enron mentions some analysts fear sec enron probe , now formal , may widen
dow jones energy service - 11 / 01 / 01
usa : s gas up
dow jones energy service - 11 / 01 / 01
competing exchanges gain slim advantage from enron woes
dow jones energy service - 11 / 01 / 01
usa : update 2 - enron ' s $ 1 billion credit line a mixed blessing .
reuters english news service - 11 / 01 / 01
usa : light profit - taking pushes nymex natgas down midday .
reuters english news service - 11 / 01 / 01
enron corp . ' s credit rating lowered to ' bbb ' by s & p ( updatel )
bloomberg - 11 / 01 / 01
enron gets $ 1 bln loan to bolster cash , credit rating ( update 8 )
bloomberg - 11 / 01 / 01
enron falls after sec steps up probe
cbsmarketwatch . com , 11 / 01 / 01
some analysts fear sec enron probe , now formal , may widen
by jason leopold and jessica berthold
of dow jones newswires
11 / 01 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
los angeles - ( dow jones ) - enron corp . ' s ( ene ) disclosure of a formal inquiry into partnerships with its former chief financial officer left some wall street analysts concerned thursday that the probe could spill over into the company ' s core business , placing further pressure on the company ' s stock .
other analysts said they doubted the investigation by the u . s . securities and exchange commission would spread , but added that the uncertainty was weighing on enron ' s share price .
" it ' s a huge cloud of uncertainty , " said merrill lynch analyst steve fleishman , who wouldn ' t speculate about the breadth of the investigation .
enron said late wednesday that the sec has elevated to a formal investigation its inquiry into " certain of the matters that were the subject of recent press reports . " the sec , as a matter of policy , declined to comment on the status or scope of any inquiry .
enron spokeswoman karen denne said it was her understanding that the formal investigation , like the informal inquiry , would be limited to the partnerships . enron is fully cooperating with the sec , she said .
robert christensen , an analyst with fac equities in new york , said he is concerned the sec could use its subpoena power to start probing enron ' s natural gas and trading practices .
" i ' m hoping that it ' s localized to the partnership with andy fastow and deals truly with the partnership as opposed to wandering into the basic interest of enron , which is wholesale trading , " christensen said .
enron and its former chief financial officer , andrew fastow , set up complicated vehicles to invest in and hedge enron assets . last month , enron disclosed a $ 1 . 2 billion writedown of shareholder equity in the third quarter related to transactions it had carried out with those entities , setting off a 65 % drop in the value of the company ' s stock in the past two weeks .
investors are already pricing in the possibility the sec investigation will reveal more bad news , christensen said .
" if it is limited to the partnership activities , which caused $ 1 . 2 billion to evaporate on the equity line , that would be well received , " he said . " i think the stock price now is reflecting the concerns that there is something greater behind the wood pile of all these partnerships . "
thursday afternoon , enron ' s shares were down $ 1 . 90 , or 14 % , at $ 12 . the shares have lost two - thirds of their value over the past two weeks . gary hoves , an analyst with argus research in new york , said enron ' s shares will continue to trade lower on news of the sec inquiry .
" this is a serious situation , especially since the investigation moved from forth worth to washington d . c . , " hoves said . " it ' s hard to say , but my guess is this will be an open - book investigation and they will go into a whole lot of stuff beyond the partnership . "
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : s & p cuts enron ratings , may cut ratings again .
11 / 01 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 1 ( reuters ) - standard & poor ' s on thursday cut its long - and short - term ratings for embattled energy trader enron corp . , and warned it may cut the ratings again because of " uncertainties " surrounding the company and the possibility of further problems in the capital markets .
enron has said it faces a probe by the securities and exchange commission .
s & p cut the houston - based company ' s senior unsecured debt to " bbb , " two notches above junk status , from " bbb - plus , " and its commercial paper to " a - 3 " from " a - 2 . " on monday , moody ' s cut enron ' s long - term debt to " baa 2 , " also two notches above junk , and warned it may cut that rating and enron ' s " prime - 2 " commercial paper rating .
downgrades could make it tougher for enron to issue debt and run its day - to - day business as fellow marketers and traders demand more collateral . if the ratings fall to junk , enron could be forced to issue more shares .
enron shares closed thursday on the new york stock exchange at $ 11 . 99 , down $ 1 . 91 , or 13 . 7 percent . they have fallen 65 percent since october 16 , and hit a nine - year low on tuesday .
copyright ? 2000 dow jones & company , inc . all rights reserved .
key north american power , gas firms stand by their enron
by mark golden
of dow jones newswires
11 / 01 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones 201 - 938 - 4604 ; mark . golden @ dowjones . com
( kristen mcnamara in new york and john edmiston in houston contributed to this article . )
copyright ? 2000 dow jones gas up
by mark golden
of dow jones newswires
11 / 01 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones aquila energy ( ila ) ; bp amoco plc ( bp ) ; deutshe bank ag ( g . dbk ) ; el paso corp . ( epg ) ; goldman sachs group ( gs ) ; morgan stanley dean witter reliant energy ( rei ) ; royal dutch / shell group ( rd ) ; societe generale sa ( f . sgf ) unit sg investment banking ; mirant corp . ( mir ) and totalfina elf sa ( tot ) .
- by mark golden , dow jones newswires ; 201 - 938 - 4604 ; mark . golden @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
competing exchanges gain slim advantage from enron woes
by stephen parker
of dow jones newswires
11 / 01 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - competing online energy marketplaces may see some gains as enron corp . ( ene ) struggles with concerns about its credit .
but energy analysts and traders say the houston - based giant ' s problems aren ' t yet serious enough to outweigh the liquidity it provides and expect its internet - based trading system enrononline to retain its leading position in the electricity and natural gas markets .
