , the u . k . ' s top electricity supplier . ` ` i don ' t think the
major risk is market liquidity , i think it ' s the domino effect . ' '
enron used derivatives - - financial instruments such as
futures and options whose value is based on other assets - - to
insure against price swings or take bets on a price ' s direction .
the houston - based company had revenue of $ 1 . 9 billion from
derivatives trading last year , more than double the $ 765 million
in 1999 , making it one of the largest traders , according to swaps
monitor publications inc .
by comparison , williams cos . , the no . 2 u . s . natural - gas
pipeline owner , had revenue of $ 1 . 29 billion on derivatives
trading in 2000 .
paul spraos , president of swaps monitor , a research company
that compiles trading figures , said enron only posts derivatives
statistics once a year so there are no figures for 2001 .
dynegy inc . abandoned its planned merger with enron on
wednesday , leaving it with more than $ 15 billion of debt and the
possibility of bankruptcy . as well as oil and gas futures , enron
trades derivatives based on such things as weather and information -
transmission capacity , known as bandwidth .
banned from trading
spraos estimates that as of sept . 30 , enron owed $ 18 . 7
billion on derivatives trades that went sour , though he said that
doesn ' t take into account the collateral enron probably posted to
back up the trades .
the european energy exchange today banned enron from trading
its products , while australian regulators barred the company ' s
finance unit , enron australia pty , from trading electricity
futures because its funding wasn ' t assured .
u . s . senate and house committees will investigate enron ' s
decline and consider new regulations for electricity and natural -
gas trading . the securities and exchange commission is also
examining the company .
enron had $ 201 billion worth of derivatives on oil , gas and
electricity at the end of last year , swaps monitor has reported .
that ' s measuring the notional amount , the face value of the
securities on which the derivatives are based .
` quantifying it '
` ` everyone will be looking at their exposure , whether they ' ve
got collateral , and quantifying it , ' ' said robert g . pickel , chief
executive officer of the international swaps and derivatives
association .
isda , a new york - based trade association representing more
than 550 companies that trade derivatives , designed the legal
contracts typically used in derivatives transactions . pickel said
those contracts are designed to address such situations .
` ` there are two potential issues relating to isda
documentation , as a result of the situation regarding enron , ' '
pickel said . the first involves companies that have entered
derivatives trades with enron using isda ' s standard contract ,
known as the master agreement . the second concerns banks that have
provided credit protection on enron in the form of a credit -
default swap , also using isda documents .
credit - default swaps work like insurance on a company ' s bonds
or loans . they pay out if there ' s a bankruptcy , default , debt
restructuring or similar occurrence , known as a credit event .
` ` if there ' s a bankruptcy filing there ' s no question it would
be a credit event , ' ' pickel said .
` can ' t tell '
enron ' s u . k . units are in administration , which has triggered
what lawyers define as a credit event , said simon firth , head of
the credit derivatives practice at linklaters & alliance , which is
acting for , the accountant for enron ' s
european arm .
` ` the documents are fairly robust , and we ' ve been through
issues before , ' ' firth said . he said that while ` ` each time the
documentation gets strengthened , you can ' t tell what happens until
you look at the individual cases . ' '
enron owes almost two dozen energy companies about $ 700
million . j . p . morgan , the bank that advised enron in the failed
merger with dynegy , said it was owed $ 500 million for unsecured
loans . canadian imperial bank of commerce was owed $ 215 million in
loans and credit derivatives .
in europe , abn amro may set aside $ 97 . 5 million to cover its
enron exposure . the energy company owes abbey national plc $ 164
million , and dresdner bank ag said its exposure is about $ 100
million .
` ` this one has left every head shaking , and people are
wondering how to organize by class of creditor and how to hire
counsel , ' ' said glenn reynolds , an analyst at creditsights inc . in
new york . ` ` lawyers are high - fiving . ' '
enron mentions - 11 / 30 / 01
enron to fire 95 % of staff after bankruptcy filing , cnbc says
bloomberg , 11 / 30 / 01
enron says cnbc report of layoffs is incorrect ( updatel )
bloomberg , 11 / 30 / 01
andersen ' s enron audit prompts tighter ` peer review ' of quality
bloomberg , 11 / 30 / 01
enron ' s fall to spark legal wrangles over derivatives ( updatel )
bloomberg , 11 / 30 / 01
enron ' s legal woes to make bankruptcy case complex ,
bloomberg , 11 / 30 / 01
enron might raise $ 610 mln in brazil asset sale , analysts say
bloomberg , 11 / 30 / 01
bush spokesman fleischer comments on enron corp . ' s collapse
bloomberg , 11 / 30 / 01
enron ' s board was compromised by financial ties ( correct )
bloomberg , 11 / 30 / 01
enrononline resumes some commodity product trading ( updatel )
bloomberg , 11 / 30 / 01
agl resources ends services contract with enron ( updatel )
bloomberg , 11 / 30 / 01
arthur andersen ' s enron audit is under review by sec ( updatel )
bloomberg , 11 / 30 / 01
enron fires u . k . workers , plans bankruptcy soon ( updatel )
bloomberg , 11 / 30 / 01
enron creditors list potential losses from energy trader ' s fall
bloomberg , 11 / 30 / 01
dynegy says pipeline option not dependent on enron ( update 8 )
bloomberg , 11 / 30 / 01
enron bankruptcy case would take years to resolve ( update 2 )
bloomberg , 11 / 30 / 01
chairman says dynegy ' s right to enron pipeline indisputable
bloomberg , 11 / 30 / 01
williams has withdrawn pipeline capacity from enron ( updatel )
bloomberg , 11 / 30 / 01
new jersey has limited exposure to enron decline , treasury says
bloomberg , 11 / 30 / 01
wall street firms , pension funds face enron losses ( update 6 )
bloomberg , 11 / 30 / 01
s & p says credit derivative exposure to enron totals $ 6 . 3 bln
bloomberg , 11 / 30 / 01
enron ' s fall to spark legal wrangles over derivatives ( updatel )
bloomberg , 11 / 30 / 01
enron to fire 95 % of staff after bankruptcy filing , cnbc says
2001 - 11 - 30 17 : 40 ( new york )
houston , nov . 30 ( bloomberg ) - - enron corp . will file for
bankruptcy monday or tuesday and fire 95 percent of its staff ,
financial news network cnbc reported , citing an unnamed employee .
the employee said a vice president told his workers that
enron would take the steps next week and give the employees two
weeks of severance pay for every year of service at the company ,
cnbc said .
enron says cnbc report of layoffs is incorrect ( updatel )
2001 - 11 - 30 17 : 59 ( new york )
( adds in third paragraph that enron says cnbc report is
false . )
houston , nov . 30 ( bloomberg ) - - enron corp . will file for
bankruptcy monday or tuesday and fire 95 percent of its staff ,
financial news network cnbc reported , citing an unnamed employee .
the employee said a vice president told his workers that
enron would take the steps next week and give the employees two
weeks of severance pay for every year of service at the company ,
cnbc said .
enron will not fire 95 percent of its workforce and has made
no announcement to workers on layoffs , company spokesman vance
meyer said . no decision has been made on whether the company will
make a bankruptcy filing , meyer said .
andersen ' s enron audit prompts tighter ` peer review ' of quality
2001 - 11 - 30 17 : 27 ( new york )
andersen ' s enron audit prompts tighter ` peer review ' of quality
washington , nov . 30 ( bloomberg ) - - enron corp . ' s accounting
firm , arthur andersen llp , will undergo tougher scrutiny in the
` ` peer review ' ' process in which u . s . audit firms police one
another ' s quality - control standards .
andersen , the fifth - largest accounting firm , said it asked
its peer reviewer , deloitte & touche llp , for the additional
scrutiny in light of financial reporting issues at enron ,
according to an andersen press release . deloitte & touche had
independently determined that it wanted to conduct additional
procedures , the release said .
` ` in light of recent developments , we believe that extending
the peer review to include work done in other offices , including
houston , and other procedures that deloitte & touche deems
appropriate and necessary is the right thing to do , ' ' andersen
chief executive joseph berardino said in the release .
the peer review is due on dec . 31 . andersen ' s last review by
deloitte & touche , the third - largest accounting and consulting
firm , was in 1998 . the review did not report any significant
problems .
the sec is examining whether andersen acted properly in
audits of energy provider enron , which is also under investigation
by the sec . andersen has acknowledged that the sec has subpoenaed
documents related to houston - based enron , which is on the brink of
bankruptcy after saying it had overstated earnings .
andersen ' s announcement comes as the public oversight board ,
an accounting industry oversight group , plans to look at the
adequacy of the peer review system amid concerns about the failed
enron audits . the system calls for audit firms to periodically
submit their reports on public companies for examination by other
accounting firms , in an effort to assure investors the firm ' s
methods comply with professional standards .
enron , the largest energy trader , this month said it
overstated earnings by $ 586 million over four - and - a - half years ,
inflated shareholder equity by $ 1 . 2 billion because of an
accounting error , and failed to consolidate results of three
affiliated partnerships into its balance sheet .
andersen was enron ' s outside auditor for more than a decade ,
assuring investors that the company ' s financial statements
conformed with generally accepted accounting principles
u . s . representative john dingell , a michigan democrat ,
questioned the peer review process recently in a letter to the
public oversight board . none of the five biggest international
accounting firms has ever issued a negative peer - review report
against another , dingell said . the so - called big five also include
 llc , kpmg llp , and ernst & young lp .
