enron mentions - 11 / 30 / 01 power points : enron exit from energy markets gets messy
dow jones energy service , 11 / 30 / 01
enron impact on gas sector not yet clear - aga officials
dow jones energy service , 11 / 30 / 01
enron considering options ; bankruptcy decision said unlikely before next week
dow jones business news , 11 / 30 / 01
u . k . trading panel decides against expelling enron
dow jones international news , 11 / 30 / 01
tables turned as commercial banks lick enron wounds
dow jones capital markets report , 11 / 30 / 01
enron collapse could weigh heavy on some insurers
dow jones news service , 11 / 30 / 01
us physical gas prices end down ahead of weekend
dow jones energy service , 11 / 30 / 01
usa : enron directors ' side deals raise eyebrows .
reuters english news service , 11 / 30 / 01
usa : basic accounting tripped enron , experts say .
reuters english news service , 11 / 30 / 01
canada : update 1 - enron collapse likely kills planned ontario plant .
reuters english news service , 11 / 30 / 01
s & p : credit derivative exposure to enron is $ 6 . 3 billion
pr newswire , 11 / 30 / 01
scope of peer review of andersen audit practice to be expanded
pr newswire , 11 / 30 / 01
fitch on enron : the coming creditor battle over enron ' s assets
business wire , 11 / 30 / 01
s & p places sutton bridge power ' s ' bbb ' ratings on creditwatch negative
pr newswire , 11 / 30 / 01
westport terminates enron contracts
pr newswire , 11 / 30 / 01
power points : enron exit from energy markets gets messy
by mark golden
11 / 30 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
a dow jones newswires column
new york - ( dow jones ) - despite assurances from many companies that the removal of enron corp . ( ene ) from north american energy markets was proceeding in an orderly fashion , enron havoc broke loose friday morning .
cleaning up the mess will be nearly unbearable for energy industry employees for a few weeks because enron was involved in so many trades . but industry workers don ' t expect electric reliability to be threatened or gas supplies to be disrupted . what ' s more , the free market ' s ability to resolve problems most efficiently and to keep infrastructure humming will shine .
the lull after wednesday morning ' s collapse of dynegy inc . ' s ( dyn ) acquisition of enron was deceptive . on thursday afternoon , mirant ( mir ) told enron it would make no more power and gas deliveries to the company starting saturday , the first day of the new month . a couple of other companies followed suit by friday morning .
enron in turn began to lose its ability to meet its obligations as a supplier , because it doesn ' t produce much electricity . to meet sales obligations , it buys from producers and other traders . the positive feedback system is expected to spiral upwards until early next week , when enron could be almost totally out of the energy market .
to get an idea of how messy this all is , look at one troubled transaction thursday for saturday delivery of electricity to a utility . the utility bought power from sempra energy ( sre ) , which had bought it from el paso ( epg ) , which bought from dynegy ( dyn ) , which bought from pg 201 - 938 - 4604 ;
mark . golden @ dowjones . com
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enron impact on gas sector not yet clear - aga officials
11 / 30 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones 202 - 862 - 6647 ;
bryan . lee @ dowjones . com
copyright ? 2000 dow jones bankruptcy decision said unlikely before next week
11 / 30 / 2001
dow jones business news
( copyright ( c ) 2001 , dow jones & company , inc . )
embattled energy - trading concern enron corp . is still considering all of its options , including the likelihood of filing for bankruptcy protection under chapter 11 , people close to the matter said . such a decision , however , won ' t occur before next week , these people said .
some enron employees are being told not to expect any action over the weekend , these people said .
the chapter 11 process is designed to hold a company ' s creditors at bay while it hammers out a plan to reduce debt . although people familiar with the situation insist an all - out liquidation - - known as a chapter 7 filing - - isn ' t in the cards , some industry observers continue to speculate that the beleaguered company may be forced to go that route .
with its energy - trading business crippled by the downgrade wednesday of most of its debt to junk status and a buyout by dynegy inc . ( dyn ) called off later that day , enron ' s fortunes have been in a downward spiral .
as of 4 p . m . est friday on the new york stock exchange , shares of enron ( ene ) dropped 10 cents , or 28 % , to 26 cents . the stock had traded above $ 90 a share last year , and , all told , equity shareholders have lost over $ 60 billion .
enron ' s outstanding bonds trade at prices of around 15 cents on the dollar . the selloff in enron ' s bonds - - down from the upper 50 - cent range before wednesday ' s developments - - suggests bondholders don ' t expect much if any recovery on their investments .
there is little doubt that any bankruptcy proceedings will be complex and time - consuming , given the nearly $ 62 billion in assets on enron ' s balance sheet , as of its last quarterly financial report . also , the bankruptcy court would have to wade through and untangle many items not listed on its balance sheet . those financing vehicles are what sparked the company ' s troubles last month .
enron ' s liabilities are still a matter of debate . the company has an estimated $ 13 billion in debt on its balance sheet , and a further $ 7 billion in financings off the balance sheet . however , there may be other obligations lurking in connection with its investment partnerships .
since the debt downgrade , enron ' s trading business appears damaged beyond repair . without a viable credit rating , the company no longer has access to the reams of cash it needs to run that business .
underscoring enron ' s woes , the company told some of its trading partners on friday that it will default on some of its deliveries of wholesale electricity under contract for sunday and monday , people familiar with the situation said .
some observers had expected enron to file for bankruptcy protection as early as this week . but the people close to the situation said the complex business structure is slowing the process . where the company would file is also a question : the houston - based company could file where it is headquartered , but it is incorporated in oregon , and many companies look to the favorable courts of delaware whenever possible .
enron hired restructuring and bankruptcy specialist blackstone group late last week to advise it on corporate matters and to help restructure its debt .
the company also is being advised by law firm weil gotshal & manges , a bankruptcy specialist .
key supplier stops delivery
mirant corp . ( mir ) stopped delivering all power and natural gas to enron sold under existing contracts world - wide , traders and people familiar with the situation said .
the move brings enron ' s struggles in north america to a new level . until now , most companies had stopped making new trades with enron , but continued to deliver under their previously done deals . and enron has been delivering under its contracts in north america .
through thursday , enron was able to get third parties to step in and buy from mirant and sell to enron . in one transaction , for power to be delivered saturday , silicon valley power stepped into the middle . silicon valley power , the municipal utility of santa clara , calif . , confirmed thursday that it had done so .
" that transaction for saturday is based on a contractual obligation we made to enron in the past , when enron was on a positive trading position with us , " said silicon valley ' s marketing manager , larry owens .
energy - market sources expect other companies to follow suit with mirant , and they don ' t expect enron will be able to find intervening third parties for much longer . companies have the legal right to suspend deliveries if they reasonably expect they won ' t get paid .
to date , enron has paid its bills on time . saturday gas and power deliveries carry more risk than deals for delivery even friday , as enron won ' t have to pay for deliveries starting dec . 1 until late january .
a spokesmen for enron wouldn ' t comment . " we don ' t discuss activities with individual counterparties , " spokesman eric thode said .
layoffs begin in europe
enron officials said friday the company will lay off all but a handful of its european employees .
a few staff will be retained to wind up the remaining operations of enron in europe , which are now largely under the court - appointed administration of .
a statement issued by said " approximately 1 , 100 redundancies have been made in the u . k . across the group , with 250 staff retained . "
there was no word on the fate of enron ' s employees elsewhere in europe .
" the over - riding priority is to preserve the valuable parts of the business and to reduce the cash needs of the business whilst seeking to secure the future of certain enron businesses and its employees , " senior administrator tony lomas said in the statement .
separately , as of friday , two of enron ' s divisions - - enron capital and trade resources ltd . and enron gas and petrochemical trading ltd . - - were in default regarding their obligations under the united kingdom ' s balancing and settlement code , although u . k . balancing market operator elexon stressed that regulators decided not to expel enron from trading at this time .
" the panel will meet again on dec . 5 to further discuss enron , and have the right to review their decision not to expel enron at any time before that , " said a spokeswoman for elexon .
in addition , german grid operators cancelled their grid - access contracts with enron capital & trade resources , effectively excluding it from all transactions that involve delivery to , or transit through germany , europe ' s largest power market and an essential part of enron ' s european power activities .
enron also has been suspended from trading on nord pool , the ukpx , the amsterdam power exchange , the european energy exchange and the automated power exchange ' s u . k . contracts .
- - christina cheddar , janet whitman , geoffrey t . smith , sarah spikes , carol s . remond , mark golden and kristen mcnamara of dow jones newswires contributed to this report .
copyright ( c ) 2001 dow jones & company , inc .
all rights reserved
copyright ? 2000 dow jones & company , inc . all rights reserved .
u . k . trading panel decides against expelling enron
11 / 30 / 2001
dow jones international news
( copyright ( c ) 2001 , dow jones ( + 44 20 ) 7842 9345 ;
sarah . spikes @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
tables turned as commercial banks lick enron wounds
by michael mackenzie
of dow jones newswires
11 / 30 / 2001
dow jones capital markets report
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - after enduring one of the toughest operating environments in recent years , investment bankers can at least raise a smile that commercial banks are bearing the brunt of the fallout from the anticipated collapse of energy trading house enron corp . ( ene ) .
the likelihood that enron will file for what would be a messy bankruptcy is " sure to illustrate one of the fundamental differences between commercial banks and investment banks , " noted analysts van hesser and justin ziegler at credit suisse first boston in new york .
the appetite of commercial banks for more exposure to an individual name than their investment banking rivals is evident in a breakdown of the direct loan exposures to enron , a list that ' s dominated by commercial banks .
according to ratings agency fitch , j . p . morgan chase has $ 500 million in unsecured exposure and at least a further $ 400 million that is secured . citigroup ( c ) , is gauged at having $ 800 million in exposure with $ 500 secured and $ 300 million unsecured by fitch . and another leading commercial entity , bank of america corp ( bac ) , is believed to have $ 300 million in direct loan exposure as at sept . 30 , note csfb .