" there are so many products on eol that don ' t have an exchange behind them , " said charlie sanchez , energy markets manager at gelber 201 - 938 - 4426 ; stephen . parker @ dowjones . com
( kristen mcnamara , mark golden and jon kamp contributed to this article . )
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : update 2 - enron ' s $ 1 billion credit line a mixed blessing .
by janet mcgurty
11 / 01 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 1 ( reuters ) - enron corp . on thursday said it gained $ 1 billion in secured credit lines to help support day - to - day trading operations and bolster investor confidence in the beleaguered energy trading giant .
but analysts said the credit is a mixed blessing for the former wall street high flyer now facing a full - scale probe by u . s . regulators into questionable financial dealings . almost daily revelations have rocked enron in the past two weeks and sent its stock price plummeting more than 60 percent .
" ultimate outcome and underlying fundamentals aside , we believe significant pressure and uncertainty will remain on enron until the investigation concludes , " said donato eassey of merrill lynch , who lowered his rating on enron ' s stock to " neutral " from " accumulate " earlier on thursday .
secured credit - in enron ' s case credit lines backed by gas and pipeline assets - often is reserved for companies with " junk " credit ratings , though many analysts saw the credit as a positive for enron .
shares of enron continued their freefall , despite the company ' s announcement of new credit lines , after the securities and exchange commission said late wednesday it would make an informal inquiry into the company a full - scale investigation .
enron lost $ 1 . 35 , or 9 . 7 percent , to $ 12 . 55 , resuming a tailspin that began oct . 16 when the company announced it was taking $ 1 . 01 billion in charges for ill - fated investments .
enron said the investment banking arm of j . p . morgan chase & co . and salomon smith barney inc . , the brokerage and investment banking unit of citigroup inc . , agreed to provide $ 1 billion in credit lines backed by enron ' s northern natural gas co . and transwestern pipeline co . assets .
' a positive step '
analysts said it is difficult to gauge the downside of the sec ' s probe of enron , which began as a request for information and became a full - fledged investigation , which provides regulators the ability to subpoena company documents .
some analysts said the general economic environment after sept . 11 has tightened lending restrictions and the secured issue is not ominous .
" it is a positive step . they will be surrounded by uncertainty until the sec probe is finalized and then they can go about their business . assuming everything is above board , and they just come out with a conflict of interest , the sec probe will probably result in a fine that will be a significant slap on the wrist . " said raymond moore of weatherly securities .
other see it as a possible buying opportunity .
" if the stock price gets to low - double digits , we might change our rating , " said mike heim , analyst with a . g . edwards who rates enron as " hold / speculative . "
" our decision not to raise our rating when shares dipped below $ 12 reflects concerns that enron ' s problems may be affecting their trading operations , "
enron said the credit lines will be used to supplement short - term liquidity , refinance maturing obligations and augment the $ 1 billion the company has of cash on hand . the commitments are subject to customary terms and conditions , including final due diligence , the company said .
" this is yet another step in our efforts to enhance market and investor confidence , " said jeffrey mcmahon , enron ' s new chief financial officer . " we are moving aggressively to strengthen our balance sheet and maintain our investment grade credit rating . "
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : light profit - taking pushes nymex natgas down midday .
11 / 01 / 2001
reuters english news service
( c ) reuters limited 2001 .
san francisco , nov 1 ( reuters ) - nymex hub gas was a touch lower in thin trade midday thursday , pressured by gentle profit - taking , market sources said .
at 12 : 30 p . m . est , december was down 2 . 1 cents at $ 3 . 27 per million british thermal units ( mmbtu ) after changing hands between $ 3 . 19 - 3 . 31 . january was 2 . 8 cents lower at $ 3 . 40 . most other months were off between 3 . 3 cents and 5 . 8 cents .
" this is just taking profits . the weather is spotty , and the only thing that is going to sustain this uptrend , which i think is already overdone , is an early and sustained winter , " one northeast trader said , adding that ample gas supplies would also limit the upside .
other traders said they believed part of the recent run - up in gas prices was due to a steady spate of short - covering in recent days by enron , whose share price has been hammered after a series of disclosures about off - balance - sheet deals with partnerships run by its former chief financial officer .
moody ' s investors service cut enron ' s credit rating on monday to two notches above junk status and warned it could lower the rating on the company ' s senior unsecured debt even further , as well as cut enron ' s short - term debt status .
enron is one of largest traders of wholesale natural gas and electricity in the united states .
many dealers said they were a bit surprised by the larger - than - expected build in weekly aga inventory data released wednesday .
aga data showed u . s . gas stocks rose last week by 23 bcf , below reuters survey estimates for a 35 - 40 bcf build , and well - below the year - ago gain of 70 bcf and the five - year average injection for this week of 35 bcf .
total inventories of 3 . 090 tcf are still 378 bcf , or 14 percent , above last year and 237 bcf above the five year average .
traders said some in the producing region may have been selling cheaper baseload gas into the spot market to cash in on the steep premium to index .
storage now stands at 94 percent full and could still climb to a record 3 . 13 tcf this week , the last week of the stock - building season , traders said .
despite wednesday ' s late spike , many traders remained skeptical of the upside , citing concerns about record levels of gas in inventory for winter and sagging demand due to a slowing u . s . economy .
but some said recent talk about further terror attacks in the u . s . created uncertainty in the market that could limit the selling .
in terms of heating degree days ( hdds ) , the national oceanic and atmospheric administration ( noaa ) said it expected 87 hdds this week , or 2 below normal . noaa also forecasted 5 cdds this week , which is 1 below normal .
the national weather service 6 - 10 day forecast released wednesday called for above normal temperatures for most of the nation , except in the east and parts of the west , where seasonal or below seasonal readings are expected .
noaa recently issued a winter weather outlook calling for colder - than - normal temperatures for northeast , upper midwest and plains states , with the possibility of heavy snow in the midwest and along the east coast .
while chart watchers said the technical picture turned bullish last week when the december gap to $ 3 . 252 was filled and the down trendline from april was broken , most agreed the upside may be limited near - term by milder late - week weather forecasts .
they now pegged december resistance at wednesday ' s high of $ 3 . 44 , with further selling expected at $ 3 . 76 and then at the august high of $ 4 . 10 .
