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Enron Mail |
Enron Names Special Committee To Examine Transactions
Dow Jones News Service, 10/31/01 Enron says SEC opens formal inquiry into related-party transactions AFX News, 10/31/01 Enron Says SEC Informal Inquiry Now a Formal Investigation Bloomberg, 10/31/01 Key Enron Employees Aren't Jumping Ship, Recruiters Say Dow Jones Energy Service, 10/31/01 Houston, We Have A Problem: How Much Is Enron Worth? Dow Jones News Service, 10/31/01 Enron's stock jumps amid takeover speculation Associated Press Newswires, 10/31/01 USA: Few signs of domino effect among Enron's peers. Reuters English News Service, 10/31/01 Waste Management Will Start Pulp And Paper Trading Tomorrow Bloomberg, 10/31/01 Enron ends 10-day skid with 25% jump CBSMarketWatch.com, 10/31/01 Enron's stock jumps amid takeover speculation Associated Press Newswires, 10/31/01 Class Action Lawsuit Commenced Against Enron Corp. By The Law Offices of Ma= rc S. Henzel PR Newswire, 10/31/01 Some Enron Trading Customers Tighten Credit Reins, Cut Trades Bloomberg, 10/31/01 USA: Enron rebounds, but investors seek more disclosure. Reuters English News Service, 10/31/01 Waiting for Balance Sheets Amid Enron's Debacle: David Wilson Bloomberg, 10/31/01 Enron Shares Rise, Rebounding From Nine-Year Low (Update3) Bloomberg, 10/31/01 Enron Names Special Committee To Examine Transactions 10/31/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp. (ENE) created a Special Committee to exam= ine deals related to the Security and Exchange Commission investigation int= o transactions involving Enron's former chief financial officer, which has = now turned into a formal investigation.=20 The energy-trading company also named William Powers Jr. to its board, maki= ng him in charge of the Special Committee, the company said in a press rele= ase Wednesday. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron says SEC opens formal inquiry into related-party transactions 10/31/2001 AFX News © 2001 by AFP-Extel News Ltd HOUSTON (AFX) - Enron Corp said the Securities and Exchange Commission has = opened a formal inquiry into the company's transactions with entities conne= cted with related parties.=20 In a statement, Enron said "the SEC has opened a formal investigation into = certain of the matters that were the subject of recent press reports and th= at previously were the subject of its informal inquiry." Earlier this month, Enron announced a charge of 1.01 bln usd, or 1.11 usd p= er share, and an incremental 1.2 bln usd reduction in stockholders' equity,= related to the unwinding of investments with the related LJM partnership.= =20 The SEC requested the company provide information on these related-party tr= ansactions days later, and the company dismissed its chief financial office= r, Andrew Fastow, for his involvement in running the LJM partnerships.=20 In today's statement, the company announced the election of William Powers = Jr to the board, effective immediately.=20 Powers, who is dean of the University of Texas School of Law, will chair a = Special Committee to examine and take any appropriate actions with respect = to transactions between Enron and entities connected to related parties, it= said.=20 In addition to reviewing the transactions in question, the Special Committe= e is charged with communicating with the SEC and recommending any other act= ions it deems appropriate.=20 "I have asked the Board to take this action to address fully and forthright= ly investors' questions and concerns," said Enron chairman and chief execut= ive officer Kenneth Lay.=20 "Responding to the SEC offers us an additional opportunity to achieve this = same goal for investors, and we will cooperate fully. We will also make eve= ry appropriate public disclosure during the course of the SEC's investigati= on."=20 pav/ Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Says SEC Informal Inquiry Now a Formal Investigation 2001-10-31 17:37 (New York) Enron Says SEC Informal Inquiry Now a Formal Investigation Houston, Oct. 31 (Bloomberg) -- Enron Corp. said an informal inquiry by the Securities and Exchange Commission is now a formal investigation, and the Houston-based company's board is appointing a special committee to address allegations related to partnerships run by its former chief financial officer. William Powers Jr., dean of the University of Texas law school, will chair a committee to handle the SEC's requests for information about the partnership, Enron said. --Andy Pratt in the Princeton newsroom at (609) 750-4657 or Key Enron Employees Aren't Jumping Ship, Recruiters Say By Michael Rieke Of DOW JONES NEWSWIRES 10/31/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp.'s (ENE) current problems aren't sending i= ts key employees running for the door, according to two executive recruiter= s.=20 While employees at Enron's underperforming units are shopping around for ne= w jobs, those working for its core wholesale energy trading and retail ener= gy units seem content, the recruiters told Dow Jones Newswires. "We've been getting resumes from their international group over the last ye= ar," said Bruce Peterson, managing director for Korn Ferry in Houston. "But= its been a very well-known fact that they're getting out of those business= es."=20 Another Houston recruiter, who didn't want to be identified, said he has go= tten "a flood" of resumes from employees at Enron's natural gas and power a= ssets in South America.=20 Employees at Enron's broadband unit are also sending out resumes, said the = recruiter. That business has brought the company losses of more than $100 m= illion this year despite hundreds of layoffs. Enron continues to cut costs = in its telecom business.=20 Neither recruiter has seen many resumes from Enron's big moneymakers - the = wholesale energy trading group and the retail energy services group.=20 Some of the lower-level employees of those units have sent out resumes but = Peterson said he hasn't seen higher-level executives in the job market. How= ever, he attached a caveat to that statement.=20 "Quite a few of the senior people at Enron have left over the last 6-12 mon= ths," he said.=20 When Enron's share price was flying high last year and early this year, som= e of Enron's top executives cashed out their stock options and left the com= pany.