` ` there appears to be little reason for the public to have
faith in andersen or the peer review process , ' ' dingell wrote .
andersen responded that it has faith in the accounting
profession ' s self - regulatory process , which the pob oversees .
a spokeswoman at deloitte & touche didn ' t return a telephone
call seeking comment .
enron ' s fall to spark legal wrangles over derivatives ( updatel )
2001 - 11 - 30 11 : 24 ( new york )
enron ' s fall to spark legal wrangles over derivatives ( updatel )
( rewrites 2 nd paragraph . )
london , nov . 30 ( bloomberg ) - - enron corp . ' s plunge toward
bankruptcy may spark legal wrangles over how to unravel the web of
derivatives contracts tied to the energy company .
enron is set to file for protection in the biggest chapter 11
reorganization ever . that ' s likely to mean the energy trader can ' t
pay on derivatives it sold as insurance against default by other
borrowers , as well as defaulting on its own debts and triggering
similar contracts bought by its creditors .
` ` if i traded with joe bloggs down the road , and enron owed
him a lot of money and he couldn ' t get it so he went into
bankruptcy , then he wouldn ' t fulfill his obligations under my
contract , ' ' said brian senior , head of trading at innogy holdings
plc , the u . k . ' s top electricity supplier . ` ` i don ' t think the
major risk is market liquidity , i think it ' s the domino effect . ' '
enron used derivatives - - financial instruments such as
futures and options whose value is based on other assets - - to
insure against price swings or take bets on a price ' s direction .
the houston - based company had revenue of $ 1 . 9 billion from
derivatives trading last year , more than double the $ 765 million
in 1999 , making it one of the largest traders , according to swaps
monitor publications inc .
by comparison , williams cos . , the no . 2 u . s . natural - gas
pipeline owner , had revenue of $ 1 . 29 billion on derivatives
trading in 2000 .
paul spraos , president of swaps monitor , a research company
that compiles trading figures , said enron only posts derivatives
statistics once a year so there are no figures for 2001 .
dynegy inc . abandoned its planned merger with enron on
wednesday , leaving it with more than $ 15 billion of debt and the
possibility of bankruptcy . as well as oil and gas futures , enron
trades derivatives based on such things as weather and information -
transmission capacity , known as bandwidth .
banned from trading
spraos estimates that as of sept . 30 , enron owed $ 18 . 7
billion on derivatives trades that went sour , though he said that
doesn ' t take into account the collateral enron probably posted to
back up the trades .
the european energy exchange today banned enron from trading
its products , while australian regulators barred the company ' s
finance unit , enron australia pty , from trading electricity
futures because its funding wasn ' t assured .
u . s . senate and house committees will investigate enron ' s
decline and consider new regulations for electricity and natural -
gas trading . the securities and exchange commission is also
examining the company .
enron had $ 201 billion worth of derivatives on oil , gas and
electricity at the end of last year , swaps monitor has reported .
that ' s measuring the notional amount , the face value of the
securities on which the derivatives are based .
` quantifying it '
` ` everyone will be looking at their exposure , whether they ' ve
got collateral , and quantifying it , ' ' said robert g . pickel , chief
executive officer of the international swaps and derivatives
association .
isda , a new york - based trade association representing more
than 550 companies that trade derivatives , designed the legal
contracts typically used in derivatives transactions . pickel said
those contracts are designed to address such situations .
` ` there are two potential issues relating to isda
documentation , as a result of the situation regarding enron , ' '
pickel said . the first involves companies that have entered
derivatives trades with enron using isda ' s standard contract ,
known as the master agreement . the second concerns banks that have
provided credit protection on enron in the form of a credit -
default swap , also using isda documents .
credit - default swaps work like insurance on a company ' s bonds
or loans . they pay out if there ' s a bankruptcy , default , debt
restructuring or similar occurrence , known as a credit event .
` ` if there ' s a bankruptcy filing there ' s no question it would
be a credit event , ' ' pickel said .
` can ' t tell '
enron ' s u . k . units are in administration , which has triggered
what lawyers define as a credit event , said simon firth , head of
the credit derivatives practice at linklaters & alliance , which is
acting for , the accountant for enron ' s
european arm .
` ` the documents are fairly robust , and we ' ve been through
issues before , ' ' firth said . he said that while ` ` each time the
documentation gets strengthened , you can ' t tell what happens until
you look at the individual cases . ' '
enron owes almost two dozen energy companies about $ 700
million . j . p . morgan , the bank that advised enron in the failed
merger with dynegy , said it was owed $ 500 million for unsecured
loans . canadian imperial bank of commerce was owed $ 215 million in
loans and credit derivatives .
in europe , abn amro may set aside $ 97 . 5 million to cover its
enron exposure . the energy company owes abbey national plc $ 164
million , and dresdner bank ag said its exposure is about $ 100
million .
` ` this one has left every head shaking , and people are
wondering how to organize by class of creditor and how to hire
counsel , ' ' said glenn reynolds , an analyst at creditsights inc . in
new york . ` ` lawyers are high - fiving . ' '
enron ' s legal woes to make bankruptcy case complex ,
2001 - 11 - 30 12 : 41 ( new york )
enron ' s legal woes to make bankruptcy case complex ,
houston , nov . 30 ( bloomberg ) - - enron corp . ' s legal problems ,
one reason for the collapse of the world ' s largest energy trader ,
would add to the complexity of a bankruptcy filing and might take
years to resolve , experts say .
with dynegy inc . having withdrawn a proposed $ 23 billion
takeover offer , enron is weighing what would be the largest
bankruptcy in history and may go to court within a week . enron
shareholders , employees and business partners are lining up to sue
the houston - based company after its shares lost $ 26 billion in
value since mid - october .
enron restated $ 586 million in earnings because of accounting
irregularities , and questions surfaced about conflicts of interest
among some of the company ' s executives . the u . s . securities and
exchange commission is investigating the company , and that
wouldn ' t be affected by a bankruptcy filing .
` ` there are so many legal tentacles to this thing it ' s
scary , ' ' said chuck tatelbaum , former vice president for research
at the american bankruptcy institute . ` ` we could be talking about
a six - year bankruptcy case here . ' '
lawsuits seeking damages from a company under chapter 11 are
pulled into the bankruptcy case and judgments or settlements are
converted into bankruptcy claims .
fraud claims
among the suits likely to be included in a bankruptcy case
are claims by shareholders that the company misled investors about
its financial health . another category would be allegations that
enron executives improperly prevented workers from moving 401 ( k )
investments out of the company ' s stock .
enron probably would face accusations it broke energy trading
contracts . the agreements , known as derivatives , were used as
insurance against price swings in the energy market . with the
company poised to file for chapter 11 , it is expected to miss
payments under the contracts .
there ' s also the developing battle between enron and dynegy
over the failed buyout bid that might end up in bankruptcy court .
that might lead a bankruptcy judge to take a look at the
recent court case involving tyson foods inc . and ibp inc . , a beef
producer . a judge in delaware ordered tyson to complete its buyout
of ibp after their proposed combination collapse . tyson , like
dynegy , had said it wasn ' t fully informed about ibp ' s financial
problems when it negotiated to acquire the beef producer .
dynegy said today it plans to take over enron ' s northern
natural gas co . pipeline unit next month . dynegy said it ' s
entitled to the pipeline under the terms of its nov . 9 merger
agreement that gave it $ 1 . 5 billion in preferred stock in northern
natural gas .
enron could sue as part of the bankruptcy case to stop dynegy
from walking away from the buyout and claiming ownership to the
pipeline .
complications
any chapter 11 cases would be ` ` inordinately complicated , ' '
said lynn lopucki , a law professor at the university of california
at los angeles .
the largest bankruptcy on record is texaco ' s $ 35 . 9 billion
filing in 1987 . enron lists $ 61 billion in assets .
other big companies , like w . r . grace & co . and sgl carbon
inc . , used bankruptcy filings to manage lawsuits , said ken
eckstein , a new york attorney who handles bankruptcy litigation .
w . r . grace , a financially healthy chemical maker , filed for
chapter 11 protection in april to cope with asbestos - related
lawsuits . sgl carbon is the u . s . unit of a german company with a
market value of more than $ 1 . 2 billion that makes products used in
steel production . sgl filed bankruptcy papers in 1999 to dispose
of customers ' suits over price - fixing claims .
what sets enron apart are the questions about its financial
viability , eckstein said . he represented customers suing sgl as
part of the bankruptcy case .
` ` here , you have a fundamentally broken company , ' ' eckstein
said . ` ` it may never emerge from bankruptcy . ' '
that makes it tougher to gauge how much other creditors
might recover , he said .
` makes me mad '
enron investors aren ' t optimistic about the future of the
company ' s shares .
` ` i took at least a 60 percent hit on them , ' ' said jim
anders , a columbia , south carolina , lawyer who has sold shares .