extending loans to companies that can run into problems , " is definitely the risk in commercial banking , but such banks are well diversified and able to absorb these situations , " said ken worthington , director and equity analyst at cibc world markets in new york .
however , in the case of j . p . morgan chase " which prides itself on passing credit risk off to others through various means , including loan syndications and hedging , this is a stunning figure , " said kathy shanley , bank and finance analyst at gimme credit , an independent credit research firm in new york .
in recent years , commercial banks have sought to leverage their diversified structures by aggressively muscling into the territory of investment banks . they sought to underwrite corporate bond and stock issues - the traditional turf of investment banks - by offering commercial banking sweetners such as lines of credit and loans .
investment banks do not enjoy the benefit of a substantial balance sheet and tend to focus on underwriting and generally don ' t provide loans . and while investment banks have been forced by competitive pressures to extend lending facilities - demonstrated by morgan stanley ' s credit facilities to lucent technologies - " they usually offload their balance sheet exposures in order to lower their risk profile , " said worthington .
this in turn underlines the more selective approach that investment banks have to financial markets than their commercial banking cousins . while investment banks are not gun - shy of building risk exposures , the csfb analysts believe " they tend to build fewer and they tend to be more disciplined about it . "
this helps explain why in respect to enron , csfb believes " broker exposures are relatively light . " the bank expects exposure to enron at goldman sachs group ( gs ) , and morgan stanley ( mwd ) " to be in the $ 50 to $ 100 million range , while other major securities houses such as bear stearns companies inc ( bsc ) , lehman brothers ( leh ) and merrill lynch & co . ( mer ) " should have exposures that are relatively immaterial . "
but the carnage at enron has left some investment bankers looking better off than the gungho commercial banks who sought juicy m & a fees by providing creditlines to the company as it planned its ultimately doomed merger with dynegy inc . ( dyn ) . as citi and jpm face the prospect of a battle over the assets of enron in a bankruptcy filing , " goldman sachs sits on the sidelines with a cheshire cat grin , reminding investors it declined to extend a credit line to enron as a condition of signing on as a merger advisor , " noted gimme credit ' s shanley .
the travails surrounding enron and the big commercial banks , " reads like a case study dreamed up by the securities industry association to illustrate why banks should never have been allowed in the investment banking business in the first place , " she said .
although goldman and morgan stanley have " meaningful energy trading operations , " csfb believe that both banks are well versed in hedging and structuring collaterized trading agreements . such methods limit the potential for gaping losses associated with failure of a counterparty to trades previously transacted .
worthington at cibc added , " what really drives the business of investment banking are relationships and talent . "
but mired at the bottom of the investment banking cycle , many firms have been looking to combine their talented workforce with the attractive balance sheets of commercial banks in order to enhance their operation . they ' ve looked to the success of citigroup ' s vaunted one - stop shopping model , which combines banking services with the investment banking offerings of salomon smith barney .
although fitch notes " the banking industry ' s stated exposures do not appear , in and of themselves , significant enough to have ratings implications , " the news from enron is perhaps a timely reminder that cultivating a big balance sheet also carries certain risks .
that ' s not to say investment banking won ' t undergo further consolidation that involves finding large balance sheets . the search for profits and economies of scale from building a joint commercial and investment banking franchise are the stuff of many bankers ' dreams .
indeed , many analysts believe merrill lynch
michael . mackenzie @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron collapse could weigh heavy on some insurers
by chad bray
of dow jones newswires
11 / 30 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - the insurance industry didn ' t need enron corp . ' s ( ene ) problems , particularly when it comes to reinsurance prices .
primary insurers could be on the hook for as much as $ 2 billion in claims against directors and officers policies , surety bonds and financial guarantees related to the houston energy trading firm , which , among its options , is considering seeking chapter 11 bankruptcy protection . some insurers also will likely take a hit in their investment portfolios if enron defaults on its bond payments .
the loss would be material , but not devastating for the industry . however , amid the backdrop of the world trade center disaster , enron ' s impact could pressure some firms going forward , particularly if most of their enron risk was ceded to reinsurers . " this event is likely to exacerbate the ( reinsurance ) capacity shortfall in the market that already exists , making 2002 one of the more , if not the most , powerful pricing years in recent history , " said alice schroeder , a morgan stanley insurance analyst .
reinsurance prices were rising prior to the sept . 11 terrorist attacks . rates are expected to rise dramatically in light of the events as reinsurers get a handle on how to insure this new risk in the u . s .
aviation rates , for example , have already climbed 200 % to 300 % in some cases . reinsurers also are willing to take on less risk , forcing primary insurers to keep more of the coverage or write policies offering less coverage .
chubb corp . ( cb ) , a warren , n . j . , insurer , said it was reviewing its surety bonds related to enron and could have a maximum net pretax exposure under outstanding surety bonds of about $ 220 million . the firm said its after - tax exposure is $ 143 million , or 82 cents a share .
a company takes out a surety bond in the event it can ' t fulfill a contractual obligation . typically , surety bonds would pay out any monetary guarantees if a company was unable do so . surety bonds are often used to improve a firm ' s credit rating .
the insurer was unable to estimate the actual amount , if any , that they may be required to pay or the timing of those payments because of contingencies , including the actions of others , possible judicial rulings or the amounts that chubb may recover under surety bond documents . no claims have yet been filed under the surety bonds .
jay cohen , a merrill lynch analyst , said chubb ' s surety bond obligations in regards to enron generally guaranteed the delivery of natural gas to energy producers , such as utilities . each bond could have different defined events that would trigger a claim , such as a bankruptcy , cohen said .
" the enron loss will likely be a very sizable one in the surety line , a line that was not particularly effected by the trade center attack , " cohen said . " the loss will likely exceed $ 1 billion and we note that the industry wrote surety premiums totaling $ 3 . 5 billion in 2000 . we would expect this loss to have an effect on insurers ' risk appetite pertaining to surety obligations . "
cohen said chubb likely has reinsurance for its losses and that its gross exposure is " above the $ 220 million maximum net exposure . "
ron frank , a salomon smith barney analyst , said , while the enron situation is clearly " unusual , " the loss should be viewed relative to chubb ' s overall financial condition , which is quite solid . he said chubb ' s historical profitability in surety is " very good even including enron . "
frank noted the chubb announcement didn ' t address any other exposure to enron , such as directors and officers liability . " management did comment to us that if they saw another exposure material to earnings per share , it would have been released , " frank said . " we infer from this that reinsurance and reserves will meaningfully mitigate such exposures . "
large surety writers include st . paul cos . ( spc ) , american international group ( aig ) , cna financial ( cna ) , act ltd . ( ace ) , safeco corp . ( safc ) and the travelers unit of citigroup inc . ( c ) . however , not all large writers of surety obligations necessarily have an exposure to enron .
at the same time , a major enron loss could inhibit some traditional property - casualty insurers from writing financial guarantee - related risk in the future , said schroeder , the morgan stanley analyst .
schroeder noted that could be a positive for traditional financial guarantors in terms of less competition , but could also be a concern .
for example , ambac financial group inc . ( abk ) and mbia inc . ( mbi ) , both traditional financial guarantors , have been able to " wrap " lower levels of risk on certain collateralized debt obligation deals with traditional p & c insurers , while taking the higher , or less risk prone , layers for themselves . being conservative in nature , they might not be willing to take on the more risky layers in the future . - by chad bray , dow jones newswires , 201 - 938 - 5293
chad . bray @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
us physical gas prices end down ahead of weekend
11 / 30 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones
john . edmiston @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron directors ' side deals raise eyebrows .
11 / 30 / 2001
reuters english news service
( c ) reuters limited 2001 .
houston , nov 30 ( reuters ) - directors of enron corp . , already under fire for failing to identify and correct problems that brought the energy trading giant to the brink of collapse , had lucrative side deals with the company that drew added criticism from corporate governance experts on friday .
the deals ranged from consulting jobs to purchases of goods and services from affiliated companies . they raised doubts about the board ' s independence from the senior managers they were supposed to supervise on behalf of the stockholders , the experts said .
" directors who have side consulting arrangements are not considered , under governance guidelines , to have the necessary independence from management , " said charles elson , director of the center for corporate governance at the university of delaware .
in contrast to the murky off - balance - sheet financing deals that played a key role in enron ' s demise , the company made detailed disclosures of its deals with members of its board of directors in a proxy statement published earlier this year .
the document shows that in addition to his supervisory duties as an enron director , john urquhart was paid $ 493 , 914 last year for providing consulting services to enron .
" that ' s a huge amount of money . best practice is no consulting fees to any directors , " said nell minnow , an editor at business research group the corporate library , which does extensive work on corporate governance issues .
another enron director , lord john wakeham , received $ 72 , 000 last year for advice on enron ' s european operations .
enron director herbert winokur was affiliated with the privately owned national tank co . that made sales to enron worth $ 370 , 294 last year , the proxy statement said .
the document also shows that enron paid $ 517 , 200 last year for travel services provided to enron employees . the travel agency business that provided the services is 50 percent - owned by sharon lay , sister of enron chairman and chief executive ken lay .
" most major companies do not engage in that dodge because it is such an obvious one , " minnow said .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : basic accounting tripped enron , experts say .
by deepa babington
11 / 30 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 29 ( reuters ) - as experts look through the remains of enron corp . for someone to blame , eyes are turning toward the auditors who allowed it to break accounting rules , rather than on the rules themselves .
once the biggest trader in the newly deregulated power market , enron is now near collapse . the auditing profession , which gives financial statements the stamp of approval , needs to be more vigilant to prevent similar future disasters , the experts said .
" the auditors - the big five auditing firms - have got to look at themselves and say , how can this sort of thing happen ? " said david hawkins , an accounting consultant with merrill lynch and a professor at harvard university .