=20 Those executives included Cliff Baxter, former vice chairman and chief stra= tegy officer; Ken Rice, former head of Enron Capital and Trade as well as f= ormer chief executive of Enron Broadband Services; Kevin Hannon, former pre= sident of Enron Broadband Services; and Lou Pai, former chairman and chief = executive of Enron Energy Services.=20 The lure of cashing out lucrative stock options won't cost Enron any more e= mployees any time soon. The company's share price has fallen too far too qu= ickly, leaving the options underwater.=20 The company's shares traded as high as $80 early this year. By July the pri= ce had dropped to around $50, leaving employees with options that were virt= ually worthless. So Enron told employees it would issue new options in Augu= st.=20 But the company's share price continued to fall as more and more bad news c= ame out. The new options issued in August, when the share prices were aroun= d $40, are now underwater also.=20 Now that the options are out of the money, Enron employees are more vulnera= ble to the lure of other companies, Peterson said.=20 Enron could face another problem in keeping key people. Its employees work = under two-year contracts. If they leave Enron before their contracts expire= s, a noncompete clause could prevent them for working for a competitor.=20 Some of those contracts will expire at the end of the year. Without the inc= entive of lucrative stock options, Enron might have a difficult time gettin= g employees to agree to new contracts with a noncompete clause, Peterson sa= id.=20 An Enron spokeswoman said the company isn't planning to issue more new opti= ons to employees.=20 -By Michael Rieke, Dow Jones Newswires; 713-547-9207; michael.rieke@dowjone= s.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Houston, We Have A Problem: How Much Is Enron Worth? By Christina Cheddar Of DOW JONES NEWSWIRES 10/31/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- With billions of dollars shaved off of the market ca= pitalization of Enron Corp. (ENE) in the past two weeks, the stock is tradi= ng at about its book value, begging the question: so how much is it worth a= nyway?=20 The answer is far from easy. Ever since Enron metamorphosed from a stodgy gas pipeline company into what= was seen by many as a dynamic energy trading firm, the company has become = increasingly more difficult to understand.=20 Just a glance at the wide-range of Wall Street analysts who follow the comp= any illustrates the point. In the mix are analysts who track natural gas an= d the pipeline industry as well as those who follow electric utilities.=20 One enticing prospect is that the assets in its portfolio are valuable in a= nd of themselves and could be seen by some as worthwhile acquisition target= s.=20 By Enron's own definition, the company houses four main divisions: Enron Wh= olesale Services, Enron Energy Services, Enron Transportation Services, and= Enron Broadband Services.=20 Wholesale Services houses the company's energy marketing business and Enron= Online. This segment accounts for the bulk of Enron's profits, and has beco= me synonymous with what Enron means to most people today.=20 Not only does Enron trade gas, oil and coal, but it also trades commodities= such as pulp and paper, petrochemicals, lumber, plastics and even weather = risk.=20 Enron Energy Services is the company's retail arm. The company provides ele= ctricity, gas and commodity risk management services through this division.= =20 Enron Transportation Services operates four natural gas pipelines that span= about 25,000 miles and have a peak capacity of 9.8 billion cubic feet per = day. Through these pipelines the company says it transports about 15% of th= e natural gas the U.S. needs. The segment also includes Portland General, a= Oregon utility company Enron is selling to Northwest Natural Gas Co. (NWN)= for $1.9 billion in cash and stock.=20 In addition, the company provides bandwidth and network services through it= s Enron Broadband services division.=20 But Enron's reach is even wider than this list suggests. The company also h= as a number of other corporate investments, including its stake in the Azur= ix water business, Enron Renewable Energy Corp. as well as methanol and MTB= E plants.=20 Through Enron's unconsolidated affiliates, the company also has investments= in additional water assets, a power plant in India and a natural gas pipel= ine in Argentina among other things.=20 What makes any valuation of Enron difficult is what remains unknown about t= he company's financial structure.=20 Enron has yet to file a balance sheet for the third quarter, and doesn't ex= pect to do so until Nov. 15, when balance sheets must be filed under Securi= ties and Exchange Commission regulations.=20 Without the balance sheet, some of the details needed for calculating a com= pany's value are missing.=20 Also, much still remains unknown about the company's obligations to its off= -balance sheet financing vehicles.=20 Using what is known about Enron's finances, several analysts have arrived a= t their own conclusions about valuation.=20 Merrill Lynch & Co. analyst Donato Eassey said Wednesday he puts Enron's ne= t asset value at between $16 to $24 a share. The calculation assumes Enron = has 850 million diluted shares outstanding.=20 Eassey valued Enron's on-balance sheet assets at nearly $11 billion, and th= e off-balance sheet assets at $1.1 billion. He has valued the company's tra= ding business at between six-to-eight-times its 2001 earnings before intere= st, taxes, depreciation and amortization, or about $19 billion to $26.5 bil= lion, based on his EBITDA estimate of $3.3 billion for this year.=20 "Thus, our total asset value stands in the $32 (billion) to $38.6 billion a= rea," Eassey said.=20 The analyst then deducted $13.8 billion in total balance sheet debt, and es= timated off-balance sheet debt at about $3.4 billion. The estimates bring t= otal debt to $17.2 billion, including $1 billion in preferred stock, he sai= d.=20 Importantly, Eassey's estimate doesn't include any cash balances or the val= ue of its current trading position.=20 At the end of June, Enron had $847 million in cash and was in a net positiv= e trading position of $306 million, Eassey said.=20 Last Thursday, Dain Rauscher Wessels analyst Mark Easterbrook arrived at a = net asset valuation of between $27 to $35 a share.=20 Easterbrook's calculation assumes added writedowns and equity adjustments.