` ` it really makes me mad . i ' d like to get my hands on some of
those executives who were doing the insider deals . that really
shook people ' s confidence in the company . ' '
enron ' s fall was accelerated by questions about some
partnerships the company used to move assets and debt off the
company ' s books . many investors had complained enron ' s financial
reports hid the significance of the partnerships .
enron ' s former chief financial officer andrew fastow led some
of the partnerships and earned more than $ 30 million through their
dealings with enron , the company disclosed . fastow and other
executives later were fired over their connection to the
partnerships .
anders acknowledged that bankruptcy law puts shareholders and
litigants at the back of the repayment line .
` ` i know we ' ve had it and aren ' t going to get squat back , ' '
anders said . ` ` the company led us to believe enron was as solid as
ge or one of the big banks . now the bank is busted . ' '
enron might raise $ 610 mln in brazil asset sale , analysts say
2001 - 11 - 30 13 : 24 ( new york )
enron might raise $ 610 mln in brazil asset sale , analysts say
sao paulo , nov . 30 ( bloomberg ) - - enron corp . may be able to
raise as much as $ 610 million from the sale of assets in brazil ,
including two power plants and stakes in two gas distributors ,
analysts and investors said .
the u . s . energy trader , which is on the brink of bankruptcy ,
also might reduce the $ 700 million price tag on its 99 percent
stake in power distributor elektro - eletricidade e servicos sa that
it has tried to sell for more than a year , analysts said .
` ` they would sell those assets to make a quick buck , ' ' said
marcos severine , a power utility analyst at sudameris corretora .
about 56 percent of enron ' s $ 6 . 5 billion of overseas assets
were in south america , most in brazil , as of june 30 . enron said
it currently plans no change to its operations in the country .
the u . s . company is expected to file for bankruptcy
protection in the biggest chapter 11 reorganization in history ,
which may force the company to sell assets to pay about $ 15
billion of debt . dynegy inc . this week abandoned its proposed
merger with enron . enron , which had less than $ 2 billion of cash
as of last week , has more than $ 61 billion in assets .
enron may fetch as much as $ 190 million from the sale of
eletrobolt , a 380 - megawatt power plant , and $ 220 million from
riogen , another power plant , severine said . both are based in rio
de janeiro .
gas companies
enron also may be able to raise $ 200 million from the sale of
stakes in two natural gas distributors , said a spokesman for
petros , the employee pension fund of petroleo brasileiro , which is
bidding for one of the companies . brazilian energy regulators
already have approved the sale , though it still requires backing
from antitrust regulators .
if enron tries again to sell elektro , it may be required to
offer the company to the federal government at a discount or to
another private company , analysts said . the country ' s regulations
aren ' t clear , they said .
regulatory approval may delay any sale of assets in brazil .
in addition , price controls in brazil ' s power industry will limit
the amount of money enron will be able to raise from the sales ,
analysts said .
investors are demanding lower prices for power companies in
brazil after electricity rationing and price controls over the
past two years cut earnings of power distributors and generators ,
analysts said . elektro has posted losses for six quarters .
venezuela , mexico
a bankruptcy filing by enron would probably result in the
cancellation of its investment plans in venezuela , latin
america ' s largest oil and natural gas producer , analysts said .
enron had been slated to invest three - quarters of the $ 700
million needed to build a liquid natural gas processing plant with
state oil company petroleos de venezuela sa .
pdvsa officials declined to comment on whether the plant ,
which would cool natural gas until it liquefies , would go on with
a new partner .
enron , which also owns a small venezuelan power company ,
pulled out of exploration in 2000 from an offshore block in the
gulf of paria between venezuela and trinidad and tobago .
enron also has smaller investments in mexico , argentina and
colombia . enron holds 20 percent of a joint venture building a
$ 189 million power plant in monterrey , mexico .
tractebel sa took an 80 percent share in the project in
november .
colombia
enron and promigas sa , a colombian natural gas pipeline
operator , each have a 50 percent stake in centrogas sa , a natural
gas pipeline that transports about 400 million cubic feet of gas a
day about 900 kilometers from the northern guajira peninsula to
barrancabermeja , the main oil refining city in central colombia .
the gas is produced at an offshore field operated by texaco .
officials at promigas weren ' t available for comment .
enron closed its administrative office in colombia about
three months ago , leaving an attorney to represent it in colombia .
enron ' s argentine assets include azurix buenos aires sa , a
natural gas and water utility , and shares in transportadora de gas
del sur sa .
perez companc , which owns shares in transportadora , is
prohibited by law from increasing its stake in the distribution
company .
` ` if the law is modified , then yes , we would consider it , ' '
said mario grandinetti , head of perez companc ' s institutional
relations . ` ` but there are also economic issues to consider . '
bush spokesman fleischer comments on enron corp . ' s collapse
2001 - 11 - 30 14 : 48 ( new york )
washington , nov . 30 ( bloomberg ) - - following are comments
from white house press secretary ari fleischer on the collapse of
enron corp . , which faces the biggest bankruptcy ever . the energy
committees in the senate and house have said they ' ll investigate
the collapse and consider new regulations for electricity and
natural - gas trading .
` ` the president understands that congress at all times should
exercise its proper oversight roles . that includes anything that ,
in a case like this , the senate sees fit , in terms of an
investigation into the collapse of a company . that ' s the purview
of the congress , ' ' fleischer said .
` ` as i indicated , the federal government , the administration ,
is already doing that . the department of treasury and other
entities are monitoring it . so i think we ' re all looking with the
same cause of concern . ' '
enron ' s board was compromised by financial ties ( correct )
2001 - 11 - 30 15 : 01 ( new york )
enron ' s board was compromised by financial ties ( correct )
( corrects percentage of natco group sales that went to enron
to 0 . 16 percent in 25 th paragraph , and adds that sales are within
council of institutional investors standards in 26 th paragraph . )
new york , nov . 29 ( bloomberg ) - - enron corp . plunged from the
largest energy trader to the verge of bankruptcy under a board of
directors whose independence was undercut by financial ties to
management , according to corporate governance experts .
enron gave seven of its 14 directors consulting contracts ,
sales to their business or donations to their non - profit
institutions , according to company and public records . the
recipients include three members of enron ' s audit committee , which
is responsible for financial oversight .
lord john wakeham , for example , a former leader of the
british house of commons , sits on the audit committee . enron gave
him a $ 72 , 000 - a - year consulting contract . john mendelsohn ,
president of the md anderson cancer center in houston , is also on
the audit committee . in the last five years , enron and its
chairman kenneth lay have donated $ 567 , 900 to the cancer center .
` ` to get on a board you have to be ` clubbable , ' but this
looks like collegiality turning to cronyism , ' ' said allan
cleveland , counsel to the new hampshire retirement system , an
enron shareholder .
enron , based in houston handled almost a quarter of all
natural gas and electricity trades . during the past seven weeks ,
its board has presided over a $ 26 billion drop in market value
that began after the company wrote down $ 1 . 2 billion in
shareholder equity and reported it had overstated earnings by $ 586
million since 1997 .
responsibility
as enron ' s shares fell , the company suffered a cash crunch .
it sought an infusion of capital and agreed to be acquired by
dynegy inc . , a houston - based rival . that plan collapsed yesterday
as investors balked at investing $ 1 . 5 billion , prompting dynegy to
withdraw its offer . enron shares today fell another 39 percent , or
24 cents , to 37 cents per share . the stock began the year trading
at $ 83 . 125 .
corporate boards are responsible for protecting shareholder
interests by reviewing the work of top executives . to accomplish
that , two - thirds of a board should be ` ` independent ' ' from
management , according to the council of institutional investors ,
which represents pension funds .
independence
the council defines an independent director as ` ` a person
whose directorship constitutes his or her only connection to the
corporation . ' '
` ` consulting contracts , donations to non - profit organizations
linked to directors , this eats away at independence , ' ' said ann
yergen , the council ' s director of research .
corporate governance standards established by the new york
and nasdaq stock exchanges say all audit committee members should
be independent .
enron board members , including wakeham and mendelsohn ,
declined repeated requests for interviews . vance meyer , a company
spokesman , said enron could not immediately respond to questions
regarding the board .
enron ' s board met nine times in 2000 , with each member
receiving annual compensation of $ 79 , 000 in cash and stock . every
member attended at least 75 percent of the meetings , except ronnie
chan , chief executive of the hang lung group , a hong kong
development business , according to company filings .
relationships
based on enron proxy statements and other documents , the
following relationships existed between enron and board members :
- - robert a . belfer , 65 , has been on the board since 1983 and
sits on the executive committee . he is enron ' s largest individual
shareholder , with 8 . 5 million shares , and is chairman and chief
executive of belco oil & gas corp . , which operates from an office
overlooking new york ' s central park . in 2000 , belco had $ 32
million in trade settlements and $ 1 million in option premiums
with enron trade resources corp . , an enron subsidiary .
- - john urquhart , 72 , a former general electric co .
executive , sat on the board until last may . he received an annual
consulting fee from enron of almost $ 200 , 000 a year as a special
adviser to the enron chairman .