" the rules are there . have we lost our way , so to speak ? do we need a new compass direction ? "
enron , once a wall street darling with a share price that hit more than $ 90 , started coming apart after it reported losses from transactions that were led by its former chief financial officer and kept off its balance sheet .
experts said it failed to apply generally accepted accounting principles and failed to disclose sufficient information to explain its dealings .
andersen , the accountancy firm that audited enron ' s books , said such judgments are premature .
" the best idea is to gather information , as the securities and exchange commission and enron board are doing , and then decide what lessons we can learn , " andersen spokesman david tabolt said . " instant judgments often are based on presumptions . . . that often turn out later to be incorrect . "
accounting 101
but the rules that enron appears to have violated are quite straightforward , according to some experts .
for example , recording the note enron received in return for selling equity to its limited partnerships as an asset is contrary to an accounting rule that bans such treatment unless the note is to be paid off in a few days , hawkins said .
ultimately , those transactions turned sour , causing a $ 1 . 2 billion reduction in shareholder equity and losses that contributed to a $ 1 billion third - quarter charge .
" this is accounting 101 here , " said paul brown , chairman of the accounting department at new york university ' s stern school of business . " it may be that the way it was dressed up was so complicated that it was hard for the auditors to ferret it out but , then again , that ' s their job . "
the financial accounting standards board ( fasb ) , which sets accounting rules , said firms must disclose extensive information about related - party transactions . enron may well have violated the spirit of that law by inadequately explaining its transactions , the experts said .
when enron began to unravel , analysts criticized andersen for failing to explain the firm ' s dealings in its financial statements . enron reported its transactions in cryptic footnotes that many said were almost incomprehensible .
andersen has also come under fire for failing to consolidate those partnerships into enron ' s books , which would have given a truer picture of enron ' s debt .
enron later restated its results to reflect those transactions in its books , cutting earnings by almost $ 600 million since 1997 , effectively admitting it made a mistake , but not before its credibility had been shattered .
on thursday , harvey pitt , chairman of the sec , which is investigating enron and andersen , said that the agency is looking at whether accounting principles were applied " appropriately , " and what may need changing .
patching up loopholes
to be sure , critics have long called for better accounting rules , particularly those regarding the type of off - the - balance - sheet financing that enron engaged in .
tim lucas , who heads a fasb task force on emerging issues , said fasb was trying to complete big projects on business combinations and asset retirement obligations this year , before tackling the issue .
lucas said the enron saga may also hold some implications for rules on financial instruments such as derivatives and recording them at fair value .
" we will certainly be aware of this ( enron situation ) and if it sheds some light on an area where we can improve the rules we will try and do that , " he said . " but it ' s not obvious to me yet that it does . "
but apart from raising questions about andersen ' s role , the implications of enron ' s near collapse may well force the entire auditing community to do some serious soul searching to prevent future disasters . " this is a wake up call , " new york university ' s brown said .
copyright ? 2000 dow jones & company , inc . all rights reserved .
canada : update 1 - enron collapse likely kills planned ontario plant .
11 / 30 / 2001
reuters english news service
( c ) reuters limited 2001 .
( recasts with comments from area legislator in paragraph 3 , adds ontario power generation ' s enron exposure paragraph 13 )
toronto , nov 30 ( reuters ) - the collapse of u . s . energy trader enron corp . likely spells the end of plans by its canadian subsidiary to build a c $ 200 million ( $ 130 million ) generating plant in southwestern ontario .
but government officials said on friday that shelving the plant would have little effect on the province ' s plans to open the electricity market to competition next year .
" enron had an option to purchase a parcel of land in st . clair township to build a peaker plant to generate electricity during peak periods , " said caroline dicocco , the member of the provincial legislator for sarnia - lampton .
" the feeling in the community is that this is not going to happen because of severe financial difficulties , " she said .
enron , north america ' s largest energy trader , now on the verge of collapse , planned through enron canada corp . to build a 400 megawatt generating plant near sarnia , ontario . it recently renewed an option on the land in st . clair township and was seeking various regulatory approvals .
however , enron ' s canadian president rob milnthorp told reuters earlier this year , that the firm had delayed construction of the plant until a clear date was set for the province to open up the market to competition .
the company was not available for comment on friday .
" we were aware that enron had considered a plant and those plans have been on hold for some time now , " said mike krizanc , a spokesman for ontario ' s energy ministry .
" the latest events affecting the company have no impact on what ' s happening in ontario in terms of competition and supply that we ' re anticipating , " he said .
ontario , canada ' s most populous province and the nation ' s industrial and economic heartland , is set to unveil plans within the next two months for the deregulated power market . the province has already pushed back its original november 2000 deadline by 18 months .
earlier this year , it said it would open the market by may 2002 .
although the planned enron plant will likely never be built , market experts said the company could sell what infrastructure and development it had completed .
" that is potentially an attractive asset . but any time you ' re selling a half - built house , you know it ' s just not the best way to get value , " said tom adams , executive director at industry watchdog energy probe in toronto .
meanwhile , ontario power generation , the province ' s biggest electricity producer , said in a release that its exposure to enron was less than c $ 100 , 000 and therefore it " does not anticipate any adverse earnings impact " related to its trading activities with the u . s . firm .
( $ 1 = $ 1 . 57 canadian ) .
copyright ? 2000 dow jones & company , inc . all rights reserved .
s & p : credit derivative exposure to enron is $ 6 . 3 billion
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
new york , nov . 30 / prnewswire / - - standard & poor ' s has reviewed a number of credit derivative transactions in which enron appears and found exposure to the company in three different types of these transactions . divided among these deals , direct enron credit exposure potentially could total $ 3 . 3 billion .
" although much attention has been focused on enron in relation to loan exposures , the energy sector , and the commodities markets , it is also a named source of credit risk in many credit derivatives transactions , " said nik khakee , director of standard & poor ' s structured finance derivatives group .
" in addition , enron had an overall derivatives market strategy that included credit derivatives . thus enron is not only a source of credit risk in derivatives transactions , it is a source of risk to derivatives transactions as it could possibly cause termination events in swaps that enron has contracted , " mr . khakee continued .
on a global basis , enron appears in 50 transactions as a reference entity or reference obligation in pooled credit derivative transactions , meaning that enron is a credit exposure . two counterparties transact a swap in which the default of enron , as defined by specified credit event language defined in the swap documentation , would lead to potential loss to one counterparty , the floating - rate payer .
this loss is defined by a valuation process whereby a settlement value for the potential enron exposure is determined . this value can often be the result of a bidding process in the market where dealers are solicited . this bidding process is commonly referred to as cash settlement . alternatively , physical settlement may be selected as the settlement mechanism whereby an enron fixed income instrument is exchanged for the notional value of the enron exposure in the overall pool .
these transactions total $ 79 billion in total notional amount . the potential enron exposure in the deals in aggregate totals $ 3 . 3 billion or 0 . 75 % of total notional exposure . it is important to note that these transactions are primarily investment grade credit derivative collateralized debt obligations in which credit support to rated noteholders typically averages 2 % - 4 % . therefore , a default of enron and low recovery on enron post - default would significantly erode this credit support .
" standard & poor ' s is currently reviewing all transactions in which enron is a named reference entity for possible rating actions , " mr . khakee said .
enron may also appear in this same type of credit derivative transaction but as part of a small pool , rather than a large pool of overall credit exposure . in this case , enron may potentially be the single reference source of credit risk in a credit derivative transaction , irrespective of the credit risk posed by the actual counterparty risk in these transactions ( which is not addressed in the estimated exposures identified above ) .
enron appears as a reference credit in six transactions with potential total notional exposure to enron of $ 2 . 7 billion in these single - name risk or small basket credit derivative transactions .
in addition , in december 2000 , enron began acting as the counterparty in swap transactions without also being the reference entity . as such , its counterparties are vulnerable to potential default by enron as counterparty , even if it is not a reference source of credit exposure in a transaction .
in these transactions , any default by enron as counterparty under the swap contract would initiate a process whereby termination of the swap contract is possible . the nondefaulting counterparty would have the option to replace enron with a new counterparty in the swaps . this could be done on the whole swap notional amount of credit exposure or the portfolio could be carved up into pieces in order to distribute the risk across various counterparties .
whether transferred to one counterparty or many , this process , called assignment , leads to a mark - to - market valuation . that mark is either in favor of enron or the counterparty enron faces . thus , after an enron default , the counterparty could be exposed to a liquidity risk because it would have to make a mark - to - market payment to enron . conversely , if enron has to make a mark - to market payment to the counterparty , the counterparty may not be receiving the payment , especially if insolvency proceedings commence .
enron has secured ratings on three such credit derivative transactions in which a total notional amount of $ 3 billion of credit derivative exposure was traded .
to give some perspective on this number , mr . khakee explained that standard & poor ' s credit derivatives analysts in new york who review pools of credit exposure have reviewed transactions with a total notional amount of $ 23 billion in the year to date . " the notional amount of $ 3 billion relative to enron represents a larger percentage of overall rated credit derivative transactions than would be expected of an entity that is not a traditional broker - dealer , investment bank , or insurer , " he said .
/ contact : nik khakee , + 1 - 212 - 438 - 2473 , or mary ryan , + 1 - 212 - 438 - 2090 , of standard & poor ' s / 16 : 54 est
copyright ? 2000 dow jones & company , inc . all rights reserved .
scope of peer review of andersen audit practice to be expanded
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
chicago , nov . 30 / prnewswire / - - andersen today announced deloitte & touche will expand the scope of its peer review of andersen ' s us accounting and audit practice . the expanded procedures , which have been under consideration for over two weeks , will include , among other things , review procedures in andersen ' s houston office . andersen asked for additional work in light of financial reporting issues at enron corp . deloitte & touche had independently determined it wanted to conduct additional procedures .