= =20 The lower half of the range assumes Enron doesn't complete any asset sales,= and assumes equity funding dilutes the shares outstanding by 24%, the anal= yst said.=20 The higher end of the range assumes asset sales of $3.5 billion, debt reduc= tion of $1 billion from the Portland General sale and no equity financing, = he said.=20 The view doesn't take into consideration the short-term liquidity crunch on= going at the company, Easterbrook said. In addition, he added, the estimate= assumes all of Enron's partnerships and investments no longer have any res= idual value.=20 Early this year, John S. Herold came up with a "rough cut" valuation of Enr= on of "plus or minus something in the $30 range" using appraised net worth = methodology, said John Parry, an analyst at the firm. However, he said, the= firm never published the estimate because it felt it didn't have enough in= formation from Enron about the off-balance sheet financing vehicles to make= a complete assessment.=20 At the time, Enron's stock was trading in the $70's, Parry said. So, he cut= the stock's rating to sell.=20 "I never imaged it would fall this low," he said.=20 Enron shares closed Wednesday at $13.90, up $2.74, or 24.6%.=20 -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar= @dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's stock jumps amid takeover speculation By JUAN. A. LOZANO Associated Press Writer 10/31/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - After plummeting to a nine-year low following recent economi= c losses and an investigation by federal securities regulators, shares of E= nron Corp. jumped nearly 25 percent Wednesday amid speculation the company = was ripe for takeover.=20 Shares of Enron, the nation's largest natural gas and power marketer, rose = $2.74 to close at $13.90 Wednesday on the New York Stock Exchange. Shares t= hough are still down 69 percent since the company reported third quarter ea= rnings just over two weeks ago. Carol Coale, an analyst with Prudential Securities Inc. in Houston, said We= dnesday's surge was likely a reaction to a The Wall Street Journal report t= hat Enron's beaten-down stock price has stirred rumors of a possible takeov= er.=20 Others may be buying figuring the stock has hit bottom, she said.=20 On Tuesday, Enron's stock closed at $11.16, its lowest level since 1992.=20 Enron shares began their steady fall in the middle of October, when the com= pany reported a net loss of $638 million in the third quarter, taking a one= -time charge of $1.01 billion attributed to investment losses, troubled ass= ets and unit restructurings.=20 Some of these losses have been tied to partnerships managed by Enron's form= er chief financial officer, Andrew Fastow, who was ousted last week.=20 The potential conflict of interest has prompted an inquiry by the Securitie= s and Exchange Commission.=20 Earlier this week, Moody's Investors Service downgraded the company's long-= term debt and warned of possible further downgrades.=20 Potential buyers include General Electric's GE Capital unit, Warren Buffett= 's Berkshire Hathaway and Royal Dutch Shell, the Journal said.=20 Duane Grubert, an analyst with Sanford C. Bernstein and Co. in New York, sa= id Shell, which has a small presence in energy marketing, would be a good f= it.=20 "Shell tried to be in the merchant energy arena and didn't really succeed,"= he said. "To buy into an established franchise must be attractive to Shell= ."=20 Enron officials did not immediately return telephone calls from The Associa= ted Press on Wednesday.=20 While Enron's stock price has made it attractive, Coale said the energy mar= keter's problems present a substantial drawback.=20 "I would fault a company for acquiring Enron with all of this hanging over = it," she said. "There are too many uncertainties."=20 Grubert said he believes Enron has the ability "to weather the storm and re= store their enterprise on their own."=20 Since reporting its disappointing third quarter losses, Enron has been nego= tiating with banks to establish new credit lines. The company last week dec= ided to cash in about $3 billion in revolving credit it has with various ba= nks to shore up investor confidence.=20 ---=20 On the Net:=20 http://www.enron.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: Few signs of domino effect among Enron's peers. By Andrew Kelly 10/31/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Oct 31 (Reuters) - U.S. energy traders such as Dynegy Inc. and Aqu= ila Inc. have taken a knock as a result of Enron Corp's recent woes, but an= alysts do not expect a broad loss of investor confidence in the sector to t= rigger massive losses in stock prices like Enron has suffered.=20 "The issues impacting Enron are pretty much specific to that company," said= Credit Lyonnais Securities analyst Gordon Howald. "I don't believe that a = lot of its peers have the same type of potential negative impact," he said. Enron's widespread use of complex off-balance-sheet financing deals and its= reluctance to disclose details about them are a key reason why investors h= ave dumped the company's stock, causing it to fall more than 60 percent in = the last two weeks.=20 And while other natural gas and electricity marketers use similar technique= s to avoid overloading their balance sheets with debt, nobody does so to th= e same extent as Enron, analysts said.=20 "Enron is a unique case in the magnitude of off-balance sheet transactions,= " said Prudential Securities analyst Carole Coale.=20 UNCOMFORTABLE WITH DISCLOSURE=20 Coale said she was not comfortable with the level of disclosure provided by= many of Enron's peers about such deals, but she said this was less of a pr= oblem at other companies because they have less exposure to the risky energ= y trading and marketing business which contributes about 80 percent of Enro= n's profits.=20 El Paso Corp., for example is channeling over $1 billion in off-balance-she= et financing into its Project Electron venture which was set up to acquire = and manage power plants.=20 Analysts say they are reasonably pleased with the information that El Paso = has provided to them about Electron.=20 El Paso's stock has fallen a relatively modest 5 percent over the last two = weeks and analysts attribute this in large part to the fact that marketing = and trading operations generate only about one quarter of the company's ear= nings.