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Enron Mail |
U.S. Treasury Comment on Monitoring Enron and Credit Markets
Bloomberg, 11/28/01 Enron Bonds May Be Good Buy for Patient Investors, Analysts Say Bloomberg, 11/28/01 Raymond James' Cartwright Comments on Enron Corp.'s Future Bloomberg, 11/28/01 Fraud Attorney Aguirre Comments on Possible Enron Bankruptcy Bloomberg, 11/28/01 Enron's 401(k) Plan Was Set Up for Fall: David Wilson (Update2) Bloomberg, 11/28/01 Dynegy Ends Enron Takeover; Credit Ratings Lowered (Update8) Bloomberg, 11/28/01 Enron's Ratings Cut to Junk by S&P, Moody's, Fitch (Update6) Bloomberg, 11/28/01 CreditSights' Reynolds Comments on Downgrade of Enron to Junk Bloomberg, 11/28/01 Spaeth Communications President Comments on Enron Corp. Outlook Bloomberg, 11/28/01 Houston Astros President Says Enron's Name Will Stay on Stadium Bloomberg, 11/28/01 California Power Authority's Freeman Comments on Enron, Dynegy Bloomberg, 11/28/01 Enron Corp. Has Busiest Day Ever for a U.S. Stock: Table Bloomberg, 11/28/01 Enron Appoints Troubh to Board to Lead Litigation Committee Bloomberg, 11/28/01 Enron's Problems May Spark Demand for Treasuries, Analysts Say Bloomberg, 11/28/01 IFR Pegasus's Evans Comments on Enron's Impact on Energy Market Bloomberg, 11/28/01 Alliance, Janus, Putnam Among Biggest Enron Owners Before Drop Bloomberg, 11/28/01 Nvidia to Replace Enron in S&P 500 at End of Trading Tomorrow Bloomberg, 11/28/01 Intercontinental Exchange's CEO Sprecher Comments on Enron Bloomberg, 11/28/01 Enron to Continue Utility Sale to Northwest Natural (Update3) Bloomberg, 11/28/01 Enron Breached Responsibility to Employees, Lawyer Says on CNBC Bloomberg, 11/28/01 J.P. Morgan, Citigroup Stumble Advising Enron on Sale to Dynegy Bloomberg, 11/28/01 Enron Online Trading Unit Stops Operating, Users Say (Update5) Bloomberg, 11/28/01 Sempra Energy Interested in Buying Some Enron Assets (Update4) Bloomberg, 11/28/01 U.S. Treasury Comment on Monitoring Enron and Credit Markets 2001-11-28 16:04 (New York) Washington, Nov. 28 (Bloomberg) -- The following is a comment from Michele Davis, assistant Treasury secretary for public affairs, on Enron Corp. Dynegy Inc. abandoned a takeover bid for Enron today, leaving the country's largest energy trader without enough cash to pay its $15 billion in debt. Treasury securities rose after the decision was announced as investors dumped stocks and moved money into the safety of government debt: ``We are monitoring credit markets as we always do everyday,'' Davis said. ``The markets always fluctuate. We haven't seen anything extraordinary.'' Enron Bonds May Be Good Buy for Patient Investors, Analysts Say 2001-11-28 16:18 (New York) Enron Bonds May Be Good Buy for Patient Investors, Analysts Say New York, Nov. 28 (Bloomberg) -- Enron Corp. debt, which plunged by half today after its credit rating was cut to junk and rival Dynegy Inc. abandoned a planned buyout of the company, may reward investors willing to hold the bonds while Enron sells assets through a bankruptcy proceeding, analysts said. Enron's notes and bonds dipped to as low as 15 cents on the dollar today after Standard & Poor's cut Enron's rating six levels to ``B-.'' The firm's debt issues, which have a combined face value of more than $15 billion according to Bloomberg data, traded mostly between 20 cents and 25 cents this afternoon. Analysts expect Enron to file for bankruptcy protection, which would put bondholders in line with banks and other creditors for Enron's cash and any proceeds from asset sales. Under that scenario, bondholders could get back between 50 cents and 60 cents on the dollar within three years, said Stephen Ardizzoni, junk- bond portfolio manager at SMH Capital Advisors. ``You should have a pretty decent return at these purchase prices,'' said Ardizzoni, who said he bought some Enron notes maturing in 2003 and bonds maturing in 2019 for between 15 cents and 20 cents on the dollar today. Bondholders may end up with less if it turns out there are fewer assets or more liabilities than the company's balance sheet now shows, Ardizzoni said. Enron has drawn fire for its disclosure practices, which in recent weeks included revelations of a $1.2 billion reduction in shareholder equity and an early repayment date on a $690 million note. Like a Broker Owners of Enron debt may recover 30 cents on the dollar within two years, mostly from proceeds of sales of Enron's pipelines, international assets, and real estate, said Jon Kyle Cartwright, who follows Enron's debt for Raymond James & Associates Inc. Enron, once the biggest energy trader, made most of its money buying and selling electricity and natural gas. The company can be likened to a broker because hiring and retaining high-performing employees and developing relationships is more important than owning physical assets, Cartwright said. ``The real value of a broker is with their clients and personnel. There typically is minimal post-bankruptcy value,'' said Cartwright. Enron's trading business doesn't have much more to offer than ``office space and the artwork on the walls'' in a bankruptcy proceeding, he said. Marty Whitman will consider Enron bonds for the $4 billion he helps manage at Third Avenue Funds in New York. Still, the 77-year- old investor, who specializes in analyzing distressed securities, prefers to invest in debt that's secured by assets. Said Whitman, ``I never did understand their trading.'' Raymond James' Cartwright Comments on Enron Corp.'s Future 2001-11-28 16:22 (New York) New York, Nov. 28 (Bloomberg) -- Jon Kyle Cartwright, a senior vice president and senior energy analyst who follows Enron Corp. for Raymond James & Associates Inc. in St. Petersburg, Florida, comments on Enron's outlook after the company's credit ratings were cut to junk status and Dynegy Inc. abandoned a takeover bid for the company. ``This is a disaster,'' Cartwright said. ``I don't know how they can't file'' for protection from creditors. ``Enron isn't a going concern. ``It is difficult, if not impossible, for anyone to do trades with Enron's trading operations in light of junk ratings across the board and Dynegy walking away from the deal. ``No trading, no cash flow. No cash flow, no Enron.'' Cartwright said he thought the company had two months to sort out its problems and had a buy on the debt when it initially ``blew up. ``It was a credibility crisis the company could manage in two months. I'm sure they are in talks with their bankers right now, but I doubt if their bankers could even help them,'' he said. ``If any (energy) trader does business with Enron right now, it is a career decision. ``It will be hard for energy traders