" maintaining the trust and confidence of investors is a central tenet of our firm , " said joseph f . berardino , managing partner and chief executive officer . " we invest hundreds of millions of dollars each year to improve our auditing tools and skills so that investors can rely on the andersen signature as a sign of quality financial reporting . we are confident that our system of quality is strong . we are pleased with deloitte & touche ' s decision to undertake additional review procedures . "
the public oversight board ( pob ) is charged with oversight of the accounting profession ' s self - regulatory peer review process in the united states . every three years since 1978 , major accounting firms , under the oversight of the pob , have been engaged to conduct comprehensive reviews of the accounting and audit practices of member firms in the american institute of certified public accountant ' s ( aicpa ) sec practice section ( secps ) .
peer reviews involve an assessment of a firm ' s system of quality control for its accounting and auditing practice under standards established by the secps . this includes , among many other quality measures , an evaluation of a firm ' s audit methodology and tools as well as a review of certain audits in select offices . deloitte & touche ' s work on the 2001 andersen review was nearing completion when enron announced certain financial reporting issues .
the 2001 peer review has been planned and under way for more than eight months . to date , deloitte & touche reviewers and andersen practice review teams have reviewed the system of quality , including audit work , in 30 offices involving more than 40 percent of andersen ' s u . s . audit partners . the reviews conducted by andersen review teams were tested by deloitte & touche , as is customary , and were subject to the oversight of the pob .
" 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 , " said berardino . he noted that andersen was the first major firm to engage another firm to review its system of quality globally - - in 1977 .
andersen is a global leader in professional services . it provides integrated solutions that draw on diverse and deep competencies in assurance , tax , consulting , corporate finance , and in some countries , legal services . andersen employs 85 , 000 people in 84 countries . andersen is frequently rated among the best places to work by leading publications around the world . it is also consistently ranked first in client satisfaction in independent surveys . andersen has enjoyed uninterrupted growth since its founding in 1913 . its 2001 revenues totaled us $ 9 . 3 billion . andersen refers to the brand identity adopted by member firms of the andersen global client service network . learn more at www . andersen . com .
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/ contact : dave tabolt of andersen , + 1 - 312 - 931 - 9000 , or david . w . tabolt @ us . andersen . com / 17 : 07 est
copyright ? 2000 dow jones & company , inc . all rights reserved .
fitch on enron : the coming creditor battle over enron ' s assets
11 / 30 / 2001
business wire
( copyright ( c ) 2001 , business wire )
new york - - ( business wire ) - - nov . 30 , 2001 - - with total assets of $ 62 . 8 billion at sept . 30 , 2001 , enron would become the biggest bankruptcy in united states history if it files for bankruptcy as expected . fitch anticipates a lengthy and contentious battle over enron ' s assets . some of the key issues for creditors are :
what is the enterprise value ?
there are several issues that cloud an enterprise valuation of enron . first and foremost is the uncertain value remaining in enron ' s wholesale trading business . approximately 75 % of enron ' s total 2000 income before interest , minority interests and taxes was generated by the wholesale services segment , which consists primarily of the energy trading business . based on recent refusals of enron ' s energy trading partners to accept the company as a counter - party and exacerbated by implementation of trading restrictions on the company by the new york mercantile exchange , fitch believes significant doubt has been cast upon enron ' s ability to continue to operate this business at its previous scale . further , previous valuations of bankrupt trading businesses have been quite low . therefore , fitch believes it would be prudent to assign a very conservative valuation to this segment in a recovery analysis . secondly , due to the ongoing securities and exchange commission investigation of enron ' s accounting , and previous restatements of earnings , there exists uncertainty over the accuracy of historical earnings reports . finally , enron ' s retail energy segment is closely integrated with the company ' s wholesale operations for energy supply . if the wholesale operations remain shutdown , the future cash flow generation ability of the retail segment may be materially impaired .
how will the value of enron ' s assets be allocated in a bankruptcy ?
fitch has conducted a preliminary analysis of recovery prospects for various creditor classes . enron ' s pipeline business has historically been a steady source of cash flow generation . a market comparable method of valuation for the transportation segment results in strong recovery prospects for secured creditors at northern natural and transwestern . fitch estimates there would be roughly $ 1 billion of residual value from the pipelines following the satisfaction of their secured and unsecured claims and dynegy ' s claim . as part of the merger agreement with enron , dynegy injected $ 1 . 5 billion into enron in exchange for preferred stock in enron ' s largest pipeline , northern natural gas , which can be converted into ownership of the pipeline . dynegy has exercised this option . it is noted that as part of its investment in the preferred stock , dynegy negotiated the right to block a bankruptcy filing at this subsidiary .
enron has various other assets that could be monetized to satisfy unsecured creditor claims . enron has an agreement to sell its portland general electric subsidiary for anticipated net proceeds of about $ 1 . 8 billion in cash or cash equivalents in 2002 . in addition , enron has contracted to sell $ 800 million of merchant assets which is expected to close before year end , subject to execution risks including regulatory and transfer risks . the net proceeds that could be realized from cash on hand , inventories , and various other monetizable assets are difficult to estimate . moreover , the full extent to which the company ' s assets have been pledged is uncertain .
the outstanding amount of senior unsecured debt is currently estimated to be about $ 11 billion , excluding possible liabilities arising from trust structures such as marlin and osprey . additionally , other general unsecured claims in a bankruptcy would include customer deposits , minority interests , project and structured finance make whole obligations , as well as an unknown amount of amount of exposure to is shareholders , employees and others relating to the spate of recent litigation against enron . the amount of these other general unsecured claims can not be determined at this time .
despite the fluidity of the situation , fitch ' s preliminary view is that unsecured creditors would realize recoveries in the 20 - 40 % range . this opinion considers the deterioration in the value of the wholesale trading business , the pledge of flagship assets to secured creditors , the uncertain cashflow generation prospects of the retail segment in light of the wholesale business situation , the opaque and uncertain accounting and off balance sheet liability issues , and other unexpected liabilities .
will enron be able to continue to operate as a going concern or seek to liquidate assets ?
enron would require a sizable debtor in possession facility to fund ongoing operations and induce counter - parties to resume business with enron . fitch believes it is uncertain whether enron has adequate unencumbered or over - collateralized assets to obtain a dip large enough to enable the resumption of wholesale operations .
what is the situation for secured creditors to marlin water trust ii and osprey trust ?
the ratings of marlin ' s $ 915 million senior secured notes and osprey ' s $ 2 . 4 billion senior secured notes rely on support of enron . a liquidation of the underlying assets is the primary source of repayment . a shortfall in liquidation proceeds would become a claim against enron , which may be subject to subordination to the claims of other creditors in a bankruptcy .
contact : fitch , new york sharon bonelli , 212 / 908 - 0581 or robert grossman , 212 / 908 - 0535 or ralph pellecchia , 212 / 908 - 0586 or glen grablesky , 212 / 908 - 0577 or james jockle ( media relations ) , 212 / 908 - 0547
15 : 56 est november 30 , 2001
copyright ? 2000 dow jones & company , inc . all rights reserved .
s & p places sutton bridge power ' s ' bbb ' ratings on creditwatch negative
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
new york , nov . 30 / prnewswire / - - standard & poor ' s today placed its triple - ' b ' rating on sutton bridge power ' s ( sbp ) guaranteed gbpl 95 million ( us $ 310 million ) and us $ 150 million secured bonds , issued by sutton bridge power financing ltd . , on creditwatch with negative implications . the creditwatch placement reflects the potential for deterioration in the credit quality of debt - service payments if the existing 25 - year swap with enron corp . is not fundamentally restructured .
the rating action results from the downgrade of enron corp . ' s corporate credit rating to single - ' b ' - minus by standard & poor ' s . enron , through enron capital & trade resources corp . , is a counterparty in the 25 - year ( until 2022 ) u . k . pound / u . s . dollar swap with sutton bridge financing . a possible restructuring or cancellation of the swap may expose bondholders to currency exchange risk .
standard & poor ' s will be shortly meeting with london electricity plc ' s ( le ) management ( which owns the sutton bridge power plant ) to discuss , among other things , le ' s options for hedging the currency exposure at sbp that will preserve sbp ' s credit strength .
/ contact : jean - francois veron of standard & poor ' s , + 33 - 1 - 4420 - 7316 / 15 : 37 est
copyright ? 2000 dow jones & company , inc . all rights reserved .
westport terminates enron contracts
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
denver , nov . 30 / prnewswire / - - westport resources corporation ( nyse : wrc ) announced today it has terminated its commodity sales and hedging contracts with enron north america corp . and certain of its affiliates . westport exercised its rights pursuant to the early termination provisions of such contracts . based on current estimates and after applying all estimated set - offs , westport believes that it owes enron north america corp . and its affiliates approximately $ 800 , 000 under these contracts . in addition , westport has commodity sales contracts with eott energy partners , l . p . and ena upstream company llc , affiliates of enron corp . westport believes that its exposure under these contracts is less than $ 4 . 0 million . ( photo : http : / / www . newscom . com / cgi - bin / prnh / 20010424 / wrclogo )
contact information : lon mccain or jonathan bloomfield at ( 303 ) 573 - 5404 .
forward - looking statements
this material includes " forward - looking statements " within the meaning of section 27 a of the securities act of 1933 , as amended , and section 21 e of the securities exchange act of 1934 , as amended . forward - looking statements include estimates , plans , expectations , opinions , forecasts , projections , guidance or other statements that are not statements of fact , including but not limited to the amount of any potential exposure to enron . although the company believes that the expectations reflected in such forward - looking statements are reasonable , it can give no assurance that such expectations will prove to have been correct . there are many factors that could cause forward - looking statements not to be correct , including differences in contractual interpretation , future volatility in oil and gas prices , and other uncertainties related to calculating market values of the company ' s contracts with enron , as well as the risks and uncertainties inherent in the company ' s business set forth in the filings of the company with the securities and exchange commission . the company does not undertake any obligation to update any forward - looking statements contained in this material .