psychological support was seen in the $ 3 . 00 area , with support also at last week ' s low of $ 2 . 77 and at the trendline in the low - $ 2 . 70 s . further buying was expected at $ 2 . 66 - 2 . 67 and then in the $ 2 . 60 area . the october low was $ 2 . 535 . the contract low was $ 2 . 415 .
in the cash today , henry hub swing quotes on average slipped about 7 cents to the $ 3 . 00 area . midwest pipes were down 5 to 10 cents to the mid - $ 2 . 80 s . in the west , gas at waha hub in west texas was about 10 cents lower in the mid - $ 2 . 80 s .
swing gas on transco at the new york city gate skidded about 20 cents to the mid - $ 3 . 30 s , while chicago was around 10 to 15 cents lower near $ 3 . 10 .
nymex said an estimated 16 , 414 henry hub contracts traded at 11 : 40 a . m . est . henry hub open interest on oct . 31 eased 129 lots to 457 , 861 .
nymex has been holding abbreviated floor trading sessions following the sept . 11 attacks on the world trade center .
nymex gas open outcry trade will run from 10 : 00 a . m . to 2 : 30 p . m . , with the internet - based access session held from 3 : 15 p . m . to 9 : 00 a . m . , through dec . 31 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron corp . ' s credit rating lowered to ` bbb ' by s & p ( updatel )
2001 - 11 - 01 17 : 04 ( new york )
( adds additional information about rating cut beginning in
first paragraph . )
new york , nov . 1 ( bloomberg ) - - enron corp . had its long - term
credit rating cut to ` ` bbb , ' ' the second - lowest investment grade ,
from ` ` bbb + ' ' by standard & poor ' s . the energy trader ' s short - term
debt rating was cut to ` ` a - 3 , ' ' the lowest investment grade , from
` ` a - 2 . ' '
s & p said further cuts are possible . the rating company said
in a report that it doesn ' t think enron ' s plan to repair its
balance sheet through asset sales and other means will be able to
restore enron ' s credit quality to the ` ` bbb + ' ' level it had since
1995 .
it said enron ' s diminishing financial flexibility stems from
its ` ` inability to calm investors who are unsure ' ' about the
strength of enron ' s core business and plan to restore its credit
profile . s & p said enron has ` ` adequate ' ' liquidity to see it
through ` ` the current period of uncertainty . ' '
the ratings of enron ' s subsidiaries , transwestern pipeline
co . and northern natural gas . , were lowered to ` ` bbb ' ' from ` ` a - ' '
to bring them in line with the parent company ratings .
enron has $ 15 . 8 billion of debt outstanding , according to
bloomberg data .
enron gets $ 1 bln loan to bolster cash , credit rating ( update 8 )
2001 - 11 - 01 16 : 59 ( new york )
enron gets $ 1 bln loan to bolster cash , credit rating ( update 8 )
( adds s & p credit rating downgrade in fourth paragraph . )
houston , nov . 1 ( bloomberg ) - - enron corp . , the largest
energy trader , received a $ 1 billion loan from j . p . morgan chase &
co . and salomon smith barney inc . after agreeing to use the
company ' s natural - gas pipelines as collateral .
enron shares fell 14 percent a day after the u . s . securities
and exchange commission began formally investigating partnerships
run by its former chief financial officer . pledging the pipelines
signals enron ' s desperation to convince shareholders and trading
partners that it ' s creditworthy , investors said .
` ` it ' s not reassuring , it ' s worrisome , ' ' said donald coxe ,
manager of the harris insight equity fund , which owns about 78 , 000
enron shares . ` ` if they had to secure the loan , obviously the
lenders don ' t think they can rely on enron ' s financial
statements . ' '
after u . s . markets closed , standard & poor ' s cut enron ' s long -
term credit rating to ` ` bbb , ' ' the second - lowest investment grade ,
from ` ` bbb + . ' ' the energy trader ' s short - term debt rating was cut
to ` ` a - 3 , ' ' the lowest investment grade , from ` ` a - 2 . ' '
the sec is investigating partnerships run by former cfo
andrew fastow that bought and sold enron shares and assets . those
trades cost enron $ 35 million and $ 1 . 2 billion in lost shareholder
equity . questions about enron ' s dealings with the partnerships
have shut it out of commercial - paper markets , where most large
corporations go to find low - interest , short - term debt .
last friday , enron tapped a $ 3 billion credit line to pay off
$ 2 . 2 billion in commercial paper it has outstanding . proceeds from
the $ 1 billion secured loan will go for debt payments and to
supplement cash reserves , enron said .
business with enron
to get the $ 1 billion loan , enron pledged assets of its
northern natural gas co . and transwestern pipeline co . , which own
gas pipeline systems that combined are about 19 , 000 miles long and
can deliver as much as 6 billion cubic feet of gas a day .
enron , based in houston , got its start as a natural gas -
pipeline operator . over the past decade , the company has shed
assets such as pipelines and power plants and focused on trading
electricity , gas , wood pulp and other commodities .
enron now accounts for about a quarter of u . s . power and gas
trades . the company still has about 25 , 000 miles of gas pipeline .
mortgaging those lines is ` ` maybe not such a good signal , ' '
said roger hamilton , who manages john hancock value funds , which
owns 600 , 000 enron shares . ` ` it shows they can ' t convince banks
with anything but secured assets . ' '
shares of enron fell $ 1 . 91 to $ 11 . 99 . earlier , they dropped
to $ 11 . 70 . the stock has fallen 86 percent this year .
enron ' s 6 . 4 percent coupon notes due in 2006 fell about 3
cents today to be bid at 74 cents on the dollar and offered at 77
cents , traders said . until last week , the notes were trading near
par value .
credit rating
enron must have investment - grade credit to borrow enough to
settle its transactions daily . energy companies including exelon
corp . and northeast utilities have restricted business with enron
as the company sought new sources of credit .