to re-adjust to a world without Enron. ``This was a self-fulfilling prophecy. It doesn't often happen that a company has a credibility crisis during a recession, in a bear market,'' Cartwright said. ``Hopefully, what comes out of the ashes of this is an entirely new group of analysts that will follow what will now be a bigger growth business -- energy trading. ``All of the smaller energy traders are about to become much bigger, and the market has to learn how to analyze these things as brokerage firms.'' Fraud Attorney Aguirre Comments on Possible Enron Bankruptcy 2001-11-28 16:28 (New York) Sacramento, California, Nov. 28 (Bloomberg) -- Following are comments made today by Michael Aguirre, a partner with San Diego- based law firm Aguirre & Meyer, which represents plaintiffs in a class action lawsuit against Enron and other energy traders over alleged fraud and price manipulation in California. Enron Corp.'s credit rating today was cut to junk status, fuelling the possibility of Enron filing for Chapter 11 bankruptcy protection. Dynegy Inc. today abandoned its bid for Enron after the rating cut. ``Enron is like the climber on the side of hill and is roped together with other climbers, and not only is it going off the cliff, but It's going to pull a number of other companies with it.'' ``Remember, when you talk about Enron, you are talking about the principal market player in the whole deregulated market. That means that Enron is not going to be able to make good on its obligations and that means that those are account receivables on the books of other companies.'' ``There will be a general collapsing of the energy markets, and what you are going see is the other companies that are now going to have lower earnings, which means their stock values are going to go down and there's going to be a downward spiral. I see this as creating a real crisis in the energy market.'' ``I'm used to seeing this happen, but this dimension is of the same type as the savings and loan and it frightens me because the scope and size of this collapse is staggering and the potential impact staggering.'' ``What worries me about this energy collapse is the dimension of it is so staggering and the impact on Wall Street could be such a massive blow, that it could actually help contribute to the recession.'' ``That, I think, means we need some government management of the problem.'' Enron's 401(k) Plan Was Set Up for Fall: David Wilson (Update2) 2001-11-28 16:44 (New York) Enron's 401(k) Plan Was Set Up for Fall: David Wilson (Update2) (Puts closing stock price in seventh paragraph. Commentary. David Wilson is a columnist for Bloomberg News. The opinions expressed are his own.) Princeton, New Jersey, Nov. 28 (Bloomberg) -- Enron Corp. employees participating in a company-sponsored savings plan were more vulnerable than usual to this year's collapse of the company and its stock price. Common and convertible preferred shares of Enron, once the largest U.S. energy trader, rose as a percentage of the plan's assets last year for the first time since 1994, according to filings with the U.S. Securities and Exchange Commission. The stock amounted to 62 percent of assets in the so-called 401(k) plan, designed to help people save for retirement, at the end of 2000. That figure was the highest in six years; in both 1998 and 1999, it had been less than a majority. Participants in the plan, which had $2.14 billion in assets available for benefits, could only do so much to diversify their investments. Enron, like many other companies, used stock rather than cash to match employee contributions and restricted sales of the shares. And they could only guess at the year-end makeup of the plan's assets until the end of June, reflecting SEC disclosure standards for savings plans. By that time, the stock's drop -- which reached 99 percent today -- was already well under way. Trio of Lawsuits Enron later reported $1.01 billion in third-quarter charges; ousted Chief Financial Officer Andrew Fastow, who ran partnerships that accounted for some of the charges; restated its results since 1997; became the target of an SEC accounting investigation; and accepted a takeover bid from Dynegy Inc., its biggest rival. The company's shares, which ended last year at $83.13, closed at just 61 cents today as Enron's debt was downgraded to junk-bond status and Dynegy abandoned its offer. In response to the plunge, employees in the 401(k) plan -- which allows workers to defer part of their pay and build tax-free savings, and takes its name from a section of the Internal Revenue Service code -- have filed three lawsuits against Enron. The suits allege, among other things, that the Houston-based company prevented employees from shifting investments within the plan between Oct. 17, the day after its disclosure of the charges, and Nov. 19 as the company made administrative changes. All three seek class-action status on behalf of the plan's participants. The most recent filing came from the Gottesdiener Law Firm, based in Washington, on Monday. It covers the longest time period: November 1995 to now. Falling Percentages Enron shares accounted for 64 percent of the savings plan's assets at the end of 1994, the year before the period associated with the Gottesdiener suit began. The figure reflected a one-time company contribution of preferred stock, and rose from 62 percent in 1993. Each preferred share has a face value of $100 and is convertible into 27.304 common shares. This translates into a conversion price of $3.66 a share, a bargain before the common tumbled 85 percent today. The plan also owned a stake in Enron's former oil and gas unit, which became EOG Resources Inc. after gaining independence in 1999. Add in those shares, and company stock represented about two-thirds of the 1994 assets. Enron's common and preferred shares fell to 60 percent of 401(k) assets available for benefits in 1995, 58 percent in 1996 and 53 percent in 1997 as the U.S. stock market rallied, lifting the value of participants' investments in equity mutual funds. The shares represented 49 percent of the plan's assets in 1998. The proportion hit bottom at 46 percent in 1999, when the assets more than doubled -- exceeding the 56 percent increase in Enron's share price that year -- to $1.62 billion. How Much Choice? Then came last year, when the common shares recorded their best performance in more than two decades even as U.S. stocks stumbled. Enron rallied 87 percent amid soaring electricity and natural gas prices, while the Standard & Poor's 500 Index, a market benchmark that includes the company, fell 10 percent. Company shares in the plan rose in value by $652.7 million, according