- - mendelsohn , 64 , is a physician who was formerly head of
medicine at memorial sloan - kettering cancer center in new york . he
pioneered research in controlling cancer through the chemistry of
a tumor ' s growth and was on president george w . bush ' s short list
to head the national institutes of health . since 1996 , mendelsohn
has been president of the m . d . anderson cancer center , part of the
university of texas health system .
donations
mendelsohn joined enron ' s board in 1999 . enron has donated
$ 221 , 650 to the cancer center . lay and a foundation he established
with his wife , the linda and ken lay family foundation , have
donated $ 346 , 250 in the last five years . the enron foundation
pledged $ 1 . 5 million for a new clinic .
- - charles lemaistre , 77 , headed the anderson cancer center
for 18 years until retiring in 1996 . he has been an enron board
member for 16 years , is a member of the executive committee and
chairs the compensation committee . that panel awarded lay a $ 20
million - a - year severance package that he renounced two weeks ago .
- - wendy gramm , 56 , has held positions at the federal trade
commission and the u . s . office of management and budget and was
chairman of the u . s . commodity futures trading commission . she is
director of regulatory studies at the mercatus center of george
mason university in fairfax , virginia . she is married to phil
gramm , a u . s . republican senator from texas .
in the last three years , enron and the ken and linda lay
family foundation have donated more than $ 50 , 000 to the university
and the mercatus center , according to university records .
consulting fee
- - wakeham , 68 , a chartered accountant and self - made
millionaire , became a force in the government of former u . k . prime
minister margaret thatcher . he was known as her ` ` mr . fix - it . ' ' he
was the target of an irish republican army bomb in 1984 that
killed his wife and left him buried under rubble for seven hours .
enron pays wakeham $ 6 , 000 a month to advise the company on
european business .
- - herbert s . winokur jr . , 57 , is the managing partner of
capricorn investors lp , a holding company that owns natco group
inc . , a maker of oil and gas production equipment .
an enron board member since 1985 , winokur serves on the
executive committee , chairs the finance committee and was
appointed to a special committee created to look into how enron
was managed .
in 2000 , natco had $ 370 , 294 in sales to enron subsidiaries ,
0 . 16 percent of sales .
` ` business between companies linked to board members ought to
be discouraged , ' ' said yergen of the council of institutional
investors . still , natco ' s sales fall within the group ' s
recommended standards . ` ` we think that anything over 1 percent is
compromising , ' ' yergen said .
enron said in a proxy statement it believes the terms of the
sales were ` ` no less favorable than the terms of similar
arrangements with third parties . ' '
audit committee
enron ' s audit committee poses particular problems , according
to corporate governance experts . the committee is composed of
wakeham , mendelsohn , gramm , chan , robert jaedicke , a retired
stanford university business school dean , and paulo ferraz
pereira , a brazilian banker .
wakeham , gramm and mendelsohn are not independent , according
to corporate governance experts and standards .
` ` for the audit committee , you don ' t even want the appearance
of a conflict , ' ' said charles drott , a forensic accountant who has
testified as an expert witness in bankruptcy and business fraud
cases involving companies such as delorean motor co . and lincoln
savings & loan association .
the committee is spread across the globe , with wakeham in
london , ferraz in rio de janeiro and chan in hong kong .
` ` the question is why this committee ? ' ' drott asked . ` ` for a
big sophisticated company like enron , why did they choose these
people ? ' '
swift descent
enron ' s rapid decline - - standard & poor ' s corp . slashed its
credit rating eight levels this month to junk status - - centered
on its dealings with partnerships the company used to move assets
and debt off the company ' s books . many investors had complained
enron ' s financial reports obscured the partnerships ' businesses to
the point they were impossible to understand . enron ' s former chief
financial officer andrew fastow led some of the partnerships and
earned more than $ 30 million through their dealings with enron ,
the company disclosed .
enron documents filed with the u . s . securities and exchange
commission state that the board determined that fastow ' s
participation in the partnerships would ` ` not adversely affect the
interests of enron . ' ' the documents also say the board approved
all transactions involving partnerships that were brought to it by
lay and other enron executives .
` ` what went wrong at enron ? ' ' said patrick mcgurn , a vice
president at institutional investor services , which evaluates
board candidates for institutional investors . ` ` a lot of it goes
back to the board . ' '
enrononline resumes some commodity product trading ( updatel )
2001 - 11 - 30 15 : 58 ( new york )
enrononline resumes some commodity product trading ( updatel )
( updates with trader comment in fourth paragraph , today ' s
halt in enrononline system in sixth and seventh paragraphs ,
trading at other exchanges in 10 th and 11 th paragraphs . )
new york , nov . 30 ( bloomberg ) - - enron corp . resumed internet
trading in almost one - third of the commodity products it normally
offers , as buyers and sellers sought to unwind positions following
a shutdown of the web site wednesday .
enrononline offered 472 products today , including natural
gas , power , metals and forest products , compared with 65
yesterday , spokesman mark palmer said . the marketplace normally
offers about 1 , 600 products for which enron is a buyer or seller
in each transaction .
the web site , which used to handle about $ 2 . 8 billion a day
in trades , shut for several hours wednesday when dynegy inc .
pulled out of a planned merger with enron , which is now poised to
file for bankruptcy . trading with enron has plunged on concern
that the company wouldn ' t be able to meet its obligations .
` ` people are only making selective trades , unwinding their
positions ' ' with enron , said david chang , vice president of energy
trading at bank of america in new york . ` ` people are adding no new
net exposure . ' '
trading has shifted to other marketplaces such as the
intercontinental exchange , dynegy direct and the new york
mercantile exchange , traders said .
trading disrupted ?
users of the system reported that enrononline stopped
functioning at 2 p . m . for about 15 minutes today , shortly after
enron announced that it was dismissing 1 , 100 of its u . k .
employees . the companied denied service was interrupted .
enron still isn ' t offering its full spectrum of products ,
said kyle cooper , an analyst at salomon smith barney in houston .
enron recorded about 825 transactions on the system
yesterday , down from an average of about 5 , 000 a day , palmer said .
houston - based enron is the counter - party for every trade at
enrononline . some of its rivals , such as the intercontinental
exchange and the nymex , are intermediaries for transactions that
are backed by funds from clearinghouses or banks .
the nymex traded a record 79 , 701 natural gas options
contracts yesterday and a record 228 , 728 natural gas futures
contracts on wednesday . by 2 : 49 p . m . today , it had traded about
133 , 000 futures .
the intercontinental exchange inc . , an internet - based system
in atlanta , said trading activity so far this month was up 65
percent from october levels .
enrononline had accounted for about 60 percent of enron ' s
energy trading volume . it also trades commodities by telephone .
` ` traders we speak to are still working on their enron
exposure , doing what they can to minimize that , ' ' said justin
fohsz , an oil broker at starsupply petroleum inc . in englewood ,
new jersey . ` ` trading has taken a back seat for the past few days
and i don ' t think this is going to change any time soon . ' '
shares of enron were down 8 cents at 28 cents in late
trading , compared with $ 70 a year ago .
agl resources ends services contract with enron ( updatel )
2001 - 11 - 30 16 : 15 ( new york )
agl resources ends services contract with enron ( updatel )
( updates with agl comment in second paragraph , closing share
prices in fifth paragraph . )
atlanta , nov . 30 ( bloomberg ) - - agl resources inc . , which
owns natural - gas utilities in the southeastern u . s . , ended a
contract for energy services provided by cash - strapped enron corp .
to its virginia natural gas unit .
the two - year contract for gas , transmission and other
services began in december and was ended without penalties , agl
spokesman russ williams said . he said he didn ' t know the value of
the pact .
enron , facing the disintegration of its energy - trading
business and saddled with $ 15 billion in debt , probably will file
for bankruptcy , analysts say . rival dynegy inc . withdrew a buyout
bid wednesday after standard & poor ' s cut enron ' s debt rating to
junk status .
atlanta - based agl said its business exposure to enron was
` ` minimal , ' ' and the end of the contract eliminates the prospect
of losses tied to enron . agl has 1 . 8 million customers in georgia ,
southeast virginia and chattanooga , tennessee .
shares of enron , which reached $ 84 . 88 just 11 months ago ,
fell 10 cents to 26 cents . agl fell 57 cents to $ 21 . 43 .
arthur andersen ' s enron audit is under review by sec ( updatel )
2001 - 11 - 30 15 : 17 ( new york )
arthur andersen ' s enron audit is under review by sec ( updatel )
( adds sec no - comment in fifth paragraph , accounting board
review in 12 th paragraph . )
chicago , nov . 30 ( bloomberg ) - - the securities and exchange
commission is investigating whether arthur andersen llp acted
properly in audits of enron corp . , which already is being examined
by the sec , a person with knowledge of the probe said .
andersen , the fifth - largest accounting firm , acknowledged the
sec has subpoenaed documents related to audits of houston - based
enron , which is on the brink of bankruptcy after saying it had
overstated earnings for four and a half years .
` ` as is customary when the sec investigates a financial
reporting matter of a company we audit , they ' ve asked for our
cooperation , ' ' said david tabolt , an andersen partner and
spokesman . ` ` the sec is reviewing our work as part of their
process . ' ' enron shares have plummeted to 30 cents from a high of
$ 37 . 50 as recently as sept . 11 .
enron ' s collapse has focused government attention on the
company ' s bookkeeping practices and the audits by andersen , which
last june agreed to pay $ 7 million to settle sec charges it issued
false and misleading audit reports about trash - hauler waste
management inc . u . s . attorneys in houston and manhattan , who would
prosecute individuals or companies if criminal wrongdoing is
found , are monitoring the sec ' s enron probe , the person with
knowledge of the investigation said .