=20 Dynegy's stock is down some 17 percent over the last two weeks and analysts= said this was linked to Dynegy's assumption of a leadership role among U.S= . energy marketers in many investors' eyes as Enron began to fall out of fa= vor and as Dynegy attained a correspondingly high price-earnings ratio.=20 Asked about Dynegy's use of off-balance-sheet financing, spokesman John Sou= sa drew a contrast between his own company and Enron, saying Dynegy had no = financing that was backed by issuance of stock, nor any "related party tran= sactions".=20 FORMER HIGH-FLIERS SHUNNED=20 Analysts said that in the current uncertain investment climate, investors a= re shunning trading-oriented companies' whose stocks had previously command= ed high price-earnings multiples and seeking out more modestly valued compa= nies which own physical assets such as power plants and natural gas pipelin= es.=20 In terms of recent stock price performance this trend has punished a market= er-trader like Aquila, whose shares are down 27 percent over the last two w= eeks.=20 On the other hand it has been relatively kind to companies such as Williams= Cos. and Duke Energy Corp. , which until recently were treated with scorn = by Enron executives who aggressively propounded an "asset-light" philosophy= .=20 Williams' stock has fallen about 5 percent over the last fortnight while Du= ke's shares are down less than 1 percent and have outperformed the broader = U.S. stock market.=20 J.P. Morgan analyst Anatol Feygin said Enron had fallen victim to its uniqu= e taste for sophisticated financing techniques and its failure to explain t= hem when doubts started to surface.=20 "Enron took it to an extreme in terms of financial engineering, but it didn= 't disclose enough information about what is behind all of these structures= ," he said.=20 Credit Lyonnais Securities' Howald had a simpler explanation, saying that a= s the euphoria which surrounded Enron last year subsided, people began to s= ee Enron for what it was.=20 "Trading companies have always had a history of winning big and losing big,= " he said. "I think the days of the big valuations are over," he added. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Waste Management Will Start Pulp And Paper Trading Tomorrow 2001-10-31 16:52 (New York) Waste Management Will Start Pulp And Paper Trading Tomorrow Houston, Oct. 31 (Bloomberg) -- Waste Management Inc., North America's largest trash hauler, will start trading paper and pulp tomorrow to limit the effects of price fluctuations of recycled materials and offer a service its biggest rivals don't provide. In the past three years, Waste Management has reduced its exposure to price swings by placing 75 percent of its recycled- commodity sales under long-term, fixed-price contracts. Still, the company's revenue from recycling fell 38 percent to $154 million in the second quarter. Chief Executive Officer Maurice Myers is hoping the trading business will help stabilize recycling revenue even when prices for cardboard, newspaper and aluminum cans fall. Trading allows Waste Management to further limit its own exposure to prices, as well as offer contracts to customers who want to lock in prices. ``What Waste Management is doing is going to reduce the company's risk and their customer's risk,'' said Thomas Leritz, an analyst at Banc of America Capital Management, which owns more than 1 million shares of Waste Management. ``I think it's a smart move. It's a reflection of the new management team.'' Myers joined the company in November 1999 as it struggled to track costs from acquisitions. He has put new financial-systems software in place and made other efforts to cut costs. The company has also raised prices where it's the dominant hauler. Myers's efforts, along with the sale of overseas businesses, have helped the company regain regard among investors. The shares have risen 22 percent in the past year. Pulp and Paper Most of Waste Management's solid-waste customers produce or consume pulp and paper. Waste Management collects, processes and sells more than five million tons a year of paper, plastic, glass, aluminum and other metals. Recycled-cardboard prices fell 62 percent to $48 a ton in the second quarter from $125 a year earlier, and the price for recycled newsprint fell to $55 a ton from $90, Myers said in August. Prices were little changed from the second quarter to the third quarter, said Steve Ragiel, Waste Management's vice president of recycling. Waste Management, which will report third-quarter results next week, had expected to begin trading in the third quarter. Its plans were delayed because it took longer than expected to find people to run the operation, Raigel said. Jeff Harbert, formerly of Enron Corp., is heading the operation along with two other Enron traders. Enron, also based in Houston, has created the largest business of trading commodities including electricity, natural gas, pulp and paper. Risk Management Waste Management's initial focus in the trading business will be on managing its own price risk. It probably only will complete five to 10 trades in each of the first few months, Raigel said. The company hopes to set fixed prices for the commodities it picks up, then sell those commodities to a third company, such as a paper producer, at a higher set price. ``We'll get with a counter party such as a paper mill or a consumer-products company and cut a deal,'' Raigel said. ``We can find a paper mill that wants to lock in a fixed price on what they buy and what they sell. They get a minimum return on their investment and greater control on their raw material costs.'' The company hasn't said how much it expects to make from trading. Analysts aren't expecting the business to contribute significantly to Waste Management's earnings. ``They are looking at it as a good time to get in on trading but I don't see it as a major contributor to their business,'' said Stewart Scharf, an analyst with Standard & Poor's Equity Group. He rates Waste Management ``accumulate'' and doesn't own shares. Republic Services Group Inc., the No. 3 U.S. waste company, contracts with individual mills to supply recycled commodities at fixed prices, but hasn't started a trading operation, spokesman Will Flower said. Allied Waste Industries Inc., the second-largest trash hauler in North America, said it has no plans to get into trading. ``We'll leave trading to people like Enron,'' Allied Waste spokesman Michael Burnett said. --Mark Johnson in the Princeton newsroom (609) 750-4662 Enron ends 10-day skid with 25% jump=20 Lisa Sanders CBSMarketWatch.com October 31, 2001 HOUSTON (CBS.MW) -- Shares of Enron, which had lost about 66 percent of the= ir value over the past 10 sessions, spiked Wednesday after a report that pe= gged the beleaguered company as a takeover target. Enron added 25 percent, or $2.74, to close at $13.90. More than 43 million = shares changed hands, making the stock the most actively traded on the New = York Stock Exchange. A.G. Edwards' analyst Michael Heim warned Wednesday against buying Enron sh= ares. He noted that Enron's troubles could be hurting its trading operation= s, the company's strength. "People interested in betting on ENE should ask themselves this -- If a per= son offered to double your money when a coin lands heads and take away half= your money when it is tails, would you take the bet? What if the person fl= ipping the coin is a magician you don't trust?"