to an SEC filing. The total includes shares bought and sold throughout the year. By contrast, mutual-fund holdings fell by $47 million and ``other investments'' rose by just $134,000, the filing said. At year-end, the 401(k) plan owned 13.9 million Enron common shares and 70,000 preferred shares, valued at $1.32 billion. This total encompasses not only Enron's matching contributions to the plan, but also employees' investments with their own money. The company generally provides a 50 percent match, in stock, for the first 6 percent of pay that goes into the plan. Employees can't sell the shares and move the proceeds into other investment choices until they reach the age of 50. Company contributions accounted for about 11 percent of the plan's stock holdings, said Karen Denne, an Enron spokeswoman. The figure suggests employees invested more heavily in their company than usual for 401(k) participants. Waiting for Data For the average U.S. plan account, company stock amounted to 19 percent of assets at the end of last year, according to a study done by the Employee Benefit Research Institute and the Investment Company Institute and published last week. In any case, Enron's approach to matching ensures that as much as one-third of the contribution to an employee's account takes the form of shares that they can't sell right away. Anyone who wanted to gauge how this approach, and Enron's stock performance, affected the plan's financial position last year had to wait until June 27. That's when the filing cited earlier arrived at the SEC. Employee savings and stock-purchase plans, such as 401(k) plans, don't have to submit annual reports until 180 days after their fiscal year ends. They can even get a 15-day extension of the deadline if they need one. By the time Enron's plan made its annual report, it was already a bit too late to act on the information. The company's shares dropped 44 percent between the end of 2000 and the date of the submission. As the filing demonstrated, employees looking to save for retirement had been set up for a fall. Dynegy Ends Enron Takeover; Credit Ratings Lowered (Update8) 2001-11-28 16:46 (New York) Dynegy Ends Enron Takeover; Credit Ratings Lowered (Update8) (Updates to add Watson comment.) New York, Nov. 28 (Bloomberg) -- Dynegy Inc. abandoned a takeover for Enron Corp., leaving the country's largest energy trader facing bankruptcy. Enron shares plunged 85 percent to below $1 on concern the company can't repay its $15 billion in debt. Dynegy withdrew after bankers failed to raise $1.5 billion Enron needed to operate until the acquisition was completed. Credit rating companies lowered Enron's rating to junk. ``The reality is Enron's going bankrupt,'' said Michael Willingham, a risk manager at Itochu International Inc., a unit of a Japanese trading firm. ``Enron touted themselves as the king of risk management, but it doesn't look like they've managed their risk very well.'' Enron's sudden collapse -- $26 billion of market value evaporated in seven weeks -- deals a blow to Alliance Capital Management Holdings LLP and other big mutual funds, Wall Street lenders, such as J.P. Morgan Chase & Co. and Citigroup Inc., and the 21,000 employees, many of whom were relying on shares of the Houston-based company for their retirement. Bankers led by J.P. Morgan Chase Vice Chairman James B. Lee tried for two weeks to raise the cash Enron needed. Investors including Saudi Prince Alwaleed Bin Talal, the Blackstone Group LP and the Carlyle Group Inc. turned them down because of concern Enron would default. That concern was heightened after Enron disclosed it had a $690 million payment due this week. Enron shares declined $3.50 to 61 cents in trading of more than 342 million shares, the most traded ever for a U.S. stock. The company's 6.4 percent bonds, which mature in 2006, were quoted as low as 20 cents on the dollar, down from 53 yesterday. At that price the bonds yield 57 percent. Termination Dynegy said it abandoned the takeover ``due to breaches by Enron of representations, warrants, and covenants.'' Chief Executive Officer Chuck Watson said Dynegy invoked its right to purchase Enron's Northern Natural Gas pipeline. Dynegy received the right to do so in exchange for an investment of $1.5 billion in Enron by ChevronTexaco Corp., which owns one quarter of Dynegy. The unit operates 16,500 miles of natural gas pipeline. ``Sometimes the best deals are the ones you do not do,'' said Watson, who two weeks earlier had sealed the acquisition over coffee and muffins in the kitchen of Enron CEO Ken Lay's Houston home. ``We felt we had no choice but to act to protect our shareholders' interest,'' Watson said. As the news of Dynegy's rejection flashed across computer screens on Enron's trading floor in Houston, some employees started to abandon their desks and leave the office, an Enron trader said. Several workers said they expect the company to begin firing workers tomorrow to prepare for bankruptcy. ``We will work to retain the employees necessary to the continuing operations of our trading and other core energy businesses,'' said Lay in a statement. Lay was a big backer of George W. Bush's campaign for presidency and said he had held discussions about a job in administration at one point. Enron said in a statement it would halt all payments other than those required to continue trading operations and would review Dynegy's ``assertion'' that it is entitled to the pipeline unit. Pipeline Company From its start as natural gas pipeline company in the 1930s, Enron was transformed by then CEO Jeffrey Skilling into the largest competitor in the business of trading energy, mainly natural gas and electric power. Under Skilling, the company also sought to expand into Internet trading for products ranging from metals to weather derivatives. Skilling resigned in August. Enron shares tripled in the two years ended December 2000, peaking at a market value of more than $70 billion, as the company snared $16.1 billion in long-term energy management contracts from companies such as International Business Machines Corp. and Starwood Hotels & Resorts Worldwide Inc. In the first quarter of 2001, Enron's profit from operations rose 20 percent to $406 million and revenue quadrupled to $50 billion. Enron began to unravel in October after it said shareholders equity was reduced by $1.2 billion because it used stock to pay off debt of a partnership run by then Chief Financial Officer Andrew Fastow. The announcement led to lawsuits and a probe by the Securities and Exchange Commission. The writedown also raised questions about how Enron accounted for debt and losses of similar affiliated partnerships. On Nov. 