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/ contact : lon mccain or jonathan bloomfield of westport resources corporation , + 1 - 303 - 573 - 5404 / 14 : 46 est
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron mentions - 11 / 30 / 01
power points : enron exit from energy markets gets messy
dow jones energy service , 11 / 30 / 01
enron impact on gas sector not yet clear - aga officials
dow jones energy service , 11 / 30 / 01
enron considering options ; bankruptcy decision said unlikely before next week
dow jones business news , 11 / 30 / 01
u . k . trading panel decides against expelling enron
dow jones international news , 11 / 30 / 01
tables turned as commercial banks lick enron wounds
dow jones capital markets report , 11 / 30 / 01
enron collapse could weigh heavy on some insurers
dow jones news service , 11 / 30 / 01
us physical gas prices end down ahead of weekend
dow jones energy service , 11 / 30 / 01
usa : enron directors ' side deals raise eyebrows .
reuters english news service , 11 / 30 / 01
usa : basic accounting tripped enron , experts say .
reuters english news service , 11 / 30 / 01
canada : update 1 - enron collapse likely kills planned ontario plant .
reuters english news service , 11 / 30 / 01
s & p : credit derivative exposure to enron is $ 6 . 3 billion
pr newswire , 11 / 30 / 01
scope of peer review of andersen audit practice to be expanded
pr newswire , 11 / 30 / 01
fitch on enron : the coming creditor battle over enron ' s assets
business wire , 11 / 30 / 01
s & p places sutton bridge power ' s ' bbb ' ratings on creditwatch negative
pr newswire , 11 / 30 / 01
westport terminates enron contracts
pr newswire , 11 / 30 / 01
power points : enron exit from energy markets gets messy
by mark golden
11 / 30 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
a dow jones newswires column
new york - ( dow jones ) - despite assurances from many companies that the removal of enron corp . ( ene ) from north american energy markets was proceeding in an orderly fashion , enron havoc broke loose friday morning .
cleaning up the mess will be nearly unbearable for energy industry employees for a few weeks because enron was involved in so many trades . but industry workers don ' t expect electric reliability to be threatened or gas supplies to be disrupted . what ' s more , the free market ' s ability to resolve problems most efficiently and to keep infrastructure humming will shine .
the lull after wednesday morning ' s collapse of dynegy inc . ' s ( dyn ) acquisition of enron was deceptive . on thursday afternoon , mirant ( mir ) told enron it would make no more power and gas deliveries to the company starting saturday , the first day of the new month . a couple of other companies followed suit by friday morning .
enron in turn began to lose its ability to meet its obligations as a supplier , because it doesn ' t produce much electricity . to meet sales obligations , it buys from producers and other traders . the positive feedback system is expected to spiral upwards until early next week , when enron could be almost totally out of the energy market .
to get an idea of how messy this all is , look at one troubled transaction thursday for saturday delivery of electricity to a utility . the utility bought power from sempra energy ( sre ) , which had bought it from el paso ( epg ) , which bought from dynegy ( dyn ) , which bought from pg 201 - 938 - 4604 ;
mark . golden @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron impact on gas sector not yet clear - aga officials
11 / 30 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones 202 - 862 - 6647 ;
bryan . lee @ dowjones . com
copyright ? 2000 dow jones bankruptcy decision said unlikely before next week
11 / 30 / 2001
dow jones business news
( copyright ( c ) 2001 , dow jones & company , inc . )
embattled energy - trading concern enron corp . is still considering all of its options , including the likelihood of filing for bankruptcy protection under chapter 11 , people close to the matter said . such a decision , however , won ' t occur before next week , these people said .
some enron employees are being told not to expect any action over the weekend , these people said .
the chapter 11 process is designed to hold a company ' s creditors at bay while it hammers out a plan to reduce debt . although people familiar with the situation insist an all - out liquidation - - known as a chapter 7 filing - - isn ' t in the cards , some industry observers continue to speculate that the beleaguered company may be forced to go that route .
with its energy - trading business crippled by the downgrade wednesday of most of its debt to junk status and a buyout by dynegy inc . ( dyn ) called off later that day , enron ' s fortunes have been in a downward spiral .
as of 4 p . m . est friday on the new york stock exchange , shares of enron ( ene ) dropped 10 cents , or 28 % , to 26 cents . the stock had traded above $ 90 a share last year , and , all told , equity shareholders have lost over $ 60 billion .
enron ' s outstanding bonds trade at prices of around 15 cents on the dollar . the selloff in enron ' s bonds - - down from the upper 50 - cent range before wednesday ' s developments - - suggests bondholders don ' t expect much if any recovery on their investments .
there is little doubt that any bankruptcy proceedings will be complex and time - consuming , given the nearly $ 62 billion in assets on enron ' s balance sheet , as of its last quarterly financial report . also , the bankruptcy court would have to wade through and untangle many items not listed on its balance sheet . those financing vehicles are what sparked the company ' s troubles last month .
enron ' s liabilities are still a matter of debate . the company has an estimated $ 13 billion in debt on its balance sheet , and a further $ 7 billion in financings off the balance sheet . however , there may be other obligations lurking in connection with its investment partnerships .
since the debt downgrade , enron ' s trading business appears damaged beyond repair . without a viable credit rating , the company no longer has access to the reams of cash it needs to run that business .
underscoring enron ' s woes , the company told some of its trading partners on friday that it will default on some of its deliveries of wholesale electricity under contract for sunday and monday , people familiar with the situation said .
some observers had expected enron to file for bankruptcy protection as early as this week . but the people close to the situation said the complex business structure is slowing the process . where the company would file is also a question : the houston - based company could file where it is headquartered , but it is incorporated in oregon , and many companies look to the favorable courts of delaware whenever possible .
enron hired restructuring and bankruptcy specialist blackstone group late last week to advise it on corporate matters and to help restructure its debt .
the company also is being advised by law firm weil gotshal & manges , a bankruptcy specialist .
key supplier stops delivery
mirant corp . ( mir ) stopped delivering all power and natural gas to enron sold under existing contracts world - wide , traders and people familiar with the situation said .
the move brings enron ' s struggles in north america to a new level . until now , most companies had stopped making new trades with enron , but continued to deliver under their previously done deals . and enron has been delivering under its contracts in north america .
through thursday , enron was able to get third parties to step in and buy from mirant and sell to enron . in one transaction , for power to be delivered saturday , silicon valley power stepped into the middle . silicon valley power , the municipal utility of santa clara , calif . , confirmed thursday that it had done so .
" that transaction for saturday is based on a contractual obligation we made to enron in the past , when enron was on a positive trading position with us , " said silicon valley ' s marketing manager , larry owens .
energy - market sources expect other companies to follow suit with mirant , and they don ' t expect enron will be able to find intervening third parties for much longer . companies have the legal right to suspend deliveries if they reasonably expect they won ' t get paid .
to date , enron has paid its bills on time . saturday gas and power deliveries carry more risk than deals for delivery even friday , as enron won ' t have to pay for deliveries starting dec . 1 until late january .
a spokesmen for enron wouldn ' t comment . " we don ' t discuss activities with individual counterparties , " spokesman eric thode said .
layoffs begin in europe
enron officials said friday the company will lay off all but a handful of its european employees .
a few staff will be retained to wind up the remaining operations of enron in europe , which are now largely under the court - appointed administration of .
a statement issued by said " approximately 1 , 100 redundancies have been made in the u . k . across the group , with 250 staff retained . "
there was no word on the fate of enron ' s employees elsewhere in europe .
" the over - riding priority is to preserve the valuable parts of the business and to reduce the cash needs of the business whilst seeking to secure the future of certain enron businesses and its employees , " senior administrator tony lomas said in the statement .
separately , as of friday , two of enron ' s divisions - - enron capital and trade resources ltd . and enron gas and petrochemical trading ltd . - - were in default regarding their obligations under the united kingdom ' s balancing and settlement code , although u . k . balancing market operator elexon stressed that regulators decided not to expel enron from trading at this time .
" the panel will meet again on dec . 5 to further discuss enron , and have the right to review their decision not to expel enron at any time before that , " said a spokeswoman for elexon .
in addition , german grid operators cancelled their grid - access contracts with enron capital & trade resources , effectively excluding it from all transactions that involve delivery to , or transit through germany , europe ' s largest power market and an essential part of enron ' s european power activities .
enron also has been suspended from trading on nord pool , the ukpx , the amsterdam power exchange , the european energy exchange and the automated power exchange ' s u . k . contracts .
- - christina cheddar , janet whitman , geoffrey t . smith , sarah spikes , carol s . remond , mark golden and kristen mcnamara of dow jones newswires contributed to this report .
copyright ( c ) 2001 dow jones & company , inc .
all rights reserved
copyright ? 2000 dow jones & company , inc . all rights reserved .
u . k . trading panel decides against expelling enron
11 / 30 / 2001
dow jones international news
( copyright ( c ) 2001 , dow jones ( + 44 20 ) 7842 9345 ;
sarah . spikes @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
tables turned as commercial banks lick enron wounds
by michael mackenzie
of dow jones newswires
11 / 30 / 2001
dow jones capital markets report
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - after enduring one of the toughest operating environments in recent years , investment bankers can at least raise a smile that commercial banks are bearing the brunt of the fallout from the anticipated collapse of energy trading house enron corp . ( ene ) .
the likelihood that enron will file for what would be a messy bankruptcy is " sure to illustrate one of the fundamental differences between commercial banks and investment banks , " noted analysts van hesser and justin ziegler at credit suisse first boston in new york .
the appetite of commercial banks for more exposure to an individual name than their investment banking rivals is evident in a breakdown of the direct loan exposures to enron , a list that ' s dominated by commercial banks .
according to ratings agency fitch , j . p . morgan chase has $ 500 million in unsecured exposure and at least a further $ 400 million that is secured . citigroup ( c ) , is gauged at having $ 800 million in exposure with $ 500 secured and $ 300 million unsecured by fitch . and another leading commercial entity , bank of america corp ( bac ) , is believed to have $ 300 million in direct loan exposure as at sept . 30 , note csfb .