on monday , moody ' s investors service lowered enron ' s long -
term credit rating to ` ` baa 2 ' ' from ` ` baal , ' ' two notches above
junk status . it also placed the company ' s ` ` p - 2 ' ' rating for
commercial paper on review for possible downgrade .
standard & poor ' s said in downgrading enron ' s credit rating
today that the company has enough liquidity to see it through the
` ` current period of uncertainty . ' ' still , s & p said , enron ' s
` ` financial flexibility has continued to diminish ' ' because of its
` ` inability to calm investors that are unsure about the strength
of enron ' s core energy marketing business . ' '
falling below investment grade would trigger early repayment
terms for affiliated companies such as the ones created by fastow .
a lower credit rating also reduces the amount of cash that enron
can raise to back its trading business .
investor confidence
the financing is to ` ` enhance market and investor
confidence , ' ' enron chief financial officer jeffrey mcmahon said
in a statement .
enron can borrow another $ 200 million by bringing other banks
into the loan , spokeswoman karen denne said . ` ` we don ' t have any
plans to do so at this point , ' ' she said .
` ` we are moving aggressively to strengthen our balance sheet
and maintain our investment grade credit rating , ' ' mcmahon said .
mcmahon , head of enron ' s industrial markets group , was named
cfo last week . fastow was ousted in an attempt to restore investor
confidence .
` ` it seems until we know more about the sec investigation ,
it ' s going to be a difficult time for the stock , ' ' said tara
gately , an energy analyst at loomis sayles & co . , which sold most
of its enron shares early last year .
j . p . morgan is advising enron on the sale of part of its
azurix north america water business to american water works inc .
for $ 148 . 8 million in cash and assumed debt . salomon smith barney
is the investment - banking arm of citigroup inc .
enron falls after sec steps up probe
cbsmarketwatch . com , 11 / 01 / 01
houston ( cbs . mw ) - - enron shares fell for the 11 th time in 12 sessions thursday after the energy merchant said the securities and exchange commission launched a formal investigation into two of its limited partnerships .
late wednesday , the nation ' s largest natural gas and power trader said it retained william mclucas , a partner in the washington , d . c . - based firm of wilmer , cutler & pickering and a former sec enforcement chief , as its counsel .
mclucas works at the same firm as stephen cutler once did . the sec named cutler its enforcement division chief on oct . 25 , giving him oversight of the program in d . c . and in 11 regional and district offices across the country . according to a sec press release , cutler specialized in " securities enforcement and litigation " while a partner at wilmer , cutler & pickering .
howard meyers , a partner in the new york city - based law firm of meyers & heim and a former staff attorney in the sec ' s northeast regional office , said the mclucas - cutler connection could give the appearance of a conflict of interest .
" whether there is or not , i don ' t know , " he said . " if there isn ' t an actual conflict , you don ' t want to give the appearance of one . the sec is a substantial regulatory agency that the public has to have confidence in . "
as new enforcement chief , cutler has a duty to remove himself from any potential conflicts , meyers said .
" generally speaking , i like to see someone a little more removed from any preexisting relationships , " he said .
no conflict , enron says
karen denne , an enron spokesperson , said enron is " satisfied that wilmer , cutler has no conflict , and the sec can speak for itself on that issue . " she said cutler left wilmer , cutler three years ago and " severed all contacts . "
" as you know , the commission conducts its investigations on a non - public basis and thus we cannot confirm or deny the existence of any investigation that may or may not be taking place , " said michael robinson , an sec spokesperson . " applicable government - wide ethics rules required that mr . cutler recuse himself from all matters involving wilmer , cutler for one year following his departure from the firm , and he did so . "
additionally , robinson said : " the sec ' s ethics office has confirmed that mr . cutler ' s involvement in matters in which wilmer , cutler plays a role is entirely consistent with applicable government - wide conflict rules , as well as ethics rules applicable to all attorneys . "
enron shares closed at $ 11 . 99 , down $ 1 . 91 , or about 14 percent . by session ' s end , 30 million shares had changed hands .
enron also said it had formed a special committee , headed by university of texas law school dean william powers , to deal with the sec .
john gavin , president of plymouth , minn . - based sec insight , said that despite public assurances to the contrary , enron ' s announcements wednesday make it apparent that the company has " decided it is no longer in its interest to cooperate with the sec . "
" as a formal investigation , the sec must now use its subpoena power to compel the production of documents and witnesses . the assembly of a high - powered legal team is further evidence this company is digging in for a fight , " he said .
initially , the sec decided to pursue an informal inquiry into related - party transactions involving the company . now , the sec is making this a formal investigation .
as such , the agency would investigate whether the company disclosed all that was required with regard to the related - party transactions , meyers said , adding that the most important factor in the case ' s transition to a formal investigation is that the sec can exercise subpoena power .
disclosure is highly important because it can determine whether an investor buys stock in a company or not , he added . after the existence of the two limited partnerships came to light , the stock plunged .
" the sec might take a look at the auditors of enron , and certainly the sec can take action against the officers of the company , " meyers said . " any officer that signs off on 10 - qs or 10 - ks could be liable . "
merrill lynch analyst donato eassey downgraded enron thursday to " neutral " from " accumulate / buy , " citing the uncertainty about the outcome of the sec investigation .
" we believe the timing and directional uncertainty of this new development will at best cap enron ' s stock price in the mid - teen ' s while increasing overall volatility , " eassey wrote in a note to clients . the investigation will way on the stock until it concludes . " timing is uncertain , but could feasibly take months . "
secures $ 1 billion in credit
enron also said it secured $ 1 billion in additional financing from j . p . morgan and salomon smith barney .
the new credit , supported by assets of enron ' s northern natural gas co . and transwestern pipeline , will help enron shore up its liquidity position .