=20 A Wall Street Journal report Wednesday speculated on Enron's potential as a= n acquisition for a more stable company. An Enron spokesman said the compan= y doesn't comment on such matters. Enron has been under pressure for more than two weeks, beginning when the e= nergy merchant reported a $1 billion charge in its third-quarter earnings. = A Securities and Exchange Commission probe into two of the company's limite= d partnerships and a rating downgrade by Moody's Investors Service haven't = helped. John Olson, an analyst at Sanders Morris Harris, said he thought an Enron t= akeover unlikely at this point. "However, if the stock were to keep coming down, and their financial diffic= ulties were extended, the odds would increase," he said. Olson pointed out that Enron's heavy losses over the last 10 sessions partl= y reflects the end of the tax year for mutual funds. The calendar year for = funds ends at the close of business Wednesday. "Mutual funds who own Enron stock have been trying to offset other gains by= selling off Enron," he said. "Mutual funds have to register all their gain= s or losses and offset them by selling or buying stock by the close today." Taking bets Art Smith, chairman and chief executive of the research firm John S. Herold= , said he'd be surprised if Enron was not entertaining offers. "It's one of= the ways that Enron gets the genie back in the bottle." On the other hand, Smith said, it would take a potential acquirer time to b= ecome comfortable with the valuation of the business.=20 "It's doubtful that a potential acquirer can resolve all the valuation issu= es quickly," Smith said. He said it's likely that any sort of purchase agre= ement would contain what he called a "look-back provision," which would pro= tect the acquirer from being strapped to a fixed value. Smith said he could see either General Electric's GE Capital or Royal Dutch= Shell making a bid. Both were mentioned in the Journal report. "GE Capital is big enough that if it didn't work out it won't cripple GE, a= nd they've been opportunistic on things like this," Smith said. "And Shell = always keeps us guessing." Olson also included AIG and Citigroup as potential acquirers. "Enron has certainly had some appeal to people that are used to an aggressi= ve trading culture," he said. Smith said that even without Enron, the energy marketing and trading busine= ss would continue to thrive.=20 "Even if Enron went away, it would not change what has developed into a hea= lthy market for commodity forward markets and hedging," he said. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. Enron's stock jumps amid takeover speculation By JUAN. A. LOZANO Associated Press Writer 10/31/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - After plummeting to a nine-year low following recent economi= c losses and an investigation by federal securities regulators, shares of E= nron Corp. jumped nearly 25 percent Wednesday amid speculation the company = was ripe for takeover.=20 Shares of Enron, the largest U.S. natural gas and power marketer, rose dlrs= 2.74 to close at dlrs 13.90 Wednesday on the New York Stock Exchange. Thou= gh still down 69 percent since the company reported third quarter earnings = just over two weeks ago. Carol Coale, an analyst with Prudential Securities Inc. in Houston, said We= dnesday's surge was likely a reaction to a The Wall Street Journal report t= hat Enron's beaten-down stock price has stirred rumors of a possible takeov= er.=20 Others may be buying figuring the stock has hit bottom, she said.=20 On Tuesday, Enron's stock closed at dlrs 11.16, its lowest level since 1992= .=20 Enron shares began their steady fall in the middle of October, when the com= pany reported a net loss of dlrs 638 million in the third quarter, taking a= one-time charge of dlrs 1.01 billion attributed to investment losses, trou= bled assets and unit restructurings.=20 Some of these losses have been tied to partnerships managed by Enron's form= er chief financial officer, Andrew Fastow, who was ousted last week.=20 The potential conflict of interest has prompted an inquiry by the Securitie= s and Exchange Commission.=20 Earlier this week, Moody's Investors Service downgraded the company's long-= term debt and warned of possible further downgrades.=20 Potential buyers include General Electric's GE Capital unit, Warren Buffett= 's Berkshire Hathaway and Royal Dutch Shell, the Journal said.=20 Duane Grubert, an analyst with Sanford C. Bernstein and Co. in New York, sa= id Shell, which has a small presence in energy marketing, would be a good f= it.=20 "Shell tried to be in the merchant energy arena and didn't really succeed,"= he said. "To buy into an established franchise must be attractive to Shell= ."=20 While Enron's stock price has made it attractive, Coale said the energy mar= keter's problems present a substantial drawback.=20 "I would fault a company for acquiring Enron with all of this hanging over = it," she said. "There are too many uncertainties." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Class Action Lawsuit Commenced Against Enron Corp. By The Law Offices of Ma= rc S. Henzel 10/31/2001 PR Newswire (Copyright © 2001, PR Newswire) BALA CYNWYD, Oct. 31 /PRNewswire/ -- A class action lawsuit was filed in th= e United States District Court for the Southern District of Texas, on behal= f of purchasers of the common stock of Enron Corp. (NYSE: ENE) between Janu= ary 18, 2000 and October 17, 2001, inclusive. The action is pending against= defendants Enron, Kenneth Lay, Jeffrey K. Skilling and Andrew Fastow.