8, it restated earnings back to 1997, lowering them by $580 million. As its shares plunged, Enron faced a cash crunch because lenders and some trading partners lost confidence the company would have the cash to pay bills. Citigroup and J.P. Morgan Chase offered to pony up $250 million each out $2 billion the company sought. Trading partners such as Mirant Corp. were less forgiving, demanding more collateral or restricting trading. EnronOnline, Enron Corp.'s online trading system, stopped allowing trades and quit posting bids and offers for natural gas this morning, say traders who use the Web site. Enron said yesterday that EnronOnline handled about 60 percent of its trading business, or about $2.8 billion a day. ``We can log in, but there is nothing there, nothing to buy and nothing to sell,'' said Juha Laiho, an energy trader at Finland-based Fortum Oyj in Houston. ``It went down some time this morning.'' Lower Credit Ratings S&P cut its rating on Enron to ``B-'' from ``BBB-'' and Moody's lowered its rating to ``B2'' from ``Baa3.'' Both ratings are below investment grade. The downgrade is significant because the reduction to junk may require Enron to repay $3.9 billion. Andre Meade, an analyst at Commerzbank Securities, said that Enron's junk credit rating would ``effectively shut down the bulk of their trading and marketing operations.'' ``It's not likely Enron will be able to raise the capital to settle those payments and continue its business,'' said Meade. The large debts make it unlikely that investors will receive much should the company file for bankruptcy, said investors. ``This will be a traditional bankruptcy in which equity holders get nothing,'' said Edward Paik, who has 1.6 million Enron shares among $7 billion in assets he helps manage for Liberty Funds Group. ``This company doesn't have the safety net in terms of assets that other companies do.'' Enron's Ratings Cut to Junk by S&P, Moody's, Fitch (Update6) 2001-11-28 16:51 (New York) Enron's Ratings Cut to Junk by S&P, Moody's, Fitch (Update6) (Adds bond prices in 14th paragraph.) New York, Nov. 28 (Bloomberg) -- Standard & Poor's, Moody's Investors Service and Fitch Inc. slashed Enron Corp.'s credit rating to junk status today, raising the prospect of Chapter 11 bankruptcy as rival energy trader Dynegy Inc. rescinded its buyout bid for the company. The company is struggling with a cash crunch as at least $3.9 billion in debt comes due immediately because of the rating cut, and is suspending its online trading unit and some ``non-core'' payments. Enron's trading business is also faltering as trading partners lose faith in the company's ability to meet its obligations. ``This is a disaster,'' said Jon Kyle Cartwright, a debt analyst at Raymond James & Associates. ``It is difficult, if not impossible, for anyone to do trades with Enron's trading operations in light of junk ratings across the board and Dynegy walking away from the deal.'' S&P cut Enron's long-term credit rating this morning six levels to ``B-'' from ``BBB-'' and withdrew its ``A'' short-term grade. S&P analyst Todd Shipman, the author of the rating report, said the rating could be lowered if Enron's cash situation isn't resolved, and that a move to a Chapter 11 bankruptcy filing and the lowest ``D'' rating were both possibilities. ``We saw the deterioration in the trading operations, and that threw the merger in doubt,'' he said. He said S&P may change the rating soon. Following Suit Moody's followed S&P with a five-level cut in Enron's credit rating to ``B2'' from ``Baa3.'' Moody's affirmed its ``Not-Prime'' rating on Enron's commercial paper. Fitch lowered Enron's senior unsecured rating 10 levels, to ``CC'' from ``BBB-,'' and its short-term rating to its second- lowest ``C'' from ``F3.'' Fitch said in its report that a ``default of some kind appears probable.'' Egan-Jones Ratings Co. cut Enron's credit rating to junk on Oct. 26, when it lowered it one level to ``BB+'' from ``BBB-.'' The rating company downgraded the credit several times since then, and cut it to ``C'' today. S&P, Moody's and Fitch all had Enron's credit rating three levels above junk in January, while Egan-Jones rated it four levels higher. The companies cut the ratings several times since October, amid news that Enron's dealings with partnerships run by former Chief Financial Officer Andy Fastow contributed to trading losses. Enron reported $1.01 billion in third-quarter losses from failed investments. Pressure The acquisition by Dynegy promised to alleviate the ensuing cash crunch. Enron's stock fell by more than 50 percent since Nov. 19 amid growing skepticism that the Dynegy would complete the acquisition. ``We became a lot more concerned when the stock didn't stabilize,'' said John Diaz, Moody's managing director for energy and one of the authors of the downgrade report. ``The drop in the stock price put pressure on Dynegy to renegotiate the deal.'' Enron has $15.5 billion of debt outstanding, according to Bloomberg data. Its shares, which have fallen 99 percent this year, lost $3.50 today to 61 cents. The company's bonds dropped by about half to 26 cents on the dollar from 53 cents. S&P's Shipman said in his report that ``the willingness of Dynegy to complete its planned acquisition of Enron has been compromised by the continued drop in confidence in the capital markets that the transaction would hold.'' Credit analysts also focused on Enron's cash flow levels, Diaz said. Enron said in its most recent filing last week that it had $1 billion in cash, which was a lot less than the market had expected, Diaz said. ``It came as a surprise to us and to others,'' he said. ``We expected at least $2.5 billion so they would have staying power.'' CreditSights' Reynolds Comments on Downgrade of Enron to Junk 2001-11-28 16:52 (New York) New York, Nov. 28 (Bloomberg) -- Glenn Reynolds, an analyst at fixed-income research firm CreditSights Inc., comments on the slide in Enron Corp.'s debt ratings to junk levels: ``The likely bankruptcy will generate material losses for a number of banks, Wall Street firms and institutional investors -- including a number who did not face the daily pressures of marking their book to market,'' Reynolds said. ``Some counterparty credit defaults will also have some follow-on effects in the commodity markets, foreign exchange and on swap desks. Many of these counterparties could delay or manage their loss recognition, but this one is now one you cannot hide from. The most interesting issue will be to see the fallout in the default swap market if -- more likely when -- that brutal step is taken and they file Chapter 11.'' Spaeth Communications President Comments on