" we are moving aggressively to strengthen our balance sheet and maintain our investment - grade rating , " said chief financial officer jeffrey mcmahon , in a statement .
lisa sanders is a dallas - based reporter for cbs . marketwatch . com .
enron mentions
some analysts fear sec enron probe , now formal , may widen
dow jones energy service - 11 / 01 / 01
usa : s gas up
dow jones energy service - 11 / 01 / 01
competing exchanges gain slim advantage from enron woes
dow jones energy service - 11 / 01 / 01
usa : update 2 - enron ' s $ 1 billion credit line a mixed blessing .
reuters english news service - 11 / 01 / 01
usa : light profit - taking pushes nymex natgas down midday .
reuters english news service - 11 / 01 / 01
enron corp . ' s credit rating lowered to ' bbb ' by s & p ( updatel )
bloomberg - 11 / 01 / 01
enron gets $ 1 bln loan to bolster cash , credit rating ( update 8 )
bloomberg - 11 / 01 / 01
enron falls after sec steps up probe
cbsmarketwatch . com , 11 / 01 / 01
some analysts fear sec enron probe , now formal , may widen
by jason leopold and jessica berthold
of dow jones newswires
11 / 01 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
los angeles - ( dow jones ) - enron corp . ' s ( ene ) disclosure of a formal inquiry into partnerships with its former chief financial officer left some wall street analysts concerned thursday that the probe could spill over into the company ' s core business , placing further pressure on the company ' s stock .
other analysts said they doubted the investigation by the u . s . securities and exchange commission would spread , but added that the uncertainty was weighing on enron ' s share price .
" it ' s a huge cloud of uncertainty , " said merrill lynch analyst steve fleishman , who wouldn ' t speculate about the breadth of the investigation .
enron said late wednesday that the sec has elevated to a formal investigation its inquiry into " certain of the matters that were the subject of recent press reports . " the sec , as a matter of policy , declined to comment on the status or scope of any inquiry .
enron spokeswoman karen denne said it was her understanding that the formal investigation , like the informal inquiry , would be limited to the partnerships . enron is fully cooperating with the sec , she said .
robert christensen , an analyst with fac equities in new york , said he is concerned the sec could use its subpoena power to start probing enron ' s natural gas and trading practices .
" i ' m hoping that it ' s localized to the partnership with andy fastow and deals truly with the partnership as opposed to wandering into the basic interest of enron , which is wholesale trading , " christensen said .
enron and its former chief financial officer , andrew fastow , set up complicated vehicles to invest in and hedge enron assets . last month , enron disclosed a $ 1 . 2 billion writedown of shareholder equity in the third quarter related to transactions it had carried out with those entities , setting off a 65 % drop in the value of the company ' s stock in the past two weeks .
investors are already pricing in the possibility the sec investigation will reveal more bad news , christensen said .
" if it is limited to the partnership activities , which caused $ 1 . 2 billion to evaporate on the equity line , that would be well received , " he said . " i think the stock price now is reflecting the concerns that there is something greater behind the wood pile of all these partnerships . "
thursday afternoon , enron ' s shares were down $ 1 . 90 , or 14 % , at $ 12 . the shares have lost two - thirds of their value over the past two weeks . gary hoves , an analyst with argus research in new york , said enron ' s shares will continue to trade lower on news of the sec inquiry .
" this is a serious situation , especially since the investigation moved from forth worth to washington d . c . , " hoves said . " it ' s hard to say , but my guess is this will be an open - book investigation and they will go into a whole lot of stuff beyond the partnership . "
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : s & p cuts enron ratings , may cut ratings again .
11 / 01 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 1 ( reuters ) - standard & poor ' s on thursday cut its long - and short - term ratings for embattled energy trader enron corp . , and warned it may cut the ratings again because of " uncertainties " surrounding the company and the possibility of further problems in the capital markets .
enron has said it faces a probe by the securities and exchange commission .
s & p cut the houston - based company ' s senior unsecured debt to " bbb , " two notches above junk status , from " bbb - plus , " and its commercial paper to " a - 3 " from " a - 2 . " on monday , moody ' s cut enron ' s long - term debt to " baa 2 , " also two notches above junk , and warned it may cut that rating and enron ' s " prime - 2 " commercial paper rating .
downgrades could make it tougher for enron to issue debt and run its day - to - day business as fellow marketers and traders demand more collateral . if the ratings fall to junk , enron could be forced to issue more shares .
enron shares closed thursday on the new york stock exchange at $ 11 . 99 , down $ 1 . 91 , or 13 . 7 percent . they have fallen 65 percent since october 16 , and hit a nine - year low on tuesday .
copyright ? 2000 dow jones & company , inc . all rights reserved .
key north american power , gas firms stand by their enron
by mark golden
of dow jones newswires
11 / 01 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones 201 - 938 - 4604 ; mark . golden @ dowjones . com
( kristen mcnamara in new york and john edmiston in houston contributed to this article . )
copyright ? 2000 dow jones gas up
by mark golden
of dow jones newswires
11 / 01 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones aquila energy ( ila ) ; bp amoco plc ( bp ) ; deutshe bank ag ( g . dbk ) ; el paso corp . ( epg ) ; goldman sachs group ( gs ) ; morgan stanley dean witter reliant energy ( rei ) ; royal dutch / shell group ( rd ) ; societe generale sa ( f . sgf ) unit sg investment banking ; mirant corp . ( mir ) and totalfina elf sa ( tot ) .
- by mark golden , dow jones newswires ; 201 - 938 - 4604 ; mark . golden @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
competing exchanges gain slim advantage from enron woes
by stephen parker
of dow jones newswires
11 / 01 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - competing online energy marketplaces may see some gains as enron corp . ( ene ) struggles with concerns about its credit .
but energy analysts and traders say the houston - based giant ' s problems aren ' t yet serious enough to outweigh the liquidity it provides and expect its internet - based trading system enrononline to retain its leading position in the electricity and natural gas markets .