=20 The Complaint alleges that defendants violated Sections 10(b) and 20(a) of = the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder,= by issuing a series of material misrepresentations to the market between J= anuary 18, 2000 and October 17, 2001, thereby artificially inflating the pr= ice of Enron common stock. Specifically, the complaint alleges that Enron i= ssued a series of statements concerning its business, financial results and= operations which failed to disclose (i) that the Company's Broadband Servi= ces Division was experiencing declining demand for bandwidth and the Compan= y's efforts to create a trading market for bandwidth were not meeting with = success as many of the market participants were not creditworthy; (ii) that= the Company's operating results were materially overstated as result of th= e Company failing to timely write-down the value of its investments with ce= rtain limited partnerships which were managed by the Company's chief financ= ial officer; and (iii) that Enron was failing to write-down impaired assets= on a timely basis in accordance with GAAP. On October 16, 2001, Enron surp= rised the market by announcing that the Company was taking non-recurring ch= arges of $1.01 billion after-tax, or ($1.11) loss per diluted share, in the= third quarter of 2001, the period ending September 30, 2001. Subsequently,= Enron revealed that a material portion of the charge related to the unwind= ing of investments with certain limited partnerships which were controlled = by Enron's chief financial officer and that the Company would be eliminatin= g more than $1 billion in shareholder equity as a result of its unwinding o= f the investments. As this news began to be assimilated by the market, the = price of Enron common stock dropped significantly. During the Class Period,= Enron insiders disposed of over $73 million of their personally held Enron= common stock to unsuspecting investors. Plaintiff is represented by The Law Offices of Marc S. Henzel. If you are a= member of the class described above, you have until December 21, 2001, to = participate in the case and ask the Court to appoint you as one of the lead= plaintiffs for the Class. In order to serve as lead plaintiff, however, yo= u must meet certain legal requirements. You do not need to seek appointment= as a lead plaintiff in order to share in any recovery.=20 If you have any questions concerning this case or your rights or interests = with respect to these matters, please contact: Marc S. Henzel, Esq. of The = Law Offices of Marc S. Henzel, 273 Montgomery Ave, Suite 202 Bala Cynwyd, P= A 19004-2808, by telephone at (888) 643-6735 or (610) 660-8000, by facsimil= e at (610) 660-8080, by e-mail at Mhenzel182@aol.com or visit the firm's we= bsite at http://members.aol.com/mhenzel182.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X40385151 /CONTACT: Marc S. Henzel, Esq. of The Law Offices of Marc S. Henzel, +1-888= -643-6735 or +1-610-660-8000, fax: +1-610-660-8080, or Mhenzel182@aol.com/ = 16:50 EST=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Some Enron Trading Customers Tighten Credit Reins, Cut Trades 2001-10-31 16:05 (New York) New York, Oct. 31 (Bloomberg) -- American Electric Power Co., Exelon Corp. and Northeast Utilities are among energy companies restricting business with Enron Corp. as the largest energy trader negotiates a credit line to keep access to cash. ``We are keeping a tight dollar limit on trades,'' said John Rowe, co-chief executive officer of Exelon, the largest U.S. nuclear power producer. ``We are keeping a close eye on our exposures.'' Enron has said it is seeking new sources of credit as the company tries to assure trading partners and rating agencies that it can meet day-to-day obligations and keep its investment-grade credit rating. Enron, which handles 25 percent of the energy trading in the U.S., relies on having investment-grade credit to borrow enough to settle its transactions daily. Enron Corp. shares, down 59 percent since Oct. 16, rose 25 percent today to $13.90 from a nine-year low amid speculation the company may be a takeover target. Still, Enron stock is down 83 percent this year. Moody's Investors Service last week lowered Enron's long-term debt to two notches above junk status and placed Enron's commercial paper on review for downgrade. ``We will be tracking very closely their wholesale volumes,'' said Stephen Moore, a vice president at Moody's. ``That will be the leading indicator of where the company is going.'' Credit People Energy trading accounted for about 98 percent of Enron's $773 million in income before interest and taxes last quarter. The company last week drew down a $3 billion credit line after surprising investors by writing off $1.2 billion of shareholder equity. The company also ousted its Chief Financial Officer Andrew Fastow after it reported that a partnership he set up lost $35 million for the company. The Securities and Exchange Commission has asked the company questions about partnerships like Fastow's. Enron spokeswoman Karen Denne said the company's trades have not declined in size while natural gas trading volume has dipped consistent with monthly pattern. Some energy executives said yesterday that companies were limiting Enron trading to reduce credit risks. ``Credit people are coming to their traders and saying, `Enron is on hold for any new positions, and at some point we may need you (to) trade out of your existing positions,''' said Charlie Sanchez, an energy markets manager at Houston-based Gelber & Associates Corp., an energy trading adviser. Watching Closely Minneapolis, Minnesota-based Xcel Energy Inc., an electricity and natural-gas seller, is limiting its business to same-day and next-day delivery, Chief Executive Officer Wayne Brunetti said at an energy conference in New Orleans. American Electric Power Chief Executive Linn Draper said at the same conference that his company is also making only short-term trades. ``We are watching very closely,'' Draper said. ``We are focusing our new deals with them in the short term, November, December. We think they'll make it, but it's a serious situation.'' Northeast Utilities, based in Berlin, Connecticut, will continue to trade with Enron as long as its debt ratings remain investment grade, said Chief Financial Officer John Forsgren, also at the conference. Northeast is New