Enron Corp. Outlook 2001-11-28 16:53 (New York) New York, Nov. 28 (Bloomberg) -- Merrie Spaeth, president of Spaeth Communications, comments on Enron Corp.'s options after the company's credit ratings were cut to junk status and Dynegy Inc. abandoned a takeover bid for the company. Dallas-based Spaeth is a communications consultant to Dynegy. ``A Chapter 11 reorganization would be the only way that Enron could resolve the lawsuits it faces and the other issues surrounding the partnerships. ``Chapter 11 carries a whole set of risks on its own, but it gives the company a chance to manage perceptions. It puts a premium on communication, quick, concise and targeted communication -- the antithesis of what Enron has developed in its culture. ``The benefit of a Chapter 11 is that it gives you the opportunity to revamp how you do business.'' Houston Astros President Says Enron's Name Will Stay on Stadium 2001-11-28 17:03 (New York) Houston, Nov. 28 (Bloomberg) -- Enron Corp., left at the brink of bankruptcy after losing potential buyer Dynegy Inc. and having its credit rating cut to junk, has a friend in the Houston Astros. Team President Tal Smith said the club isn't abandoning the company, which is paying $3.3 million annually for 30 years to have its name on the Astros' home ballpark, Enron Field. ``We identify with Enron, and they identify with us,'' Smith said. ``There's no negative association because of their difficulties.'' Enron, the U.S.'s biggest energy trader, entered into the agreement with the Major League Baseball team just before the new stadium opened for the 2000 season. The company's shares were on the way to tripling their value from 1998, and the Astros had just won their third straight National League Central Division title. Since then, the company's fortunes have plummeted. The company has $15 billion in debt and not enough cash to pay it. Dynegy abandoned its plan to buy its Houston neighbor for at least $23 billion in stock and assumed debt today. Enron also has a contract to supply and manage energy for the baseball stadium for the next 30 years, said Dean Bonham, a Denver- based consultant who analyzes and sells naming rights agreements. ``This is more than a naming rights deal,'' Bonham said. ``They're going to eventually have to find another company to supply that service as well as put their name on the ballpark.'' Meantime, the name of the Astros' home won't change, Smith said. ``Until there's no longer a company, it'll still be Enron Field,'' he said. California Power Authority's Freeman Comments on Enron, Dynegy 2001-11-28 17:03 (New York) Sacramento, California, Nov. 28 (Bloomberg) -- The following are comments by California Power Authority Chairman S. David Freeman on Dynegy Inc.'s decision to abandon its purchase of Enron Corp. and the possibility of Enron filing for Chapter 11 bankruptcy protection. ``I don't think that trading of energy in the spot market is going to be materially affected by this. There are a lot of other people who will take up the slack.'' ``I see this as an indication that a very volatile market can kill the consumer, but it can also kill one of the companies.'' ``It's a fascinating footnote that a year ago it was the state of California that appeared to be on the verge of bankruptcy, at least some of the utilities were. And now the shoe has kind of dropped on the other foot.'' ``I take no pleasure in this at all. I don't view this as a happy or good thing, but when you live by the sword, sometimes you die by the sword.'' Enron Corp. Has Busiest Day Ever for a U.S. Stock: Table 2001-11-28 17:19 (New York) Enron Corp. Has Busiest Day Ever for a U.S. Stock: Table New York, Nov. 28 (Bloomberg) -- Enron Corp. had the most- active day for a U.S. stock, with 343 million shares trading, according to preliminary figures from the New York Stock Exchange. Enron plunged $3.50, or 85 percent, to 61 cents a share after Dynegy Inc. abandoned a takeover bid for Enron, leaving the largest energy trader without enough cash to pay its $15 billion in debt. Standard & Poor's Corp. cut Enron's credit rating to junk as bankers failed to raise $1.5 billion Enron needed to operate until the sale was completed. The following is a list of stocks with the 10 highest one-day trading volumes in U.S. market history, according to data from the NYSE and the Nasdaq Stock Market. *T Stock Date Volume (in Millions) Enron Corp. Nov. 28, 2001 343.2 Intel Corp. Sept. 22, 2000 308.7 Cisco Systems Inc. Feb. 7, 2001 281.6 Oracle Corp. March 2, 2001 224.0 Cisco Systems Jan. 10, 2001 213.0 JDS Uniphase Corp. July 26, 2000 200.4 Cisco Systems Oct. 3, 2001 196.5 WorldCom Inc. Nov. 1, 2000 195.5 Exodus Communications Sept. 25, 2001 193.1 Exodus Communications June 21, 2001 186.4 *T Enron Appoints Troubh to Board to Lead Litigation Committee 2001-11-28 17:28 (New York) Enron Appoints Troubh to Board to Lead Litigation Committee Houston, Nov. 28 (Bloomberg) -- Enron Corp., whose shares dropped 85 percent today after Dynegy Inc. walked away from its takeover bid, appointed financial consultant Raymond S. Troubh to the board and to lead a new litigation committee. Enron, the top energy trader whose shares have fallen 99 percent this year, said the committee will evaluate claims from shareholder and other lawsuits filed against the company since the U.S. Securities and Exchange Commission began investigating the company's finances. Enron board member William C. Powers Jr., dean of the University of Texas School of Law, who was appointed last month, will also serve on the litigation committee. Troubh serves on the boards of Starwood Hotels & Resorts, HealthNet Inc. Diamond Offshore Drilling, Triarc Cos. and Gentiva Health Services Inc., among others. He holds degrees from Bowdoin College and Yale Law School and is a former general partner at investment bank Lazard Freres & Co. Shares of Houston-based Enron fell $3.50 to 61 cents. Enron's Problems May Spark Demand for Treasuries, Analysts Say 2001-11-28 17:36 (New York) New York, Nov. 28 (Bloomberg) -- Enron Corp.'s fall to junk credit ratings may benefit Treasury securities as traders and investors worry about what firms have exposure to the Houston, Texas-based energy trader. Gains would add to U.S. government debt that has returned more than 6 percent this year. It benefited from falling stocks and disappointing corporate earnings as well as from the Federal Reserve's 4.5 percentage points of rate cuts aimed at reviving an economy that has been in recession since March. Dynegy Inc., which had agreed to purchase Enron, terminated that agreement following the downgrade. ``Anything with a negative connotation like this, investors get spooked