" there are so many products on eol that don ' t have an exchange behind them , " said charlie sanchez , energy markets manager at gelber 201 - 938 - 4426 ; stephen . parker @ dowjones . com
( kristen mcnamara , mark golden and jon kamp contributed to this article . )
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : update 2 - enron ' s $ 1 billion credit line a mixed blessing .
by janet mcgurty
11 / 01 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 1 ( reuters ) - enron corp . on thursday said it gained $ 1 billion in secured credit lines to help support day - to - day trading operations and bolster investor confidence in the beleaguered energy trading giant .
but analysts said the credit is a mixed blessing for the former wall street high flyer now facing a full - scale probe by u . s . regulators into questionable financial dealings . almost daily revelations have rocked enron in the past two weeks and sent its stock price plummeting more than 60 percent .
" ultimate outcome and underlying fundamentals aside , we believe significant pressure and uncertainty will remain on enron until the investigation concludes , " said donato eassey of merrill lynch , who lowered his rating on enron ' s stock to " neutral " from " accumulate " earlier on thursday .
secured credit - in enron ' s case credit lines backed by gas and pipeline assets - often is reserved for companies with " junk " credit ratings , though many analysts saw the credit as a positive for enron .
shares of enron continued their freefall , despite the company ' s announcement of new credit lines , after the securities and exchange commission said late wednesday it would make an informal inquiry into the company a full - scale investigation .
enron lost $ 1 . 35 , or 9 . 7 percent , to $ 12 . 55 , resuming a tailspin that began oct . 16 when the company announced it was taking $ 1 . 01 billion in charges for ill - fated investments .
enron said the investment banking arm of j . p . morgan chase & co . and salomon smith barney inc . , the brokerage and investment banking unit of citigroup inc . , agreed to provide $ 1 billion in credit lines backed by enron ' s northern natural gas co . and transwestern pipeline co . assets .
' a positive step '
analysts said it is difficult to gauge the downside of the sec ' s probe of enron , which began as a request for information and became a full - fledged investigation , which provides regulators the ability to subpoena company documents .
some analysts said the general economic environment after sept . 11 has tightened lending restrictions and the secured issue is not ominous .
" it is a positive step . they will be surrounded by uncertainty until the sec probe is finalized and then they can go about their business . assuming everything is above board , and they just come out with a conflict of interest , the sec probe will probably result in a fine that will be a significant slap on the wrist . " said raymond moore of weatherly securities .
other see it as a possible buying opportunity .
" if the stock price gets to low - double digits , we might change our rating , " said mike heim , analyst with a . g . edwards who rates enron as " hold / speculative . "
" our decision not to raise our rating when shares dipped below $ 12 reflects concerns that enron ' s problems may be affecting their trading operations , "
enron said the credit lines will be used to supplement short - term liquidity , refinance maturing obligations and augment the $ 1 billion the company has of cash on hand . the commitments are subject to customary terms and conditions , including final due diligence , the company said .
" this is yet another step in our efforts to enhance market and investor confidence , " said jeffrey mcmahon , enron ' s new chief financial officer . " we are moving aggressively to strengthen our balance sheet and maintain our investment grade credit rating . "
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : light profit - taking pushes nymex natgas down midday .
11 / 01 / 2001
reuters english news service
( c ) reuters limited 2001 .
san francisco , nov 1 ( reuters ) - nymex hub gas was a touch lower in thin trade midday thursday , pressured by gentle profit - taking , market sources said .
at 12 : 30 p . m . est , december was down 2 . 1 cents at $ 3 . 27 per million british thermal units ( mmbtu ) after changing hands between $ 3 . 19 - 3 . 31 . january was 2 . 8 cents lower at $ 3 . 40 . most other months were off between 3 . 3 cents and 5 . 8 cents .
" this is just taking profits . the weather is spotty , and the only thing that is going to sustain this uptrend , which i think is already overdone , is an early and sustained winter , " one northeast trader said , adding that ample gas supplies would also limit the upside .
other traders said they believed part of the recent run - up in gas prices was due to a steady spate of short - covering in recent days by enron , whose share price has been hammered after a series of disclosures about off - balance - sheet deals with partnerships run by its former chief financial officer .
moody ' s investors service cut enron ' s credit rating on monday to two notches above junk status and warned it could lower the rating on the company ' s senior unsecured debt even further , as well as cut enron ' s short - term debt status .
enron is one of largest traders of wholesale natural gas and electricity in the united states .
many dealers said they were a bit surprised by the larger - than - expected build in weekly aga inventory data released wednesday .
aga data showed u . s . gas stocks rose last week by 23 bcf , below reuters survey estimates for a 35 - 40 bcf build , and well - below the year - ago gain of 70 bcf and the five - year average injection for this week of 35 bcf .
total inventories of 3 . 090 tcf are still 378 bcf , or 14 percent , above last year and 237 bcf above the five year average .
traders said some in the producing region may have been selling cheaper baseload gas into the spot market to cash in on the steep premium to index .
storage now stands at 94 percent full and could still climb to a record 3 . 13 tcf this week , the last week of the stock - building season , traders said .
despite wednesday ' s late spike , many traders remained skeptical of the upside , citing concerns about record levels of gas in inventory for winter and sagging demand due to a slowing u . s . economy .
but some said recent talk about further terror attacks in the u . s . created uncertainty in the market that could limit the selling .
in terms of heating degree days ( hdds ) , the national oceanic and atmospheric administration ( noaa ) said it expected 87 hdds this week , or 2 below normal . noaa also forecasted 5 cdds this week , which is 1 below normal .
the national weather service 6 - 10 day forecast released wednesday called for above normal temperatures for most of the nation , except in the east and parts of the west , where seasonal or below seasonal readings are expected .
noaa recently issued a winter weather outlook calling for colder - than - normal temperatures for northeast , upper midwest and plains states , with the possibility of heavy snow in the midwest and along the east coast .
while chart watchers said the technical picture turned bullish last week when the december gap to $ 3 . 252 was filled and the down trendline from april was broken , most agreed the upside may be limited near - term by milder late - week weather forecasts .
they now pegged december resistance at wednesday ' s high of $ 3 . 44 , with further selling expected at $ 3 . 76 and then at the august high of $ 4 . 10 .