England's biggest utility owner. ``Three weeks ago, we started monitoring our position with Enron,'' said Forsgren. ``Right now, we have a net payable to them, so there's no exposure on our side, and we'll probably keep it that way.'' Overblown Many companies say that Enron remains the most economical and efficient place to trade electricity, and that the company's credit woes are overblown. ``We're still actively trading with them and we believe they will work their way out of this,'' said Mike Griswold, a trader with Hafslund Trading Co., a subsidiary of Norwegian energy company Hafslund ASA. ``They have the best liquidity and the best prices. They are the premier trading market.'' --David Ward and Bradley Keoun in San Francisco=20 USA: Enron rebounds, but investors seek more disclosure. By Carolyn Koo 10/31/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 31 (Reuters) - Shares of Enron Corp. snapped back from 10 str= aight days of losses on Wednesday after investors said the deep plunge had = made the stock attractive.=20 Shares of Houston-based Enron, which lost more than $17 billion in market c= apitalization during the rout, surged almost 27 percent in heavy trade, mak= ing the stock second-most active on the New York Stock Exchange and third-b= iggest gainer by percentage. Despite the surge, investors and analysts said they were still dissatisfied= with Enron's failure to disclose key information and said the rebound coul= d prove short-lived for the largest trader of natural gas and power in Nort= h America.=20 "At this level the stock is attracting money. However, the near term is not= going to be good," said Tim Ghriskey, president of money managers Ghriskey= Capital Partners LLC.=20 "We don't own any Enron. We have in the past and sold a while ago. We've be= en tempted a couple of times during the slide, but the information flow is = not that strong, and there is potential for more negative surprises."=20 Enron closed up $2.74, or 24.6 percent, to $13.90 on the NYSE. The stock su= rged to an intraday high of $14.17, recouping the past two days of losses, = but is far from $33.84, the closing price for Enron on Oct. 16, the last da= y before the 10-day tumble began.=20 Enron shares have been hammered over the past two weeks amid a series of un= welcome disclosures, including murky off-balance-sheet deals with partnersh= ips once run by Chief Financial Officer Andrew Fastow.=20 The disclosures forced Fastow's ouster, led to a Securities and Exchange Co= mmission inquiry into Enron and caused at least one credit rating agency to= cut Enron's senior-debt credit status.=20 The company said Fastow's removal was aimed at assuaging investor concerns = as the almost daily disclosures forced it to draw down about $3 billion fro= m existing credit lines.=20 TRYING TO QUANTIFY 'WORST-CASE SCENARIO'=20 But that's not enough, say analysts and investors.=20 "Enron needs to substantially improve the level of disclosures," said Nitin= Khandkar, a portfolio manager with Dubai-based Al Majid Investment Co., wh= ich owns Enron stock. "The accounting policies it follows should not be mer= ely legal but should also reflect the company's true profitability."=20 As an industry heavyweight, "investors expect Enron to come clean on the co= ntroversial issues," he said.=20 One issue Enron would do well to address is its partnerships and the liabil= ities they may have.=20 "People are still struggling with trying to quantify what the worst-case sc= enario could be," said Mike Heim, an analyst with A.G. Edwards & Sons, of t= he existing partnerships.=20 "Instead of dismissing the worst-case scenario, I think it would make sense= to mathematically show that 'here's what happens under such a scenario' an= d then let analysts make their own assessments."=20 Enron's refusal to make public its finances with greater transparency is a = hallmark of arrogance, noted one academic.=20 "The lack of transparency is an arrogance that says, 'I don't have to expla= in anything because if people don't want to buy my shares, they can just si= t and spin,'" said Paul Kedrosky, a professor at the University of British = Columbia who sits on the board of Exponentia, a company dedicated to improv= ing communications with shareholders.=20 "It's an arrogance that says, 'I do not have to disclose anything until I a= m forced to,'" Kedrosky said. "The crucial thing is to disclose early and d= isclose all." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Waiting for Balance Sheets Amid Enron's Debacle: David Wilson 2001-10-31 16:39 (New York) (Commentary. David Wilson is a columnist for Bloomberg News. The opinions expressed are his own.) Princeton, New Jersey, Oct. 31 (Bloomberg) -- International Business Machines Corp.'s press release about its third-quarter results included this statement, attributed to Louis Gerstner, chairman and chief executive officer: ``IBM's balance sheet remains among the strongest in the technology industry, or any industry.'' The largest maker of computers and provider of computer services wasn't the only company to cite its balance sheet, a statistical summary of what a company owned, what it owed, and what was left over for shareholders on a specific date. General Electric Co., the largest company by stock market value, and Citigroup Inc., the No. 1 financial-services company, made similar references in their third-quarter releases. None of the companies really showed people what they were telling them. IBM, General Electric and Citigroup are among 19 members of the Dow Jones Industrial Average whose most recent quarterly releases didn't include balance sheets. The evidence will come only when the companies submit their quarterly reports to the U.S. Securities and Exchange Commission. Balance sheets are required in the so-called 10-Q filings, along with the 10-K filings that cover the full year. Not Much Publicity By then, statistics about the companies' assets, liabilities and shareholders' equity, the accounting terms for what's owned, what's owed and what's left over, will be rather outdated. U.S. companies have 45 days from the end of a fiscal quarter to submit 10-Q reports, and 90 days from the end of a fiscal year for 10-K reports. These filings usually don't arrive until weeks after the publication of earnings releases. So it's easy to overlook the additional information they provide, especially when it doesn't receive the kind of publicity that the