and the first thing they think of is to jump into something safe like Treasuries,'' said Brian Cothran, who helps manage $15 billion in fixed income at Fifth Third Bank in Cincinnati. He said he plans to hold on to the Enron bonds in his portfolio. Treasuries jumped following Standard & Poor's downgrade of Enron Corp. as investors sought the relative safety of debt backed by the U.S. The most-widely traded 10-year note rose to 101 6/32 from 100 25/32 in the 10 minutes after the announcement. The downgrades of Enron by S&P and Moody's Investors Service to junk bond status raised concern about credit ratings of firms that have exposure to the energy trader, especially if it files for bankruptcy protection. The downgrades also triggered Enron's need to repay about $3.9 billion in notes sold by two trusts -- Marlin Water Trust and Osprey Trust. Enron has more than $15 billion in debt and preferred stock and about $4 billion in bank loans, of which $3 billion is unsecured. Swaps, options, and derivative risk aren't included in those figures. Banks and Wall Street dealers hold unsecured Enron loans and some sold credit default swaps, which provide insurance to debt holders in case Enron defaults. Interest Rate Futures Eurodollar futures, indications of three-month interest rates, which are used to hedge risk, rose ``after the announcement that S&P downgraded Enron to junk on a flight to quality bid as traders tried to figure out just how big a calamity this may be,'' said Scott Gelling, an assistant vice president at Carr Futures Inc. in Chicago. ``On a scale of one to 10, with Long-Term Capital Management being a 10, they are wondering where this will fall.'' Swap spreads, a gauge of investors' willingness to buy riskier assets, rose for the fourth day in five after the downgrade, and as major U.S. stock indexes declined. At 72 basis points above the 10-year Treasury yield, the 10-year swap spread has risen 14 basis points from a three year low two weeks ago. Today's move was, in part, a reaction to concerns about exposure some U.S.-based banks may have to Enron, including J.P. Morgan Chase & Co. and Citigroup, which arranged the company's fully drawn $3 billion unsecured credit line, traders said. Seeking Yield The Fed's ten interest-rate cuts this year helped encourage investors to seek higher yields from top investment-grade borrowers including AT&T Corp. and American Express Co. The Fed's cuts also depressed already-low rates on money-market funds and certificates of deposit. The price on Enron's 6.4 percent notes maturing in 2006 tumbled to 20 cents on the dollar from 53 cents yesterday. At that price, the bonds yield 57 percent. Enron's tumble pulled prices down on other corporate bonds as investors worried the recession is eroding companies' ability to repay debts. Corporate yield spreads widened as much as 4 basis points, according to Fidelity Capital Markets. Still, the flight to quality may be short-lived, said Kevin Cronin, who oversees $45 billion at Putnam Investments in Boston, who owns Enron debt. Enron ``is just one credit and I don't think it's indicative of a financial crisis,'' he said. Erasing Gains Treasuries erased gains after the government sold a record amount of two-year debt, and on expectations that sales will increase to pay for the nation's war on terrorism and fiscal spending and tax cuts. Investors selling debt they purchased expecting a flight-to-quality on the Enron news that didn't materialize, exacerbated the sell-off, traders said. The 10-year note lost almost a half point in a half hour, its yield rising to 4.91 percent from 4.87 percent. The note, which has a 5 percent coupon and matures in August 2011, ended the day little changed, yielding 4.92 percent. ``Nobody has a terrific handle on why the market is acting this violently,'' said Brad Stone, director of U.S. market strategy at Barclays Capital. Volatility is increasing into year- end and ``no one wants to take a lot of risk,'' he said. IFR Pegasus's Evans Comments on Enron's Impact on Energy Market 2001-11-28 17:36 (New York) New York, Nov. 28 (Bloomberg) -- Tim Evans, senior energy analyst at IFR Pegasus in New York, comments on the impact on energy trading from the credit crisis that has left Enron Corp. facing bankruptcy. The company's EnronOnline Internet-based platform for trading natural gas, power and oil stopped functioning this morning, at about the same time Dynegy Inc. pulled out of a planned buyout of Enron. That decision came moments after Standard & Poor's cut its credit rating on Enron to junk status. Enron's shares, which peaked at $90.75 in August 2000, plunged $3.50 today to 61 cents. On risks of using EnronOnline, other trading platforms: ``The point isn't to simply give all of your trading to the largest entity possible and then pray they don't collapse. Rather, the point is to actively manage your risk. People will now be spreading it around more and paying more attention to who their risk is really with.'' ``Companies should have been cutting their credit lines with Enron since the summer and should have greatly reduced residual exposures. If not, shame on them. ``Having been burned, traders will be reluctant to load up on the next trading platform that comes along and will look to spread their risk further. The New York Mercantile Exchange may also see more direct trading from companies who recognize that the clearing system inherently spreads the counter-party risk across all of the clearing members.'' On the impact on other energy companies: ``Trading is going to continue, with plenty of volume, as long as companies are looking to lay off price risk somewhere in the market. Much of Enron's roll was as a middleman and these are notoriously replaceable. It's a cliche to state that no one is bigger than the market, but that's what I believe. We'll see, but I don't anticipate a string of bankruptcies to follow this one, at least not among sizable companies. ``Most of the exposures I've heard of are small, relative to the size of the company, Duke (Energy Corp.), with $100 million, for example.'' On futures markets: ``We could see further volatility as Enron closes out positions. The market is also ripe for rumors that they're doing this or that, regardless of the reality. However, I expect this to work it's way through the market within the next week, with business as usual, certainly by the new year.'' Alliance, Janus, Putnam Among Biggest Enron Owners Before Drop 2001-11-28 18:15 (New York) Alliance, Janus, Putnam Among Biggest Enron Owners Before Drop New York, Nov. 28 (Bloomberg) -- John Waterman's money management firm bought Enron Corp. shares for its clients in June, and