extending loans to companies that can run into problems , " is definitely the risk in commercial banking , but such banks are well diversified and able to absorb these situations , " said ken worthington , director and equity analyst at cibc world markets in new york .
however , in the case of j . p . morgan chase " which prides itself on passing credit risk off to others through various means , including loan syndications and hedging , this is a stunning figure , " said kathy shanley , bank and finance analyst at gimme credit , an independent credit research firm in new york .
in recent years , commercial banks have sought to leverage their diversified structures by aggressively muscling into the territory of investment banks . they sought to underwrite corporate bond and stock issues - the traditional turf of investment banks - by offering commercial banking sweetners such as lines of credit and loans .
investment banks do not enjoy the benefit of a substantial balance sheet and tend to focus on underwriting and generally don ' t provide loans . and while investment banks have been forced by competitive pressures to extend lending facilities - demonstrated by morgan stanley ' s credit facilities to lucent technologies - " they usually offload their balance sheet exposures in order to lower their risk profile , " said worthington .
this in turn underlines the more selective approach that investment banks have to financial markets than their commercial banking cousins . while investment banks are not gun - shy of building risk exposures , the csfb analysts believe " they tend to build fewer and they tend to be more disciplined about it . "
this helps explain why in respect to enron , csfb believes " broker exposures are relatively light . " the bank expects exposure to enron at goldman sachs group ( gs ) , and morgan stanley ( mwd ) " to be in the $ 50 to $ 100 million range , while other major securities houses such as bear stearns companies inc ( bsc ) , lehman brothers ( leh ) and merrill lynch & co . ( mer ) " should have exposures that are relatively immaterial . "
but the carnage at enron has left some investment bankers looking better off than the gungho commercial banks who sought juicy m & a fees by providing creditlines to the company as it planned its ultimately doomed merger with dynegy inc . ( dyn ) . as citi and jpm face the prospect of a battle over the assets of enron in a bankruptcy filing , " goldman sachs sits on the sidelines with a cheshire cat grin , reminding investors it declined to extend a credit line to enron as a condition of signing on as a merger advisor , " noted gimme credit ' s shanley .
the travails surrounding enron and the big commercial banks , " reads like a case study dreamed up by the securities industry association to illustrate why banks should never have been allowed in the investment banking business in the first place , " she said .
although goldman and morgan stanley have " meaningful energy trading operations , " csfb believe that both banks are well versed in hedging and structuring collaterized trading agreements . such methods limit the potential for gaping losses associated with failure of a counterparty to trades previously transacted .
worthington at cibc added , " what really drives the business of investment banking are relationships and talent . "
but mired at the bottom of the investment banking cycle , many firms have been looking to combine their talented workforce with the attractive balance sheets of commercial banks in order to enhance their operation . they ' ve looked to the success of citigroup ' s vaunted one - stop shopping model , which combines banking services with the investment banking offerings of salomon smith barney .
although fitch notes " the banking industry ' s stated exposures do not appear , in and of themselves , significant enough to have ratings implications , " the news from enron is perhaps a timely reminder that cultivating a big balance sheet also carries certain risks .
that ' s not to say investment banking won ' t undergo further consolidation that involves finding large balance sheets . the search for profits and economies of scale from building a joint commercial and investment banking franchise are the stuff of many bankers ' dreams .
indeed , many analysts believe merrill lynch
michael . mackenzie @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron collapse could weigh heavy on some insurers
by chad bray
of dow jones newswires
11 / 30 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - the insurance industry didn ' t need enron corp . ' s ( ene ) problems , particularly when it comes to reinsurance prices .
primary insurers could be on the hook for as much as $ 2 billion in claims against directors and officers policies , surety bonds and financial guarantees related to the houston energy trading firm , which , among its options , is considering seeking chapter 11 bankruptcy protection . some insurers also will likely take a hit in their investment portfolios if enron defaults on its bond payments .
the loss would be material , but not devastating for the industry . however , amid the backdrop of the world trade center disaster , enron ' s impact could pressure some firms going forward , particularly if most of their enron risk was ceded to reinsurers . " this event is likely to exacerbate the ( reinsurance ) capacity shortfall in the market that already exists , making 2002 one of the more , if not the most , powerful pricing years in recent history , " said alice schroeder , a morgan stanley insurance analyst .
reinsurance prices were rising prior to the sept . 11 terrorist attacks . rates are expected to rise dramatically in light of the events as reinsurers get a handle on how to insure this new risk in the u . s .
aviation rates , for example , have already climbed 200 % to 300 % in some cases . reinsurers also are willing to take on less risk , forcing primary insurers to keep more of the coverage or write policies offering less coverage .
chubb corp . ( cb ) , a warren , n . j . , insurer , said it was reviewing its surety bonds related to enron and could have a maximum net pretax exposure under outstanding surety bonds of about $ 220 million . the firm said its after - tax exposure is $ 143 million , or 82 cents a share .
a company takes out a surety bond in the event it can ' t fulfill a contractual obligation . typically , surety bonds would pay out any monetary guarantees if a company was unable do so . surety bonds are often used to improve a firm ' s credit rating .
the insurer was unable to estimate the actual amount , if any , that they may be required to pay or the timing of those payments because of contingencies , including the actions of others , possible judicial rulings or the amounts that chubb may recover under surety bond documents . no claims have yet been filed under the surety bonds .
jay cohen , a merrill lynch analyst , said chubb ' s surety bond obligations in regards to enron generally guaranteed the delivery of natural gas to energy producers , such as utilities . each bond could have different defined events that would trigger a claim , such as a bankruptcy , cohen said .
" the enron loss will likely be a very sizable one in the surety line , a line that was not particularly effected by the trade center attack , " cohen said . " the loss will likely exceed $ 1 billion and we note that the industry wrote surety premiums totaling $ 3 . 5 billion in 2000 . we would expect this loss to have an effect on insurers ' risk appetite pertaining to surety obligations . "
cohen said chubb likely has reinsurance for its losses and that its gross exposure is " above the $ 220 million maximum net exposure . "
ron frank , a salomon smith barney analyst , said , while the enron situation is clearly " unusual , " the loss should be viewed relative to chubb ' s overall financial condition , which is quite solid . he said chubb ' s historical profitability in surety is " very good even including enron . "
frank noted the chubb announcement didn ' t address any other exposure to enron , such as directors and officers liability . " management did comment to us that if they saw another exposure material to earnings per share , it would have been released , " frank said . " we infer from this that reinsurance and reserves will meaningfully mitigate such exposures . "
large surety writers include st . paul cos . ( spc ) , american international group ( aig ) , cna financial ( cna ) , act ltd . ( ace ) , safeco corp . ( safc ) and the travelers unit of citigroup inc . ( c ) . however , not all large writers of surety obligations necessarily have an exposure to enron .
at the same time , a major enron loss could inhibit some traditional property - casualty insurers from writing financial guarantee - related risk in the future , said schroeder , the morgan stanley analyst .
schroeder noted that could be a positive for traditional financial guarantors in terms of less competition , but could also be a concern .
for example , ambac financial group inc . ( abk ) and mbia inc . ( mbi ) , both traditional financial guarantors , have been able to " wrap " lower levels of risk on certain collateralized debt obligation deals with traditional p & c insurers , while taking the higher , or less risk prone , layers for themselves . being conservative in nature , they might not be willing to take on the more risky layers in the future . - by chad bray , dow jones newswires , 201 - 938 - 5293
chad . bray @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
us physical gas prices end down ahead of weekend
11 / 30 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones
john . edmiston @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron directors ' side deals raise eyebrows .
11 / 30 / 2001
reuters english news service
( c ) reuters limited 2001 .
houston , nov 30 ( reuters ) - directors of enron corp . , already under fire for failing to identify and correct problems that brought the energy trading giant to the brink of collapse , had lucrative side deals with the company that drew added criticism from corporate governance experts on friday .
the deals ranged from consulting jobs to purchases of goods and services from affiliated companies . they raised doubts about the board ' s independence from the senior managers they were supposed to supervise on behalf of the stockholders , the experts said .
" directors who have side consulting arrangements are not considered , under governance guidelines , to have the necessary independence from management , " said charles elson , director of the center for corporate governance at the university of delaware .
in contrast to the murky off - balance - sheet financing deals that played a key role in enron ' s demise , the company made detailed disclosures of its deals with members of its board of directors in a proxy statement published earlier this year .
the document shows that in addition to his supervisory duties as an enron director , john urquhart was paid $ 493 , 914 last year for providing consulting services to enron .
" that ' s a huge amount of money . best practice is no consulting fees to any directors , " said nell minnow , an editor at business research group the corporate library , which does extensive work on corporate governance issues .
another enron director , lord john wakeham , received $ 72 , 000 last year for advice on enron ' s european operations .
enron director herbert winokur was affiliated with the privately owned national tank co . that made sales to enron worth $ 370 , 294 last year , the proxy statement said .
the document also shows that enron paid $ 517 , 200 last year for travel services provided to enron employees . the travel agency business that provided the services is 50 percent - owned by sharon lay , sister of enron chairman and chief executive ken lay .
" most major companies do not engage in that dodge because it is such an obvious one , " minnow said .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : basic accounting tripped enron , experts say .
by deepa babington
11 / 30 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 29 ( reuters ) - as experts look through the remains of enron corp . for someone to blame , eyes are turning toward the auditors who allowed it to break accounting rules , rather than on the rules themselves .
once the biggest trader in the newly deregulated power market , enron is now near collapse . the auditing profession , which gives financial statements the stamp of approval , needs to be more vigilant to prevent similar future disasters , the experts said .
" the auditors - the big five auditing firms - have got to look at themselves and say , how can this sort of thing happen ? " said david hawkins , an accounting consultant with merrill lynch and a professor at harvard university .
" the rules are there . have we lost our way , so to speak ? do we need a new compass direction ? "
enron , once a wall street darling with a share price that hit more than $ 90 , started coming apart after it reported losses from transactions that were led by its former chief financial officer and kept off its balance sheet .
experts said it failed to apply generally accepted accounting principles and failed to disclose sufficient information to explain its dealings .
andersen , the accountancy firm that audited enron ' s books , said such judgments are premature .