earnings release does. Yet the recent example of Enron Corp. -- another company that omits balance sheets from press releases -- provides evidence that investors who forgo the extra effort needed to find them do so at their own peril. Enron, the largest energy trader, reported $1.01 billion in ``non-recurring'' costs in the third quarter from an expansion into water, telecommunications and retail-energy sales. The expense contributed to a $618 million loss for the quarter. These numbers were part of the Houston-based company's income statement, a summary of sales, costs and expenses, and profits or losses during a specified time period. Income statements are the cornerstone of any company's earnings release. Billion-Dollar Numbers The release didn't even mention a larger figure that affected the balance sheet: a $1.2 billion drop in shareholders' equity during the quarter resulting from the company's repurchase of 55 million shares from two partnerships, LJM Cayman LP and LJM2 Co- Investment LP, that helped finance projects. Andrew Fastow, who ran both partnerships, was ousted from his job as chief financial officer last week. Chairman and CEO Kenneth Lay disclosed the repurchase in a subsequent conference call. Such a one-two punch dealt a blow to investors' fortunes. Since Oct. 17, the day after the earnings release, Enron's shares have fallen each day and have lost two-thirds of their value. The low of $10.90 yesterday was the lowest price since July 1992. Enron's third-quarter statement referred only to a loss on ``finance arrangements with a previously disclosed entity'' which contributed to $544 million of investment losses. The size of that item was later put at $35 million. The latter number amounts to just 3.5 percent of the overall figure for ``non-recurring'' costs, and less than 1 percent of the company's $47.6 billion in revenue for the quarter. Growing Debt Burden The $1.2 billion figure is considerably larger not only in dollars, but also in percentage terms. Enron had $11.74 billion of shareholders' equity as of June 30, according to the balance sheet in its second-quarter 10-Q filing. The reduction equaled more than 10 percent of that total. Among other things, the balance sheet also shows that the company relied more heavily on debt financing during this year's first half. Short-term debt, due in one year or less, doubled to $3.46 billion. Long-term debt, maturing in more than one year, rose 9.4 percent to $9.36 billion. There's even more to the story of Enron's indebtedness. The company guaranteed $3.3 billion in borrowing by Osprey Trust and Marlin Water Trust, which bought some of its power plants. Unless they pay off the debt by reselling the plants, the company may have to come up with the difference. Nevertheless, any summary of a company's financial position provides a more complete picture than the income statement alone. This also holds true for companies whose finances are in better shape -- IBM, General Electric and Citigroup, to name three. Knowing by Showing Other members of the Dow industrials that wait until their filings to provide balance sheets are American Express Co., AT&T Corp., Boeing Co., Caterpillar Inc., Coca-Cola Co., Walt Disney Co., DuPont Co., Eastman Kodak Co., Exxon Mobil Corp., General Motors Corp., Honeywell International Inc., Johnson & Johnson, McDonald's Corp., Merck & Co., Procter & Gamble Co. and SBC Communications Inc. Companies that include them in releases are Alcoa Inc., Hewlett-Packard Co., Home Depot Inc., Intel Corp., International Paper Co., Microsoft Corp., Minnesota Mining & Manufacturing Co., J.P. Morgan Chase & Co., Philip Morris Cos., United Technologies Corp. and Wal-Mart Stores Inc. Citigroup's third-quarter earnings release has this quote from Sandy Weill, chairman and CEO: ``We have the balance sheet strength to make timely acquisitions to expand our franchises.'' The New York-based company had more than $85 billion of ``total equity,'' Weill said in the statement. General Electric's release quoted Chairman and CEO Jeffrey Immelt as saying ``our strong balance sheet, which gives us the flexibility to pursue strategic opportunities,'' is one of the Fairfield, Connecticut-based company's ``fundamental strengths.'' Investors can only take these CEOs at their word for now. Their companies, and many others, are only telling rather than showing -- at least in their earnings releases. Enron Shares Rise, Rebounding From Nine-Year Low (Update3) 2001-10-31 16:20 (New York) Enron Shares Rise, Rebounding From Nine-Year Low (Update3) (Closes shares.) Houston, Oct. 31 (Bloomberg) -- Enron Corp. shares jumped 25 percent, one day after falling to their lowest level in more than nine years, amid speculation the company may be a takeover target. Shares of the top energy trader rose $2.74 to $13.90 in trading of 43.4 million shares, more than four times the three- month daily average of 10.4 million. The shares reached $14.20 earlier in the day. Shares of Houston-based Enron have fallen 83 percent this year. They have dropped 49 percent this month amid a U.S. Securities and Exchange Commission inquiry into partnerships headed by Andrew Fastow, Enron's former chief financial officer. Fastow was ousted last week in an attempt to restore confidence in the stock. ``There are rumors out there that they are a potential takeover target, but I think it's very unlikely that anyone will buy them out at this point,'' said Zach Wagner, an analyst at Edward Jones & Co. ``There are too many uncertainties.'' Enron is more likely to get a large cash infusion from an investor, Wagner said. Wagner has a ``reduce'' rating on Enron shares. He doesn't own the stock. The Wall Street Journal today said General Electric Co.'s GE Capital, Warren Buffett's Berkshire Hathaway Inc. and Royal Dutch Petroleum Co. are ``among the names bandied about'' as potential buyers for all or part of Enron. Merrill Lynch analyst Donato Eassey said in a report issued today that Enron has a net asset value of $16 to $24 a share. He based that on a total asset value of $32 billion to $38.6 billion and total obligations of $18.2 billion. Eassey has a ``near-term accumulate'' rating on Enron's shares. He said Enron should be considered as an investment for ``high-risk profile investors'' because of the uncertainty attached to the company. --Margot Habiby in the Dallas newsroom (214) 954-9452
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