` ` we don ' t confirm or deny the existence of investigations , ' '
sec spokesman michael robinson said .
enron restatement
andersen worked as enron ' s outside auditor for more than a
decade , assuring investors the company ' s financial statements
conformed with generally accepted accounting principles . tabolt
declined to say when the sec subpoena was received , or what
documents were requested .
earlier this month , enron said it overstated earnings by $ 586
million over four - and - a - half years , inflated shareholder equity by
$ 1 . 2 billion because of an ` ` accounting error , ' ' and failed to
consolidate results of three affiliated partnerships into its
balance sheet . last month , enron said it was the subject of a
formal investigation by the sec .
enron restated its financial reports as the company suffered
a cash crisis triggered by disclosure of the cut in shareholder
equity and the start of an sec investigation .
the prospect of dual investigations by the sec and the
justice department ' s u . s . attorneys arises because the sec only
has authority to file civil lawsuits alleging securities law
violations . the justice department has jurisdiction on criminal
securities law prosecutions .
parallel probes
the agencies often conduct parallel probes , such as the
current investigations of initial public offering practices at
some of wall street ' s biggest underwriters . yesterday , credit
suisse first boston said the manhattan u . s . attorney has dropped a
criminal probe of how it allocated ipo shares , while the sec is
continuing to investigate .
last year , the sec and justice department prosecutors both
filed charges against executives accused of inflating revenue at
hbo & co . before its 1999 acquisition by mckesson corp .
citing concerns raised by andersen ' s audits of enron , public
oversight board chairman charles bowsher last week said that
accounting industry oversight group plans to examine the adequacy
of its peer - review system for ensuring proper audit procedures .
under that system , each of the five biggest international
accounting firms is reviewed periodically by another firm in the
so - called big five .
non - audit work
enron paid andersen $ 52 million last year , $ 25 million for
auditing and $ 27 million for services including business and tax
consulting , due diligence procedures and help in preparing sec
filings , according the company ' s proxy statement . enron and
andersen declined to provide further detail .
asked if the sec request includes documents relating to
andersen ' s consulting work for enron , tabolt said , ` ` questions
about the nature of the investigation should be directed to the
sec . ' '
earlier this year , andersen paid $ 130 million to settle
private lawsuits alleging the firm allowed waste management and
sunbeam corp . to file false financial reports that cost investors
billions of dollars in losses .
in april , andersen agreed to pay $ 110 million to settle a
securities fraud class - action suit filed over its accounting work
for appliance maker sunbeam corp . the appliance maker filed for
bankruptcy protection in february . earlier this month the firm
agreed to pay $ 20 million to settle a class - action lawsuit about
its work with waste management .
enron fires u . k . workers , plans bankruptcy soon ( updatel )
2001 - 11 - 30 15 : 49 ( new york )
enron fires u . k . workers , plans bankruptcy soon ( updatel )
( updating share change . )
new york , nov . 30 ( bloomberg ) - - enron corp . fired 1 , 100
employees in the u . k . as the energy trader sought to line up
financing for the largest u . s . bankruptcy reorganization .
enron ' s bankers , led by j . p . morgan chase & co . and salomon
smith barney inc . , sought to arrange more than $ 1 billion of loans
to help enron trade while in bankruptcy , said people familiar with
the situation . the debtor - in - possession financing may be secured
in part by $ 1 . 8 billion in proceeds enron expects to receive by
selling its portland general electric co . unit .
enron is also considering using its northern natural gas co .
pipeline , which analysts estimate is worth $ 2 . 7 billion , as
collateral for new loans . dynegy inc . said it would seek to block
such a move by exercising an option to purchase the pipelines .
` ` this whole thing is going to be in the courts , ' ' said
kathleen vuchetich , who helps manage $ 1 . 4 billion in assets . the
firm owns dynegy shares in the strong american utilities fund that
vuchetich helps run .
enron will have 250 u . k . workers after the dismissals ,
according to a statement by , which is
overseeing the company ' s british operations . enron has 6 , 800
workers in europe and 21 , 000 total .
more firings are likely in the u . s . after its $ 23 billion
acquisition by dynegy collapsed earlier this week . that failure ,
and a credit - rating downgrade to junk , left the company short of
cash needed to pay its $ 15 billion of debt .
enron , with less than $ 2 billion in cash as of last week ,
needs to pay $ 690 million to lenders by mid - december and is
responsible for another $ 3 . 9 billion in debt owed by affiliated
partnerships .
pipeline debate
dynegy said it plans to take over enron ' s northern natural
gas pipeline on dec . 12 , even if enron files for bankruptcy .
dynegy invested $ 1 . 5 billion in enron as part of the merger plan ,
giving it preferred stock in northern natural gas . dynegy backed
out of the takeover wednesday .
enron likely will go to court to argue that dynegy didn ' t
have the right to end the merger , so it shouldn ' t get the
pipeline , new york bankruptcy lawyer robert christmas said . enron
needs collateral for loans to stay in business .
enron pledged assets of northern natural gas and transwestern
pipeline as collateral for $ 1 billion in loans from j . p . morgan
and salomon this month . the banks may not back enron ' s claim , as
they are more likely to be repaid by dynegy , said fahnestock & co .
analyst fadel gheit .
` ` i expect to see enron , j . p . morgan , citibank and dynegy all
in court fighting over who owns the pipeline , ' ' said jon kyle
cartwright , a fixed - income senior analyst at raymond james &
associates . ` ` at this point we put our chips on dynegy . we suspect
they had the time and expertise to perfect their purchase . ' '
biggest pipeline
dynegy will assume $ 950 million of northern natural debt with
the purchase . enron can buy the pipeline back if it pays dynegy
$ 1 . 5 billion , plus interest , within 180 days of the merger ' s
collapse , dynegy chairman chuck watson said yesterday . watson said
he would rather get the pipeline than recoup the investment .
northern natural gas , the biggest of enron ' s four gas
pipelines , stretches from the permian basin in texas to the great
lakes . dynegy ' s right to buy it ` ` is not dependent on enron ' s
agreement to our right to terminate the merger , ' ' dynegy chief
financial officer rob doty said today in a statement .
shares of enron fell 9 cents to 27 cents in early afternoon
trading . they had fallen 99 percent since mid - october . dynegy fell
$ 2 . 34 , or 7 percent , to $ 31 . 31 . enron ' s unsecured bonds were bid
at 18 cents on the dollar this morning , down about 3 cents from
yesterday , traders said .
enron , which got its start as a natural - gas pipeline company ,
was transformed in the past decade into the biggest competitor in
the business of trading energy . as part of the company ' s strategy ,
it shifted its focus from developing assets such as pipelines and
power plants to developing markets for commodities . as a result ,
enron has few assets it can use as collateral for loans .
on the brink
enron has been unable to raise enough cash to ensure it can
pay debts and is having trouble financing daily operations .
dynegy ' s decision to back out of the acquisition left enron on the
brink of bankruptcy .
northern natural gas can ' t take any action , including filing
for bankruptcy , without the consent of dynegy as a preferred
stockholder , dynegy said in the statement .
` ` from what i understand , dynegy has as strong a legal claim
to the pipeline as they can have , ' ' said commerzbank securities
analyst andre meade . ` ` they structured the deal in a way , with
bankruptcy as a likely scenario , to have good legal standing . ' '
meade rates enron ` ` sell ' ' and dynegy ` ` buy ' ' and doesn ' t own
shares of either company . he values northern natural at $ 2 . 7
billion , more than the $ 2 . 47 billion that dynegy is paying ,
including debt .
` ` dynegy paid fair market value ( for the pipeline ) , and they
have the law and the facts on their side , ' ' said john olson ,
research director for sanders , morris , harris group inc . , a
houston financial - services firm .
watson said yesterday he hopes that northern natural
employees won ' t quit after the takeover . enron and dynegy are both
based in houston .
` ` dynegy has contacted enron to begin a transition of the
pipeline ' s management and expect enron ' s full cooperation , ' ' doty
said today .
enron creditors list potential losses from energy trader ' s fall
2001 - 11 - 30 15 : 54 ( new york )
enron creditors list potential losses from energy trader ' s fall
new york , nov . 30 ( bloomberg ) - - enron corp . ' s creditors ,
companies spanning the energy , financial and banking industries ,
stand to lose billions of dollars from the collapse of the energy
trader . the following list shows how much each might lose .