by the end of September owned 6.2 million shares. Rittenhouse Financial Services Inc. had sold all the shares by the end of October as evidence mounted that the largest energy trader was in trouble, said Waterman, chief investment officer of the firm, which manages $18 billion in Radnor, Pennsylvania. Even he didn't realize just how precarious Enron's position was. ``We lost money,'' said Waterman. ``We're glad we got out when we did. When we started selling it wasn't clear at all that things would unravel in the way they did.'' The stock plunged below $1 today after rival Dynegy Inc. abandoned its proposed purchase of Enron, hammering the portfolios of some of the biggest U.S. investors. The largest holders of Enron shares as of Sept. 30 were Alliance Capital Management Holding LP; Janus Capital Corp., a unit of Stilwell Financial Inc.; Putnam Investment Management Inc., which is owned by Marsh & McLennan Cos.; Barclays Global Investors, a unit of Barclays Plc; and Fidelity Investments, the world's largest money manager. Enron shares have fallen 99 percent this year, wiping out about $77.1 billion in market value. Investors lost $2.61 billion today alone as the stock plunged $3.50, or 85 percent, to 61 cents a share. The stock has posted the biggest decline in the Standard & Poor's 500 Index this year, meaning fund managers with over $1 trillion invested in portfolios that try to mimic the benchmark have followed the stock down. Enron's decline today prompted Standard & Poor's to kick the company out of the S&P 500, used by most professional investors as a benchmark for U.S. stocks. The company will be removed when the market closes tomorrow. Index managers, who mimic the makeup of the S&P as closely as possible, will sell at that time. Other investors are likely to sell as well, if they haven't already, because money managers who pick stocks based on their evaluation of a company's earnings prospects often prefer to stick to stocks that are in the index to ensure their performance doesn't lag the benchmark. Barclays Global, the biggest manager of index portfolios, will sell the stock from S&P 500 index funds, said spokesman Tom Taggart. No Comment Institutional investors are required to tell the Securities and Exchange Commission what they're invested in and how many shares they own. The biggest investors may have sold or bought shares since the last filings Sept. 30. Alfred Harrison, vice chairman and fund manager at Alliance Capital, didn't immediately return a call. John Meyers, a spokesman, declined to comment, as did Janus spokeswoman Shelley Peterson and Fidelity spokesman Vin Loporchio. A call to Putnam spokeswoman Nancy Fisher wasn't immediately returned. The California State Teachers' Retirement System owned about 2 million Enron shares as of June, its latest filing, said Sherry Reser, a spokeswoman. About 88 percent of that stake was in index or index-like funds, she said. ``We would follow whatever rebalancing is done in the index,'' she said. The California Public Employees' Retirement System, the biggest U.S. employee pension fund with about $144 billion in assets, owns about 3 million Enron shares, most of them in an index fund, said spokesman Brad Pacheco. He said the losses won't hurt Calpers overall. ``You're going to have winners and losers,'' Pacheco said. ``It's minimal compared to our entire portfolio.'' Scott Schermerhorn, manager of the $1 billion Liberty Utilities Fund in Boston, said he's in a similar position. He bought shares in the largest energy trader at $10 each this year. He wouldn't say if he had sold his stake, or when. Still, his utilities fund is down 8.7 percent in 2001 versus a 14.5 percent decline in the S&P 500. ``It knocked me for a good loop, but it didn't knock me down,'' he said. The three largest sellers of Enron stock since the end of the third quarter were Rorer Asset Management, Goldman Sachs Group Inc. and American Express Financial. Goldman spokeswoman Kathleen Baum declined to comment. Edward Rorer, chairman of Philadelphia- based Rorer Asset Management, didn't immediately return a call. Spokeswoman Terri Dresen of American Express said the firm has sold shares over the last several months. She said she didn't know how many. Time to Sell The three largest buyers were Alliance, Rittenhouse and Fidelity. The pain extends beyond the stockholders. Enron's 6.4 percent bonds, which mature in 2006, were quoted at 20 cents on the dollar, down from 53 yesterday. Enron exchange notes, which are traded on the New York Stock Exchange and are convertible into shares of EOG Resources Inc., fell $11.76 to $6.15. The notes are tied to Enron's stake in EOG, said EOG spokeswoman Maire Baldwin. EOG is a former Enron unit. Shares of NewPower Holdings Inc. fell 26 cents to 90 cents, giving them a loss for the year of 90 percent. Enron is NewPower's largest shareholder as well as a major creditor. NewPower markets power to homeowners nationwide. In Canada, the Ontario Teachers' Pension Plan, which oversees about C$70 billion (US$44 billion), hasn't sold its stake in NewPower, according to senior vice president of merchant banking James Leech. The plan owned 2.5 million shares and 5.6 million Class A warrants. Standard & Poor's cut Enron's credit rating to junk today as bankers failed to raise $1.5 billion Enron needed to operate until the deal was done. The lack of funds and the prospect of a downgrade contributed to Dynegy's decision to cancel the buyout, which was valued at $23 billion on Nov. 9. ``We've obviously lost money like any other shareholder has,'' Pacheco said. Calpers has the ``same tools in our toolbox - - corporate governance measures, lawsuits like you've seen already filed against Enron -- that any shareholder has in trying to recover any losses, but decisions about using those are going to be made by the board.'' Pacheco said it's likely Calpers won't take any action until the pension fund's board has a chance to talk at a planned meeting on Dec. 17 in Sacramento. ``We would certainly be a member of a class action suit,'' said Taggart of Barclays Global. Schermerhorn said he could sue, though he's not sure if it's worth the trouble, in part because bondholders are typically paid first when a company goes bankrupt. ``It's like suing the guy washing windows outside the Lincoln Tunnel,'' Schermerhorn said. ``You could win, but what would you get?'' Largest Enron Shareholders as of Sept. 30 *T Name Shares AXA Financial 43.01 million Janus Capital 41.36 million Putnam Investment 23.12 million Barclays Global 23.04 million Fidelity Management 20.79 million Citigroup Inc. 20.79 million State Street Global 16.14 million Aim Advisors Inc. 13.99 million