psychological support was seen in the $ 3 . 00 area , with support also at last week ' s low of $ 2 . 77 and at the trendline in the low - $ 2 . 70 s . further buying was expected at $ 2 . 66 - 2 . 67 and then in the $ 2 . 60 area . the october low was $ 2 . 535 . the contract low was $ 2 . 415 .
in the cash today , henry hub swing quotes on average slipped about 7 cents to the $ 3 . 00 area . midwest pipes were down 5 to 10 cents to the mid - $ 2 . 80 s . in the west , gas at waha hub in west texas was about 10 cents lower in the mid - $ 2 . 80 s .
swing gas on transco at the new york city gate skidded about 20 cents to the mid - $ 3 . 30 s , while chicago was around 10 to 15 cents lower near $ 3 . 10 .
nymex said an estimated 16 , 414 henry hub contracts traded at 11 : 40 a . m . est . henry hub open interest on oct . 31 eased 129 lots to 457 , 861 .
nymex has been holding abbreviated floor trading sessions following the sept . 11 attacks on the world trade center .
nymex gas open outcry trade will run from 10 : 00 a . m . to 2 : 30 p . m . , with the internet - based access session held from 3 : 15 p . m . to 9 : 00 a . m . , through dec . 31 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron corp . ' s credit rating lowered to ` bbb ' by s & p ( updatel )
2001 - 11 - 01 17 : 04 ( new york )
( adds additional information about rating cut beginning in
first paragraph . )
new york , nov . 1 ( bloomberg ) - - enron corp . had its long - term
credit rating cut to ` ` bbb , ' ' the second - lowest investment grade ,
from ` ` bbb + ' ' by standard & poor ' s . the energy trader ' s short - term
debt rating was cut to ` ` a - 3 , ' ' the lowest investment grade , from
` ` a - 2 . ' '
s & p said further cuts are possible . the rating company said
in a report that it doesn ' t think enron ' s plan to repair its
balance sheet through asset sales and other means will be able to
restore enron ' s credit quality to the ` ` bbb + ' ' level it had since
1995 .
it said enron ' s diminishing financial flexibility stems from
its ` ` inability to calm investors who are unsure ' ' about the
strength of enron ' s core business and plan to restore its credit
profile . s & p said enron has ` ` adequate ' ' liquidity to see it
through ` ` the current period of uncertainty . ' '
the ratings of enron ' s subsidiaries , transwestern pipeline
co . and northern natural gas . , were lowered to ` ` bbb ' ' from ` ` a - ' '
to bring them in line with the parent company ratings .
enron has $ 15 . 8 billion of debt outstanding , according to
bloomberg data .
enron gets $ 1 bln loan to bolster cash , credit rating ( update 8 )
2001 - 11 - 01 16 : 59 ( new york )
enron gets $ 1 bln loan to bolster cash , credit rating ( update 8 )
( adds s & p credit rating downgrade in fourth paragraph . )
houston , nov . 1 ( bloomberg ) - - enron corp . , the largest
energy trader , received a $ 1 billion loan from j . p . morgan chase &
co . and salomon smith barney inc . after agreeing to use the
company ' s natural - gas pipelines as collateral .
enron shares fell 14 percent a day after the u . s . securities
and exchange commission began formally investigating partnerships
run by its former chief financial officer . pledging the pipelines
signals enron ' s desperation to convince shareholders and trading
partners that it ' s creditworthy , investors said .
` ` it ' s not reassuring , it ' s worrisome , ' ' said donald coxe ,
manager of the harris insight equity fund , which owns about 78 , 000
enron shares . ` ` if they had to secure the loan , obviously the
lenders don ' t think they can rely on enron ' s financial
statements . ' '
after u . s . markets closed , standard & poor ' s cut enron ' s long -
term credit rating to ` ` bbb , ' ' the second - lowest investment grade ,
from ` ` bbb + . ' ' the energy trader ' s short - term debt rating was cut
to ` ` a - 3 , ' ' the lowest investment grade , from ` ` a - 2 . ' '
the sec is investigating partnerships run by former cfo
andrew fastow that bought and sold enron shares and assets . those
trades cost enron $ 35 million and $ 1 . 2 billion in lost shareholder
equity . questions about enron ' s dealings with the partnerships
have shut it out of commercial - paper markets , where most large
corporations go to find low - interest , short - term debt .
last friday , enron tapped a $ 3 billion credit line to pay off
$ 2 . 2 billion in commercial paper it has outstanding . proceeds from
the $ 1 billion secured loan will go for debt payments and to
supplement cash reserves , enron said .
business with enron
to get the $ 1 billion loan , enron pledged assets of its
northern natural gas co . and transwestern pipeline co . , which own
gas pipeline systems that combined are about 19 , 000 miles long and
can deliver as much as 6 billion cubic feet of gas a day .
enron , based in houston , got its start as a natural gas -
pipeline operator . over the past decade , the company has shed
assets such as pipelines and power plants and focused on trading
electricity , gas , wood pulp and other commodities .
enron now accounts for about a quarter of u . s . power and gas
trades . the company still has about 25 , 000 miles of gas pipeline .
mortgaging those lines is ` ` maybe not such a good signal , ' '
said roger hamilton , who manages john hancock value funds , which
owns 600 , 000 enron shares . ` ` it shows they can ' t convince banks
with anything but secured assets . ' '
shares of enron fell $ 1 . 91 to $ 11 . 99 . earlier , they dropped
to $ 11 . 70 . the stock has fallen 86 percent this year .
enron ' s 6 . 4 percent coupon notes due in 2006 fell about 3
cents today to be bid at 74 cents on the dollar and offered at 77
cents , traders said . until last week , the notes were trading near
par value .
credit rating
enron must have investment - grade credit to borrow enough to
settle its transactions daily . energy companies including exelon
corp . and northeast utilities have restricted business with enron
as the company sought new sources of credit .