* t
company description amount ( $ mil )
j . p . morgan chase & co . u . s . securities company 500
john hancock financial services u . s . life insurer 320
credit lyonnais sa french bank 250
canadian imperial bank canadian bank 215
ing groep nv dutch financial - services co . 195
principal financial group u . s . insurer 172
abbey national plc british bank 164
daiwa asset management co . japanese financial - services co . 140
australia & new zealand bnk grp australian bank 120
national australia bank ltd . australian bank 104
dresdner bank ag german bank 100
hvb group german bank 100
duke energy corp . u . s . energy company 100
williams cos . u . s . energy company 100
abn amro holding nv dutch bank 97 . 5
lincoln national corp . u . s . insurer 95
deutsche bank ag german bank < 90
reliant resources inc . u . s . energy company 80
dynegy inc . u . s . energy company 75
bear stearns & co . u . s . securities company 69
metlife inc . u . s . insurer 62 . 6
mirant corp . u . s . energy company 60
aquila inc . unit of u . s . - based utilicorp < 50
american electric power co . u . s . energy company 50
el paso corp . u . s . energy company 50
commerzbank german bank < 45
centrica plc u . k . energy company 43
exelon corp . u . s . energy company < 20
energen corp . u . s . energy company 18 . 3
sempra energy u . s . energy company < 15
dominion resources inc . u . s . energy company 11
nrg energy inc . u . s . energy company 10
rwe ag german energy company < 8 . 9
peoples energy corp . u . s . energy company 8 . 0
st . mary land & exploration u . s . energy company 4 . 17
keyspan corp . u . s . energy company < 4 . 0
houston exploration co . u . s . energy company 3 . 9
western gas resources inc . u . s . energy company 2 . 6
fpl group inc . u . s . energy company < 2 . 0
xl capital ltd . bermudan insurer ` ` limited ' '
< is ` ` less than ' '
* t
dynegy says pipeline option not dependent on enron ( update 8 )
2001 - 11 - 30 16 : 06 ( new york )
dynegy says pipeline option not dependent on enron ( update 8 )
( updates with closing share prices in 12 th paragraph . )
houston , nov . 30 ( bloomberg ) - - dynegy inc . said it plans to
take over enron corp . ' s northern natural gas co . pipeline unit on
dec . 12 , even if enron seeks chapter 11 bankruptcy protection or
challenges dynegy ' s decision to call off their merger .
dynegy invested $ 1 . 5 billion in enron as part of the merger
agreement , giving it preferred stock in northern natural and the
right to buy the business for about $ 23 million . dynegy backed out
of the $ 23 billion buyout of enron on wednesday and said it would
exercise the right to acquire the 16 , 500 - mile pipeline .
enron said it ' s reviewing options for northern natural , which
analysts estimate is worth $ 2 . 7 billion . enron likely will go to
court to argue that dynegy didn ' t have the right to end the
merger , so it shouldn ' t get the pipeline , new york bankruptcy
lawyer robert christmas said . enron needs collateral for loans to
stay in business .
` ` this whole thing is going to be in the courts , regardless
of whether dynegy wants this asset , ' ' said kathleen vuchetich , who
helps manage $ 1 . 4 billion in assets , 4 . 2 percent of them dynegy
shares , in the strong american utilities fund . ` ` dynegy may as
well be fighting for something worthwhile . ' '
j . p . morgan chase & co . and citigroup inc . ' s salomon smith
barney inc . may join the dispute . enron pledged assets of northern
natural and the transwestern pipeline as collateral for $ 1 billion
in loans from the banks this month . the banks may not back enron ' s
claim , as they are more likely to be repaid by dynegy , said
fahnestock & co . analyst fadel gheit .
` ` i expect to see enron , j . p . morgan , citibank and dynegy all
in court fighting over who owns the pipeline , ' ' said jon kyle
cartwright , a fixed - income senior analyst at raymond james &
associates . ` ` at this point we put our chips on dynegy . we suspect
they had the time and expertise to perfect their purchase . ' '
biggest pipeline
dynegy will assume $ 950 million of northern natural debt with
the purchase . enron can buy the pipeline back if it pays dynegy
$ 1 . 5 billion , plus interest , within six months of the nov . 9
merger agreement date , dynegy chairman chuck watson said today in
an interview .
` ` i ' d rather have the pipe than the $ 1 . 5 billion , but they
absolutely have the right to do that , ' ' watson said . ` ` that was
the deal from day one . ' '
northern natural , the biggest of enron ' s four gas pipelines ,
stretches from the permian basin in texas to the great lakes .
dynegy ' s right to buy it ` ` is not dependent on enron ' s agreement
to our right to terminate the merger , ' ' dynegy chief financial
officer rob doty said today in a statement .
after dynegy canceled the buyout , enron said in a statement
it was reviewing dynegy ' s claim to the pipeline . enron has
suffered from a crisis of credibility , integrity and leadership
for months , watson said . questioning the pipeline agreement ` ` is
not helping , ' ' he said .
` ` i find it out of balance that ( enron is ) questioning
this , ' ' watson said . ` ` to throw this out in the press that this
might be challenged is irresponsible and disingenuous . ' '
shares of enron fell 11 cents to 25 cents . they have fallen
99 percent since mid - october . dynegy fell $ 3 . 30 , or 9 . 8 percent ,
to $ 30 . 35 . both companies are based in houston .
enron ' s 6 . 4 percent notes maturing in 2006 fell as much as 4
cents to 17 cents on the dollar today , traders said .
few assets
enron , which got its start as a natural - gas pipeline company ,
was transformed in the past decade into the biggest competitor in
the business of trading energy . as part of the company ' s strategy ,
it shifted its focus from adding assets such as pipelines and
power plants to developing markets for commodities . as a result ,
enron has few assets it can use as collateral for loans .
enron has been unable to raise enough cash to ensure it can
pay debts and is having trouble financing daily operations .
dynegy ' s decision to back out of the acquisition left enron on the
brink of bankruptcy .
northern natural can ' t take any action , including filing for
bankruptcy , without the consent of dynegy as a preferred
stockholder , dynegy said in the statement .
` ` from what i understand , dynegy has as strong a legal claim
to the pipeline as they can have , ' ' said commerzbank securities
analyst andre meade . ` ` they structured the deal in a way , with
bankruptcy as a likely scenario , to have good legal standing . ' '
meade rates enron ` ` sell ' ' and dynegy ` ` buy ' ' and doesn ' t own
shares of either company . he values northern natural gas at
$ 2 . 7 billion , more than the $ 2 . 47 billion that dynegy is paying ,
including debt .
` ` dynegy paid fair market value ( for the pipeline ) , and they
have the law and the facts on their side , ' ' said john olson ,
research director for sanders , morris , harris group inc . , a
houston financial - services firm .
watson said yesterday he hopes that northern natural
employees won ' t quit after the takeover . the unit has 1 , 100
employees .
` ` dynegy has contacted enron to begin a transition of the
pipeline ' s management and expect enron ' s full cooperation , ' ' doty
said .
enron bankruptcy case would take years to resolve ( update 2 )
2001 - 11 - 30 16 : 20 ( new york )
enron bankruptcy case would take years to resolve ( update 2 )
( updates enron shares in 12 th paragraph . )
houston , nov . 30 ( bloomberg ) - - enron corp . is likely to face
a maze of lawsuits that would complicate a bankruptcy filing and
take years to resolve , experts say .
with dynegy inc . having withdrawn a proposed $ 23 billion
takeover offer , enron is weighing what would be the largest
bankruptcy in history and may go to court within a week . enron
shareholders , employees and business partners are lining up to sue
the houston - based company after its shares lost $ 26 billion in
value since mid - october .
enron restated $ 586 million in earnings because of accounting
irregularities , and there are potential conflicts of interest
among some of the company ' s executives . the u . s . securities and
exchange commission is investigating the company , and that
wouldn ' t be affected by a bankruptcy filing .
` ` there are so many legal tentacles to this thing it ' s
scary , ' ' said chuck tatelbaum , former vice president for research
at the american bankruptcy institute . ` ` we could be talking about
a six - year bankruptcy case here . ' '
lawsuits seeking damages from a company under chapter 11 are
pulled into the bankruptcy case and judgments or settlements are
converted into bankruptcy claims .
fraud claims
among the suits likely to be included in a bankruptcy case
are claims by shareholders that the company misled investors about
its financial health . another category would be allegations that
enron executives improperly prevented workers from moving 401 ( k )
investments out of the company ' s stock .
enron probably would face accusations it broke energy trading
contracts . the agreements , known as derivatives , were used as
insurance against price swings in the energy market . with the
company poised to file for chapter 11 , it is expected to miss
payments under the contracts .
there ' s also the developing battle between enron and dynegy
over the failed buyout bid that might end up in bankruptcy court .
that might lead a bankruptcy judge to take a look at the
recent court case involving tyson foods inc . and ibp inc . , a beef
producer . a judge in delaware ordered tyson to complete its buyout
of ibp after their proposed combination collapse . tyson , like
dynegy , had said it wasn ' t fully informed about ibp ' s financial
problems when it negotiated to acquire the beef producer .
dynegy said today it plans to take over enron ' s northern
natural gas co . pipeline unit next month . dynegy said it ' s
entitled to the pipeline under the terms of its nov . 9 merger
agreement that gave it $ 1 . 5 billion in preferred stock in northern
natural gas .
enron could sue as part of the bankruptcy case to stop dynegy
from walking away from the buyout and claiming ownership to the
pipeline .
enron shares fell 10 cents to 26 cents . they have lost 99
percent of their value in the last seven weeks .
complications
any chapter 11 cases would be ` ` inordinately complicated , ' '
said lynn lopucki , a law professor at the university of california
at los angeles .
the largest bankruptcy on record is texaco ' s $ 35 . 9 billion
filing in 1987 . enron lists $ 61 billion in assets .
other big companies , like w . r . grace & co . and sgl carbon
inc . , used bankruptcy filings to manage lawsuits , said ken
eckstein , a new york attorney who handles bankruptcy litigation .
w . r . grace , a financially healthy chemical maker , filed for
chapter 11 protection in april to cope with asbestos - related
lawsuits . sgl carbon is the u . s . unit of a german company with a
market value of more than $ 1 . 2 billion that makes products used in
steel production . sgl filed bankruptcy papers in 1999 to dispose
of customers ' suits over price - fixing claims .
what sets enron apart are the questions about its financial
viability , eckstein said . he represented customers suing sgl as
part of the bankruptcy case .