" the best idea is to gather information , as the securities and exchange commission and enron board are doing , and then decide what lessons we can learn , " andersen spokesman david tabolt said . " instant judgments often are based on presumptions . . . that often turn out later to be incorrect . "
accounting 101
but the rules that enron appears to have violated are quite straightforward , according to some experts .
for example , recording the note enron received in return for selling equity to its limited partnerships as an asset is contrary to an accounting rule that bans such treatment unless the note is to be paid off in a few days , hawkins said .
ultimately , those transactions turned sour , causing a $ 1 . 2 billion reduction in shareholder equity and losses that contributed to a $ 1 billion third - quarter charge .
" this is accounting 101 here , " said paul brown , chairman of the accounting department at new york university ' s stern school of business . " it may be that the way it was dressed up was so complicated that it was hard for the auditors to ferret it out but , then again , that ' s their job . "
the financial accounting standards board ( fasb ) , which sets accounting rules , said firms must disclose extensive information about related - party transactions . enron may well have violated the spirit of that law by inadequately explaining its transactions , the experts said .
when enron began to unravel , analysts criticized andersen for failing to explain the firm ' s dealings in its financial statements . enron reported its transactions in cryptic footnotes that many said were almost incomprehensible .
andersen has also come under fire for failing to consolidate those partnerships into enron ' s books , which would have given a truer picture of enron ' s debt .
enron later restated its results to reflect those transactions in its books , cutting earnings by almost $ 600 million since 1997 , effectively admitting it made a mistake , but not before its credibility had been shattered .
on thursday , harvey pitt , chairman of the sec , which is investigating enron and andersen , said that the agency is looking at whether accounting principles were applied " appropriately , " and what may need changing .
patching up loopholes
to be sure , critics have long called for better accounting rules , particularly those regarding the type of off - the - balance - sheet financing that enron engaged in .
tim lucas , who heads a fasb task force on emerging issues , said fasb was trying to complete big projects on business combinations and asset retirement obligations this year , before tackling the issue .
lucas said the enron saga may also hold some implications for rules on financial instruments such as derivatives and recording them at fair value .
" we will certainly be aware of this ( enron situation ) and if it sheds some light on an area where we can improve the rules we will try and do that , " he said . " but it ' s not obvious to me yet that it does . "
but apart from raising questions about andersen ' s role , the implications of enron ' s near collapse may well force the entire auditing community to do some serious soul searching to prevent future disasters . " this is a wake up call , " new york university ' s brown said .
copyright ? 2000 dow jones & company , inc . all rights reserved .
canada : update 1 - enron collapse likely kills planned ontario plant .
11 / 30 / 2001
reuters english news service
( c ) reuters limited 2001 .
( recasts with comments from area legislator in paragraph 3 , adds ontario power generation ' s enron exposure paragraph 13 )
toronto , nov 30 ( reuters ) - the collapse of u . s . energy trader enron corp . likely spells the end of plans by its canadian subsidiary to build a c $ 200 million ( $ 130 million ) generating plant in southwestern ontario .
but government officials said on friday that shelving the plant would have little effect on the province ' s plans to open the electricity market to competition next year .
" enron had an option to purchase a parcel of land in st . clair township to build a peaker plant to generate electricity during peak periods , " said caroline dicocco , the member of the provincial legislator for sarnia - lampton .
" the feeling in the community is that this is not going to happen because of severe financial difficulties , " she said .
enron , north america ' s largest energy trader , now on the verge of collapse , planned through enron canada corp . to build a 400 megawatt generating plant near sarnia , ontario . it recently renewed an option on the land in st . clair township and was seeking various regulatory approvals .
however , enron ' s canadian president rob milnthorp told reuters earlier this year , that the firm had delayed construction of the plant until a clear date was set for the province to open up the market to competition .
the company was not available for comment on friday .
" we were aware that enron had considered a plant and those plans have been on hold for some time now , " said mike krizanc , a spokesman for ontario ' s energy ministry .
" the latest events affecting the company have no impact on what ' s happening in ontario in terms of competition and supply that we ' re anticipating , " he said .
ontario , canada ' s most populous province and the nation ' s industrial and economic heartland , is set to unveil plans within the next two months for the deregulated power market . the province has already pushed back its original november 2000 deadline by 18 months .
earlier this year , it said it would open the market by may 2002 .
although the planned enron plant will likely never be built , market experts said the company could sell what infrastructure and development it had completed .
" that is potentially an attractive asset . but any time you ' re selling a half - built house , you know it ' s just not the best way to get value , " said tom adams , executive director at industry watchdog energy probe in toronto .
meanwhile , ontario power generation , the province ' s biggest electricity producer , said in a release that its exposure to enron was less than c $ 100 , 000 and therefore it " does not anticipate any adverse earnings impact " related to its trading activities with the u . s . firm .
( $ 1 = $ 1 . 57 canadian ) .
copyright ? 2000 dow jones & company , inc . all rights reserved .
s & p : credit derivative exposure to enron is $ 6 . 3 billion
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
new york , nov . 30 / prnewswire / - - standard & poor ' s has reviewed a number of credit derivative transactions in which enron appears and found exposure to the company in three different types of these transactions . divided among these deals , direct enron credit exposure potentially could total $ 3 . 3 billion .
" although much attention has been focused on enron in relation to loan exposures , the energy sector , and the commodities markets , it is also a named source of credit risk in many credit derivatives transactions , " said nik khakee , director of standard & poor ' s structured finance derivatives group .
" in addition , enron had an overall derivatives market strategy that included credit derivatives . thus enron is not only a source of credit risk in derivatives transactions , it is a source of risk to derivatives transactions as it could possibly cause termination events in swaps that enron has contracted , " mr . khakee continued .
on a global basis , enron appears in 50 transactions as a reference entity or reference obligation in pooled credit derivative transactions , meaning that enron is a credit exposure . two counterparties transact a swap in which the default of enron , as defined by specified credit event language defined in the swap documentation , would lead to potential loss to one counterparty , the floating - rate payer .
this loss is defined by a valuation process whereby a settlement value for the potential enron exposure is determined . this value can often be the result of a bidding process in the market where dealers are solicited . this bidding process is commonly referred to as cash settlement . alternatively , physical settlement may be selected as the settlement mechanism whereby an enron fixed income instrument is exchanged for the notional value of the enron exposure in the overall pool .
these transactions total $ 79 billion in total notional amount . the potential enron exposure in the deals in aggregate totals $ 3 . 3 billion or 0 . 75 % of total notional exposure . it is important to note that these transactions are primarily investment grade credit derivative collateralized debt obligations in which credit support to rated noteholders typically averages 2 % - 4 % . therefore , a default of enron and low recovery on enron post - default would significantly erode this credit support .
" standard & poor ' s is currently reviewing all transactions in which enron is a named reference entity for possible rating actions , " mr . khakee said .
enron may also appear in this same type of credit derivative transaction but as part of a small pool , rather than a large pool of overall credit exposure . in this case , enron may potentially be the single reference source of credit risk in a credit derivative transaction , irrespective of the credit risk posed by the actual counterparty risk in these transactions ( which is not addressed in the estimated exposures identified above ) .
enron appears as a reference credit in six transactions with potential total notional exposure to enron of $ 2 . 7 billion in these single - name risk or small basket credit derivative transactions .
in addition , in december 2000 , enron began acting as the counterparty in swap transactions without also being the reference entity . as such , its counterparties are vulnerable to potential default by enron as counterparty , even if it is not a reference source of credit exposure in a transaction .
in these transactions , any default by enron as counterparty under the swap contract would initiate a process whereby termination of the swap contract is possible . the nondefaulting counterparty would have the option to replace enron with a new counterparty in the swaps . this could be done on the whole swap notional amount of credit exposure or the portfolio could be carved up into pieces in order to distribute the risk across various counterparties .
whether transferred to one counterparty or many , this process , called assignment , leads to a mark - to - market valuation . that mark is either in favor of enron or the counterparty enron faces . thus , after an enron default , the counterparty could be exposed to a liquidity risk because it would have to make a mark - to - market payment to enron . conversely , if enron has to make a mark - to market payment to the counterparty , the counterparty may not be receiving the payment , especially if insolvency proceedings commence .
enron has secured ratings on three such credit derivative transactions in which a total notional amount of $ 3 billion of credit derivative exposure was traded .
to give some perspective on this number , mr . khakee explained that standard & poor ' s credit derivatives analysts in new york who review pools of credit exposure have reviewed transactions with a total notional amount of $ 23 billion in the year to date . " the notional amount of $ 3 billion relative to enron represents a larger percentage of overall rated credit derivative transactions than would be expected of an entity that is not a traditional broker - dealer , investment bank , or insurer , " he said .
/ contact : nik khakee , + 1 - 212 - 438 - 2473 , or mary ryan , + 1 - 212 - 438 - 2090 , of standard & poor ' s / 16 : 54 est
copyright ? 2000 dow jones & company , inc . all rights reserved .
scope of peer review of andersen audit practice to be expanded
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
chicago , nov . 30 / prnewswire / - - andersen today announced deloitte & touche will expand the scope of its peer review of andersen ' s us accounting and audit practice . the expanded procedures , which have been under consideration for over two weeks , will include , among other things , review procedures in andersen ' s houston office . andersen asked for additional work in light of financial reporting issues at enron corp . deloitte & touche had independently determined it wanted to conduct additional procedures .