on monday , moody ' s investors service lowered enron ' s long -
term credit rating to ` ` baa 2 ' ' from ` ` baal , ' ' two notches above
junk status . it also placed the company ' s ` ` p - 2 ' ' rating for
commercial paper on review for possible downgrade .
standard & poor ' s said in downgrading enron ' s credit rating
today that the company has enough liquidity to see it through the
` ` current period of uncertainty . ' ' still , s & p said , enron ' s
` ` financial flexibility has continued to diminish ' ' because of its
` ` inability to calm investors that are unsure about the strength
of enron ' s core energy marketing business . ' '
falling below investment grade would trigger early repayment
terms for affiliated companies such as the ones created by fastow .
a lower credit rating also reduces the amount of cash that enron
can raise to back its trading business .
investor confidence
the financing is to ` ` enhance market and investor
confidence , ' ' enron chief financial officer jeffrey mcmahon said
in a statement .
enron can borrow another $ 200 million by bringing other banks
into the loan , spokeswoman karen denne said . ` ` we don ' t have any
plans to do so at this point , ' ' she said .
` ` we are moving aggressively to strengthen our balance sheet
and maintain our investment grade credit rating , ' ' mcmahon said .
mcmahon , head of enron ' s industrial markets group , was named
cfo last week . fastow was ousted in an attempt to restore investor
confidence .
` ` it seems until we know more about the sec investigation ,
it ' s going to be a difficult time for the stock , ' ' said tara
gately , an energy analyst at loomis sayles & co . , which sold most
of its enron shares early last year .
j . p . morgan is advising enron on the sale of part of its
azurix north america water business to american water works inc .
for $ 148 . 8 million in cash and assumed debt . salomon smith barney
is the investment - banking arm of citigroup inc .
enron falls after sec steps up probe
cbsmarketwatch . com , 11 / 01 / 01
houston ( cbs . mw ) - - enron shares fell for the 11 th time in 12 sessions thursday after the energy merchant said the securities and exchange commission launched a formal investigation into two of its limited partnerships .
late wednesday , the nation ' s largest natural gas and power trader said it retained william mclucas , a partner in the washington , d . c . - based firm of wilmer , cutler & pickering and a former sec enforcement chief , as its counsel .
mclucas works at the same firm as stephen cutler once did . the sec named cutler its enforcement division chief on oct . 25 , giving him oversight of the program in d . c . and in 11 regional and district offices across the country . according to a sec press release , cutler specialized in " securities enforcement and litigation " while a partner at wilmer , cutler & pickering .
howard meyers , a partner in the new york city - based law firm of meyers & heim and a former staff attorney in the sec ' s northeast regional office , said the mclucas - cutler connection could give the appearance of a conflict of interest .
" whether there is or not , i don ' t know , " he said . " if there isn ' t an actual conflict , you don ' t want to give the appearance of one . the sec is a substantial regulatory agency that the public has to have confidence in . "
as new enforcement chief , cutler has a duty to remove himself from any potential conflicts , meyers said .
" generally speaking , i like to see someone a little more removed from any preexisting relationships , " he said .
no conflict , enron says
karen denne , an enron spokesperson , said enron is " satisfied that wilmer , cutler has no conflict , and the sec can speak for itself on that issue . " she said cutler left wilmer , cutler three years ago and " severed all contacts . "
" as you know , the commission conducts its investigations on a non - public basis and thus we cannot confirm or deny the existence of any investigation that may or may not be taking place , " said michael robinson , an sec spokesperson . " applicable government - wide ethics rules required that mr . cutler recuse himself from all matters involving wilmer , cutler for one year following his departure from the firm , and he did so . "
additionally , robinson said : " the sec ' s ethics office has confirmed that mr . cutler ' s involvement in matters in which wilmer , cutler plays a role is entirely consistent with applicable government - wide conflict rules , as well as ethics rules applicable to all attorneys . "
enron shares closed at $ 11 . 99 , down $ 1 . 91 , or about 14 percent . by session ' s end , 30 million shares had changed hands .
enron also said it had formed a special committee , headed by university of texas law school dean william powers , to deal with the sec .
john gavin , president of plymouth , minn . - based sec insight , said that despite public assurances to the contrary , enron ' s announcements wednesday make it apparent that the company has " decided it is no longer in its interest to cooperate with the sec . "
" as a formal investigation , the sec must now use its subpoena power to compel the production of documents and witnesses . the assembly of a high - powered legal team is further evidence this company is digging in for a fight , " he said .
initially , the sec decided to pursue an informal inquiry into related - party transactions involving the company . now , the sec is making this a formal investigation .
as such , the agency would investigate whether the company disclosed all that was required with regard to the related - party transactions , meyers said , adding that the most important factor in the case ' s transition to a formal investigation is that the sec can exercise subpoena power .
disclosure is highly important because it can determine whether an investor buys stock in a company or not , he added . after the existence of the two limited partnerships came to light , the stock plunged .
" the sec might take a look at the auditors of enron , and certainly the sec can take action against the officers of the company , " meyers said . " any officer that signs off on 10 - qs or 10 - ks could be liable . "
merrill lynch analyst donato eassey downgraded enron thursday to " neutral " from " accumulate / buy , " citing the uncertainty about the outcome of the sec investigation .
" we believe the timing and directional uncertainty of this new development will at best cap enron ' s stock price in the mid - teen ' s while increasing overall volatility , " eassey wrote in a note to clients . the investigation will way on the stock until it concludes . " timing is uncertain , but could feasibly take months . "
secures $ 1 billion in credit
enron also said it secured $ 1 billion in additional financing from j . p . morgan and salomon smith barney .
the new credit , supported by assets of enron ' s northern natural gas co . and transwestern pipeline , will help enron shore up its liquidity position .
" we are moving aggressively to strengthen our balance sheet and maintain our investment - grade rating , " said chief financial officer jeffrey mcmahon , in a statement .
lisa sanders is a dallas - based reporter for cbs . marketwatch . com .