` ` here , you have a fundamentally broken company , ' ' eckstein
said . ` ` it may never emerge from bankruptcy . ' '
that makes it tougher to gauge how much other creditors
might recover , he said .
` makes me mad '
enron investors aren ' t optimistic about the future of the
company ' s shares .
` ` i took at least a 60 percent hit on them , ' ' said jim
anders , a columbia , south carolina , lawyer who has sold shares .
` ` it really makes me mad . i ' d like to get my hands on some of
those executives who were doing the insider deals . that really
shook people ' s confidence in the company . ' '
enron ' s fall was accelerated by questions about some
partnerships the company used to move assets and debt off the
company ' s books . many investors had complained enron ' s financial
reports hid the significance of the partnerships .
enron ' s former chief financial officer andrew fastow led some
of the partnerships and earned more than $ 30 million through their
dealings with enron , the company disclosed . fastow and other
executives later were fired over their connection to the
partnerships .
anders acknowledged that bankruptcy law puts shareholders and
litigants at the back of the repayment line .
` ` i know we ' ve had it and aren ' t going to get squat back , ' '
anders said . ` ` the company led us to believe enron was as solid as
ge or one of the big banks . now the bank is busted . ' '
chairman says dynegy ' s right to enron pipeline indisputable
2001 - 11 - 30 16 : 21 ( new york )
chairman says dynegy ' s right to enron pipeline indisputable
houston , nov . 30 , ( bloomberg ) - - enron corp . negotiated an
agreement that gives dynegy inc . the right to take over the
northern natural gas co . pipeline , and arguments to the contrary
are ` ` irresponsible ' ' and ` ` disingenuous , ' ' dynegy inc . chairman
chuck watson said .
on nov . 9 , dynegy announced it would buy enron in a
transaction valued at about $ 23 billion in stock and assumed debt .
that buyout collapsed wednesday after enron failed to get
financing to run daily operations , its stock price plunged and
credit rating companies lowered its debt below junk , triggering
$ 3 . 9 billion in debt payments .
as part of the buyout , chevrontexaco corp . , owner of 26
percent of dynegy , gave enron $ 1 . 5 billion in return for the right
to take over the 16 , 500 - mile line even if the merger collapsed ,
watson said . watson said someone is telling reporters that enron
might challenge the takeover of the pipeline . enron doesn ' t have a
case , watson said .
` ` chevrontexaco is not going to give dynegy ( $ 1 . 5 billion )
which they know dynegy is going to give to enron - - a company that
has lost $ 90 billion in net worth - - without a pretty damn good
assurance that dynegy can get the pipeline or the money back , ' '
watson said .
enron said it ' s reviewing options for northern natural gas ,
which analysts estimate is worth $ 2 . 7 billion . enron likely will
go to court to argue that dynegy didn ' t have the right to end the
merger , so it shouldn ' t get the pipeline , new york bankruptcy
lawyer robert christmas said . enron needs collateral for loans to
stay in business .
` ` this whole thing is going to be in the courts , regardless
of whether dynegy wants this asset , ' ' said kathleen vuchetich , who
helps manage $ 1 . 4 billion in assets , 4 . 2 percent of them dynegy
shares , in the strong american utilities fund .
dynegy has notified enron by letter that it plans to go
forward , and he plans to take possession by dec . 19 , watson said .
enron has the right to buy back the pipelines if it gives dynegy
$ 1 . 5 billion plus interest in the next six months , he said .
` ` if the banks want to keep the pipe because they need
collateral to loan enron money , then do it , ' ' watson said . ` ` but
don ' t go out in the press and make it look like a big fight . tell
me what you want to do . ' '
watson said he would prefer to keep the pipeline system
rather than get the $ 1 . 5 billion back .
enron has suffered from a crisis of credibility , integrity
and leadership for months . ` ` this is not helping , ' ' he said .
dynegy shares fell $ 3 . 30 to $ 30 . 35 . enron shares fell 10
cents to 26 cents .
williams has withdrawn pipeline capacity from enron ( updatel )
2001 - 11 - 30 16 : 54 ( new york )
williams has withdrawn pipeline capacity from enron ( updatel )
( updates with closing share prices in fifth paragraph . )
tulsa , oklahoma , nov . 30 ( bloomberg ) - - williams cos . , the
second - biggest u . s . natural - gas pipeline owner , won ' t let cash -
strapped enron corp . use its lines because of credit concerns ,
williams spokesman jim gipson said .
other gas shippers have taken enron ' s share of capacity on
williams ' s 27 , 000 - mile network , gipson said . he said he hadn ' t
heard of interruptions of supplies to customers .
williams competes with houston - based enron in energy trading .
the tulsa , oklahoma - based company continues limited business with
enron to reduce the amount of money owed by enron to williams , he
said .
enron ' s potential debt to williams is less than $ 100 million ,
williams said yesterday . williams negotiated with enron , the
biggest energy trader , for several weeks on reducing that amount ,
gipson said .
shares of williams fell 28 cents to $ 26 . 72 . enron shares fell
10 cents to 26 cents . they fell 85 percent wednesday after dynegy
inc . abandoned a takeover offer for enron after standard & poor ' s
corp . cut enron ' s debt rating to junk status .
williams ' s third - quarter net income rose 83 percent to
$ 221 . 3 million as trading profit more than doubled .
el paso corp . is the biggest u . s . pipeline company .
new jersey has limited exposure to enron decline , treasury says
2001 - 11 - 30 17 : 06 ( new york )
new jersey has limited exposure to enron decline , treasury says
trenton , new jersey , nov . 30 ( bloomberg ) - - the new jersey
pension fund , which covers 665 , 750 state and local government
workers and retirees , holds 2 . 65 million shares of collapsed
energy - trader enron corp . , a fraction of the state ' s total
investment portfolio , the treasury department said .
` ` the state has $ 70 billion in investments , ' ' said francis
rapa , spokesman for new jersey ' s treasury . the state paid an
average of $ 23 a share for its enron stake between june 1994 and
august 2001 , which translates into an investment of about $ 61
million in total . enron shares fell 10 cents to 26 cents today .
` ` that investment represents less than 1 / 10 of 1 percent of
our investment portfolio , ' ' rapa said . the state holds no enron
bonds , he said .
rapa said it ' s too early to tell if the state or localities
within the state would have to increase their pension
contributions because of the decline in enron shares but said
it ' s ` ` highly unlikely ' ' because of the size of the investment .
wall street firms , pension funds face enron losses ( update 6 )
2001 - 11 - 30 17 : 07 ( new york )
wall street firms , pension funds face enron losses ( update 6 )
( adds aegon exposure in ninth paragraph . )
new york , nov . 30 ( bloomberg ) - - wall street financial firms ,
banks in europe and asia , and pension funds from california to new
york stand to lose billions of dollars from the collapse of energy
trader enron corp .
` ` this is having a ripple effect across the world , ' ' said
robert penaloza , a fund manager at aberdeen asset management asia
in singapore .
analysts estimate companies that lent money to enron - - from
abn amro holding nv , the largest dutch bank , to national australia
bank ltd . - - may lose more than $ 5 billion . lenders , trying to
reassure clients and investors by disclosing how much they have at
stake have already revealed $ 3 billion in losses . investment
bankers such as citigroup inc . and j . p . morgan chase & co . are
working to line up financing for enron to operate under bankruptcy
protection .
the houston company ' s demise is also a blow to the mutual and
pension funds that invested in it , tripling the stock price in
1999 and 2000 . the shares , which started this year at more than
$ 83 . 13 , fell 6 cents to 30 cents today . enron had $ 15 billion of
debt and less than $ 2 billion of cash as of last week .
bear stearns cos . , the sixth - biggest u . s . securities firm by
capital , said its exposure to enron is $ 69 million . energy
companies , including duke energy corp . and williams cos . , and
banks such as j . p . morgan chase and abbey national plc said they
are on the hook for a total of $ 1 . 4 billion .
abn amro said it may set aside 110 million euros ( $ 97 . 5
million ) to cover its loans to enron . britain ' s abbey national
said it ' s owed almost $ 135 million . national australia and other
australian lenders said exposure totals about $ 350 million .
france ' s credit lyonnais sa said it has $ 250 million in loans
outstanding .
ing to j . p . morgan
ing groep nv , the biggest dutch financial - services company ,
said it holds about $ 195 million of enron unsecured loans and
bonds . canadian imperial bank of commerce , the country ' s third -
biggest bank , said enron owes it $ 215 million , more than half in
unsecured loans , letters of credit and derivatives .
almost two dozen electricity and natural gas companies said
enron owed them about $ 700 million as of wednesday , when dynegy
inc . abandoned a plan to buy enron , depriving it of the cash
needed to avoid insolvency .
john hancock financial services inc . , xl capital ltd . and
other insurers may absorb total losses of more than $ 3 billion
from the collapse , analysts said . chubb corp . , the sixth - biggest
u . s . business insurer , said its pretax exposure is about $ 220
million . aegon nv , the no . 2 dutch insurer , said it is owed about
$ 300 million in loans .
abn amro is one of the lenders behind enron ' s $ 3 billion
indian power plant . enron owns 65 percent of the dabhol power co .
project outside of mumbai , the city formerly known as bombay . the
plant has been hampered by cost over - runs , penalty claims for
undelivered power , and conflicts with its only client , the
maharashtra state electricity board .