" maintaining the trust and confidence of investors is a central tenet of our firm , " said joseph f . berardino , managing partner and chief executive officer . " we invest hundreds of millions of dollars each year to improve our auditing tools and skills so that investors can rely on the andersen signature as a sign of quality financial reporting . we are confident that our system of quality is strong . we are pleased with deloitte & touche ' s decision to undertake additional review procedures . "
the public oversight board ( pob ) is charged with oversight of the accounting profession ' s self - regulatory peer review process in the united states . every three years since 1978 , major accounting firms , under the oversight of the pob , have been engaged to conduct comprehensive reviews of the accounting and audit practices of member firms in the american institute of certified public accountant ' s ( aicpa ) sec practice section ( secps ) .
peer reviews involve an assessment of a firm ' s system of quality control for its accounting and auditing practice under standards established by the secps . this includes , among many other quality measures , an evaluation of a firm ' s audit methodology and tools as well as a review of certain audits in select offices . deloitte & touche ' s work on the 2001 andersen review was nearing completion when enron announced certain financial reporting issues .
the 2001 peer review has been planned and under way for more than eight months . to date , deloitte & touche reviewers and andersen practice review teams have reviewed the system of quality , including audit work , in 30 offices involving more than 40 percent of andersen ' s u . s . audit partners . the reviews conducted by andersen review teams were tested by deloitte & touche , as is customary , and were subject to the oversight of the pob .
" 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 , " said berardino . he noted that andersen was the first major firm to engage another firm to review its system of quality globally - - in 1977 .
andersen is a global leader in professional services . it provides integrated solutions that draw on diverse and deep competencies in assurance , tax , consulting , corporate finance , and in some countries , legal services . andersen employs 85 , 000 people in 84 countries . andersen is frequently rated among the best places to work by leading publications around the world . it is also consistently ranked first in client satisfaction in independent surveys . andersen has enjoyed uninterrupted growth since its founding in 1913 . its 2001 revenues totaled us $ 9 . 3 billion . andersen refers to the brand identity adopted by member firms of the andersen global client service network . learn more at www . andersen . com .
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/ contact : dave tabolt of andersen , + 1 - 312 - 931 - 9000 , or david . w . tabolt @ us . andersen . com / 17 : 07 est
copyright ? 2000 dow jones & company , inc . all rights reserved .
fitch on enron : the coming creditor battle over enron ' s assets
11 / 30 / 2001
business wire
( copyright ( c ) 2001 , business wire )
new york - - ( business wire ) - - nov . 30 , 2001 - - with total assets of $ 62 . 8 billion at sept . 30 , 2001 , enron would become the biggest bankruptcy in united states history if it files for bankruptcy as expected . fitch anticipates a lengthy and contentious battle over enron ' s assets . some of the key issues for creditors are :
what is the enterprise value ?
there are several issues that cloud an enterprise valuation of enron . first and foremost is the uncertain value remaining in enron ' s wholesale trading business . approximately 75 % of enron ' s total 2000 income before interest , minority interests and taxes was generated by the wholesale services segment , which consists primarily of the energy trading business . based on recent refusals of enron ' s energy trading partners to accept the company as a counter - party and exacerbated by implementation of trading restrictions on the company by the new york mercantile exchange , fitch believes significant doubt has been cast upon enron ' s ability to continue to operate this business at its previous scale . further , previous valuations of bankrupt trading businesses have been quite low . therefore , fitch believes it would be prudent to assign a very conservative valuation to this segment in a recovery analysis . secondly , due to the ongoing securities and exchange commission investigation of enron ' s accounting , and previous restatements of earnings , there exists uncertainty over the accuracy of historical earnings reports . finally , enron ' s retail energy segment is closely integrated with the company ' s wholesale operations for energy supply . if the wholesale operations remain shutdown , the future cash flow generation ability of the retail segment may be materially impaired .
how will the value of enron ' s assets be allocated in a bankruptcy ?
fitch has conducted a preliminary analysis of recovery prospects for various creditor classes . enron ' s pipeline business has historically been a steady source of cash flow generation . a market comparable method of valuation for the transportation segment results in strong recovery prospects for secured creditors at northern natural and transwestern . fitch estimates there would be roughly $ 1 billion of residual value from the pipelines following the satisfaction of their secured and unsecured claims and dynegy ' s claim . as part of the merger agreement with enron , dynegy injected $ 1 . 5 billion into enron in exchange for preferred stock in enron ' s largest pipeline , northern natural gas , which can be converted into ownership of the pipeline . dynegy has exercised this option . it is noted that as part of its investment in the preferred stock , dynegy negotiated the right to block a bankruptcy filing at this subsidiary .
enron has various other assets that could be monetized to satisfy unsecured creditor claims . enron has an agreement to sell its portland general electric subsidiary for anticipated net proceeds of about $ 1 . 8 billion in cash or cash equivalents in 2002 . in addition , enron has contracted to sell $ 800 million of merchant assets which is expected to close before year end , subject to execution risks including regulatory and transfer risks . the net proceeds that could be realized from cash on hand , inventories , and various other monetizable assets are difficult to estimate . moreover , the full extent to which the company ' s assets have been pledged is uncertain .
the outstanding amount of senior unsecured debt is currently estimated to be about $ 11 billion , excluding possible liabilities arising from trust structures such as marlin and osprey . additionally , other general unsecured claims in a bankruptcy would include customer deposits , minority interests , project and structured finance make whole obligations , as well as an unknown amount of amount of exposure to is shareholders , employees and others relating to the spate of recent litigation against enron . the amount of these other general unsecured claims can not be determined at this time .
despite the fluidity of the situation , fitch ' s preliminary view is that unsecured creditors would realize recoveries in the 20 - 40 % range . this opinion considers the deterioration in the value of the wholesale trading business , the pledge of flagship assets to secured creditors , the uncertain cashflow generation prospects of the retail segment in light of the wholesale business situation , the opaque and uncertain accounting and off balance sheet liability issues , and other unexpected liabilities .
will enron be able to continue to operate as a going concern or seek to liquidate assets ?
enron would require a sizable debtor in possession facility to fund ongoing operations and induce counter - parties to resume business with enron . fitch believes it is uncertain whether enron has adequate unencumbered or over - collateralized assets to obtain a dip large enough to enable the resumption of wholesale operations .
what is the situation for secured creditors to marlin water trust ii and osprey trust ?
the ratings of marlin ' s $ 915 million senior secured notes and osprey ' s $ 2 . 4 billion senior secured notes rely on support of enron . a liquidation of the underlying assets is the primary source of repayment . a shortfall in liquidation proceeds would become a claim against enron , which may be subject to subordination to the claims of other creditors in a bankruptcy .
contact : fitch , new york sharon bonelli , 212 / 908 - 0581 or robert grossman , 212 / 908 - 0535 or ralph pellecchia , 212 / 908 - 0586 or glen grablesky , 212 / 908 - 0577 or james jockle ( media relations ) , 212 / 908 - 0547
15 : 56 est november 30 , 2001
copyright ? 2000 dow jones & company , inc . all rights reserved .
s & p places sutton bridge power ' s ' bbb ' ratings on creditwatch negative
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
new york , nov . 30 / prnewswire / - - standard & poor ' s today placed its triple - ' b ' rating on sutton bridge power ' s ( sbp ) guaranteed gbpl 95 million ( us $ 310 million ) and us $ 150 million secured bonds , issued by sutton bridge power financing ltd . , on creditwatch with negative implications . the creditwatch placement reflects the potential for deterioration in the credit quality of debt - service payments if the existing 25 - year swap with enron corp . is not fundamentally restructured .
the rating action results from the downgrade of enron corp . ' s corporate credit rating to single - ' b ' - minus by standard & poor ' s . enron , through enron capital & trade resources corp . , is a counterparty in the 25 - year ( until 2022 ) u . k . pound / u . s . dollar swap with sutton bridge financing . a possible restructuring or cancellation of the swap may expose bondholders to currency exchange risk .
standard & poor ' s will be shortly meeting with london electricity plc ' s ( le ) management ( which owns the sutton bridge power plant ) to discuss , among other things , le ' s options for hedging the currency exposure at sbp that will preserve sbp ' s credit strength .
/ contact : jean - francois veron of standard & poor ' s , + 33 - 1 - 4420 - 7316 / 15 : 37 est
copyright ? 2000 dow jones & company , inc . all rights reserved .
westport terminates enron contracts
11 / 30 / 2001
pr newswire
( copyright ( c ) 2001 , pr newswire )
denver , nov . 30 / prnewswire / - - westport resources corporation ( nyse : wrc ) announced today it has terminated its commodity sales and hedging contracts with enron north america corp . and certain of its affiliates . westport exercised its rights pursuant to the early termination provisions of such contracts . based on current estimates and after applying all estimated set - offs , westport believes that it owes enron north america corp . and its affiliates approximately $ 800 , 000 under these contracts . in addition , westport has commodity sales contracts with eott energy partners , l . p . and ena upstream company llc , affiliates of enron corp . westport believes that its exposure under these contracts is less than $ 4 . 0 million . ( photo : http : / / www . newscom . com / cgi - bin / prnh / 20010424 / wrclogo )
contact information : lon mccain or jonathan bloomfield at ( 303 ) 573 - 5404 .
forward - looking statements
this material includes " forward - looking statements " within the meaning of section 27 a of the securities act of 1933 , as amended , and section 21 e of the securities exchange act of 1934 , as amended . forward - looking statements include estimates , plans , expectations , opinions , forecasts , projections , guidance or other statements that are not statements of fact , including but not limited to the amount of any potential exposure to enron . although the company believes that the expectations reflected in such forward - looking statements are reasonable , it can give no assurance that such expectations will prove to have been correct . there are many factors that could cause forward - looking statements not to be correct , including differences in contractual interpretation , future volatility in oil and gas prices , and other uncertainties related to calculating market values of the company ' s contracts with enron , as well as the risks and uncertainties inherent in the company ' s business set forth in the filings of the company with the securities and exchange commission . the company does not undertake any obligation to update any forward - looking statements contained in this material .
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/ contact : lon mccain or jonathan bloomfield of westport resources corporation , + 1 - 303 - 573 - 5404 / 14 : 46 est
copyright ? 2000 dow jones & company , inc . all rights reserved .