` ` should there be a need to provide ( for a loss ) , we will do
so in the fourth quarter of this year , ' ' said abn amro spokesman
martin winn .
australia to germany
national australia said it has a $ 200 million ( $ 104 million )
in secured and unsecured exposure . ` ` we had already factored in
provisions for this kind of event , and it is consistent with our
bad debt outlook for this year , ' ' said majella allen , a
spokeswoman .
australia & new zealand banking group ltd . , the fourth -
largest australian bank , said its direct exposure is $ 69 million
and it has a further $ 51 million of indirect exposure . the bank
said it will more aside for bad loans this fiscal year .
` ` their exposures are a little surprising , but then again
enron is such a huge organization and spans the globe so it deals
with syndicates of banks for its facilities , ' ' said bill
chatterton , head of equities at abn amro morgans ltd . , the 50
percent - owned private client arm of abn amro australia ltd .
in germany , dresdner bank ag , which is owned by allianz ag ,
said its exposure is less than $ 100 million , while hvb group ,
germany ' s no . 2 bank , has about $ 100 million . deutsche bank ag
said its losses may be in the ` ` double - digit ' ' millions of
dollars . commerzbank ag said their exposure amounts to ` ` double -
digit ' ' millions of euros .
u . s . banks have as much as $ 2 . 6 billion of exposure , said
judah kraushaar , bank analyst at merrill lynch & co . for citigroup
the biggest u . s . financial services company , it may have as much
as $ 1 billion .
j . p . morgan chase said it has $ 500 million of unsecured
exposure to the energy trader , and $ 400 million of loans with
pipelines as collateral .
` we lost money , ' ' said john waterman , chief investment
officer at rittenhouse financial services inc . , which sold all its
enron shares at the end of october . ` ` we ' re glad we got out when
we did . when we started selling it wasn ' t clear at all that things
would unravel in the way they did . ' '
the california public employees ' retirement system , or
calpers , the biggest u . s . public pension fund , held 3 million
shares as of wednesday of this week . the california state teachers
retirement fund owned about 2 million shares . the new york state
common retirement system said it lost as much as $ 60 million .
among energy companies that do business with enron , duke
energy and williams cos . said they may lose $ 100 million each if
enron is unable to pay them back .
energen corp . , an oil and natural - gas explorer and gas
distributor , said it has an $ 18 . 3 million exposure with the
company , and cut its 2002 earnings by 20 cents to 25 cents a
share .
* t
below is a list of some banks and their estimated exposure to
enron :
u . s . electricity firms $ 700 million
j . p . morgan chase $ 500 million
credit lyonnais $ 250 million
canadian imperial bank $ 215 million
ing groep $ 195 million
abbey national $ 164 million
australia & new zealand banking $ 120 million
national australia bank $ 104 million
dresdner bank less than $ 100 million
abn amro $ 97 . 5 million
deutsche bank less than $ 90 million
bear stearns $ 69 million commerzbank
less than $ 45 million
hvb group $ 100 million
new york state common retirement fund $ 50 - $ 60 million
chubb $ 220 million
energen 20 - 25 cents / shr
new york state common retirement fund $ 50 - $ 60 million
chubb $ 220 million
aegon $ 300 million
energen 20 - 25 cents / shr
* t
s & p says credit derivative exposure to enron totals $ 6 . 3 bln
2001 - 11 - 30 17 : 18 ( new york )
new york , nov . 30 ( bloomberg ) - - standard & poor ' s said
credit derivative transactions in which enron corp . may total
$ 6 . 3 billion .
the credit rating agency said it has reviewed credit
derivative transactions in which enron appears and found that
there are $ 3 . 3 billion in credit default swaps directly on enron
debt . another $ 3 billion of credit swaps exist in which a
subsidiary of enron is a counterparty , but the credit default
swaps is not on enron debt , according to nik kahkee , director of
s & p ' s structured finance derivatives group .
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 .
enron ' s fall to spark legal wrangles over derivatives ( updatel )
2001 - 11 - 30 11 : 24 ( new york )
enron ' s fall to spark legal wrangles over derivatives ( updatel )
( rewrites 2 nd paragraph . )
london , nov . 30 ( bloomberg ) - - enron corp . ' s plunge toward
bankruptcy may spark legal wrangles over how to unravel the web of
derivatives contracts tied to the energy company .
enron is set to file for protection in the biggest chapter 11
reorganization ever . that ' s likely to mean the energy trader can ' t
pay on derivatives it sold as insurance against default by other
borrowers , as well as defaulting on its own debts and triggering
similar contracts bought by its creditors .
` ` if i traded with joe bloggs down the road , and enron owed
him a lot of money and he couldn ' t get it so he went into
bankruptcy , then he wouldn ' t fulfill his obligations under my
contract , ' ' said brian senior , head of trading at innogy holdings
plc , the u . k . ' s top electricity supplier . ` ` i don ' t think the
major risk is market liquidity , i think it ' s the domino effect . ' '
enron used derivatives - - financial instruments such as
futures and options whose value is based on other assets - - to
insure against price swings or take bets on a price ' s direction .
the houston - based company had revenue of $ 1 . 9 billion from
derivatives trading last year , more than double the $ 765 million
in 1999 , making it one of the largest traders , according to swaps
monitor publications inc .
by comparison , williams cos . , the no . 2 u . s . natural - gas
pipeline owner , had revenue of $ 1 . 29 billion on derivatives
trading in 2000 .
paul spraos , president of swaps monitor , a research company
that compiles trading figures , said enron only posts derivatives
statistics once a year so there are no figures for 2001 .
dynegy inc . abandoned its planned merger with enron on
wednesday , leaving it with more than $ 15 billion of debt and the
possibility of bankruptcy . as well as oil and gas futures , enron
trades derivatives based on such things as weather and information -
transmission capacity , known as bandwidth .
banned from trading
spraos estimates that as of sept . 30 , enron owed $ 18 . 7
billion on derivatives trades that went sour , though he said that
doesn ' t take into account the collateral enron probably posted to
back up the trades .
the european energy exchange today banned enron from trading
its products , while australian regulators barred the company ' s
finance unit , enron australia pty , from trading electricity
futures because its funding wasn ' t assured .
u . s . senate and house committees will investigate enron ' s
decline and consider new regulations for electricity and natural -
gas trading . the securities and exchange commission is also
examining the company .
enron had $ 201 billion worth of derivatives on oil , gas and
electricity at the end of last year , swaps monitor has reported .
that ' s measuring the notional amount , the face value of the
securities on which the derivatives are based .
` quantifying it '
` ` everyone will be looking at their exposure , whether they ' ve
got collateral , and quantifying it , ' ' said robert g . pickel , chief
executive officer of the international swaps and derivatives
association .
isda , a new york - based trade association representing more
than 550 companies that trade derivatives , designed the legal
contracts typically used in derivatives transactions . pickel said
those contracts are designed to address such situations .
` ` there are two potential issues relating to isda
documentation , as a result of the situation regarding enron , ' '
pickel said . the first involves companies that have entered
derivatives trades with enron using isda ' s standard contract ,
known as the master agreement . the second concerns banks that have
provided credit protection on enron in the form of a credit -
default swap , also using isda documents .
credit - default swaps work like insurance on a company ' s bonds
or loans . they pay out if there ' s a bankruptcy , default , debt
restructuring or similar occurrence , known as a credit event .
` ` if there ' s a bankruptcy filing there ' s no question it would
be a credit event , ' ' pickel said .
` can ' t tell '
enron ' s u . k . units are in administration , which has triggered
what lawyers define as a credit event , said simon firth , head of
the credit derivatives practice at linklaters & alliance , which is
acting for , the accountant for enron ' s
european arm .
` ` the documents are fairly robust , and we ' ve been through
issues before , ' ' firth said . he said that while ` ` each time the
documentation gets strengthened , you can ' t tell what happens until
you look at the individual cases . ' '
enron owes almost two dozen energy companies about $ 700
million . j . p . morgan , the bank that advised enron in the failed
merger with dynegy , said it was owed $ 500 million for unsecured
loans . canadian imperial bank of commerce was owed $ 215 million in
loans and credit derivatives .
in europe , abn amro may set aside $ 97 . 5 million to cover its
enron exposure . the energy company owes abbey national plc $ 164
million , and dresdner bank ag said its exposure is about $ 100
million .
` ` this one has left every head shaking , and people are
wondering how to organize by class of creditor and how to hire
counsel , ' ' said glenn reynolds , an analyst at creditsights inc . in
new york . ` ` lawyers are high - fiving . ' '