Taunus Corp. 12.45 million Vanguard Group 11.45 million *T Source: SEC filings Nvidia to Replace Enron in S&P 500 at End of Trading Tomorrow 2001-11-28 17:40 (New York) Nvidia to Replace Enron in S&P 500 at End of Trading Tomorrow New York, Nov. 28 (Bloomberg) -- Enron Corp. will be dropped from the Standard & Poor's 500 Index and replaced with Nvidia Corp. at the close of trading tomorrow, Standard & Poor's said. Shares of Enron, the largest energy trader, plunged 85 percent to 61 cents today, and the company may go bankrupt. Rival Dynegy Inc. abandoned a takeover of the company after Enron failed to raise enough cash to keep operating until the purchase could be completed. Nvidia, which makes computer-graphics chips, is the best- performing stock in the Nasdaq 100 Index this year, gaining 214 percent. Anheuser-Busch Cos. will replace Enron in the S&P 100, Standard & Poor's said. The largest brewer already is a member of the S&P 500. Intercontinental Exchange's CEO Sprecher Comments on Enron 2001-11-28 18:01 (New York) Atlanta, Nov. 28 (Bloomberg) -- Jeffrey Sprecher, chief executive officer of Intercontinental Exchange Inc., comments on how the downgrade today of Enron Corp.'s credit rating to junk status affected Intercontinental's online energy-trading system. Atlanta-based Intercontinental is owned by a consortium of banks and energy companies, including BP Plc, Duke Energy Corp. and Goldman Sachs Group Inc. ``We had about 3,600 bids and offers'' logged into the Intercontinental system at about 11 a.m., Sprecher said. Within 15 minutes of the credit downgrade by Standard & Poor's, which left Enron's rating at junk status, ``that number dropped to 2,100. So about 40 percent of the people in the market pulled out momentarily to assess what was going on.'' ``It was a very big trading day on ICE. If not a record day, it was one of the top five busiest days we've had. We're up about 65 percent in terms of our trading volumes over the last 30 days, and the number of new users has gone up by about 30 percent. So there's a lot of growth we've been trying to digest in the last 30 days, much of which is attributable to problems at Enron.'' Enron to Continue Utility Sale to Northwest Natural (Update3) 2001-11-28 17:40 (New York) Enron to Continue Utility Sale to Northwest Natural (Update3) (Adds Northwest Natural comment in fourth, fifth paragraphs.) Portland, Oregon, Nov. 28 (Bloomberg) -- Enron Corp., the nearly bankrupt energy trader, plans to go through with the sale of its Portland General Electric Co. utility unit to Northwest Natural Gas Co., both companies said. Enron last month agreed to sell PGE to Northwest Natural for $2.9 billion in cash, stock and assumed debt. Dynegy Inc. today called off its planned purchase of Enron, saying the energy trader breached covenants in the merger agreement. Dynegy had supported the PGE sale. Northwest Natural filed its application to buy PGE with the Oregon Public Utility Commission today. In the application, Northwest Natural said combining its operations with PGE would eventually result in savings of as much as $30 million a year. Northwest Natural will ``have to study'' the potential impact of Enron's latest problems, Northwest Chairman and Chief Executive Officer Richard G. Reiten said. He said he expects the acquisition to move forward. ``We believe it only underscores the merits of the acquisition of PGE by Northwest Natural,'' Reiten said in a conference call with analysts. Enron spokeswoman Karen Denne said her company has no plans to call off the sale. ``We are proceeding with our previously announced asset sales, including Portland General,'' Denne said. Northwest Natural shares fell 47 cents to $23.87. Enron shares fell $3.50 to 61 cents. Enron shares have dropped 99 percent since the first of the year. Commission's Role Marc Hellman, the administrator responsible for mergers and acquisitions at the Oregon Public Utility Commission, said he is unsure what would happen if Enron were to file for bankruptcy protection. `` I can't recall it ever happening, and I've been here for 22 years,'' Hellman said. ``If it went all the way to the end, where they're liquidating assets, you can't sell utility property without commission approval. There are probably some issues where our attorney general's office may look into it.'' Hellman said he has heard nothing to indicate Northwest Natural's purchase of PGE wouldn't go forward. ``Enron was getting cash from Northwest Natural for the purchase, as well as shares,'' Hellman said. ``That aspect of the transaction becomes a little curious if Enron is going through bankruptcy.'' Debt Downgrades Moody's Investors Service today downgraded PGE's senior secured debt to ``A3'' from ``A2.'' Moody's also downgraded PGE's unsecured debt, its junior subordinated debt and its preferred stock. Moody's, Standard & Poor's and Fitch Inc. cut Enron's credit rating to junk status today. The ratings service said it had expected to downgrade PGE's ratings once Northwest Natural completed its acquisition of the utility. ``However, today's rating action is being taken in advance of the expected closing of that transaction to reflect Moody's concerns surrounding Portland General's ability to remain fully insulated from the many financial challenges currently being faced by its parent, Enron Corp., due in large part to lost investor confidence in Enron,'' Moody's said in a statement. Enron Breached Responsibility to Employees, Lawyer Says on CNBC 2001-11-28 17:38 (New York) Houston, Nov. 28 (Bloomberg) -- Enron Corp. breached its fiduciary responsibilities to its employees by allowing them to continue to invest in company stock for their retirement plans, Enron employees' lawyer Eli Gottesdiener said in an interview with financial news network CNBC. The company should have stopped its program that encouraged employees to invest in its shares as part of its 401(k) plan, Gottesdiener said in the interview. The company should have known its stock was artificially inflated, he told CNBC. J.P. Morgan, Citigroup Stumble Advising Enron on Sale to Dynegy 2001-11-28 18:32 (New York) J.P. Morgan, Citigroup Stumble Advising Enron on Sale to Dynegy New York, Nov. 28 (Bloomberg) -- J.P. Morgan Chase & Co. and Citigroup Inc. bet their reputations backing Enron Corp.'s sale to Dynegy Inc. -- and the failed merger left the investment firms with black eyes and hundreds of millions in possible losses. With Dynegy abandoning its proposed takeover today, the banks could lose $800 million each, according to Goldman Sachs Group Inc. financial services analyst Richard Strauss. The banks also stand to forfeit $45 million apiece in advisory fees. ``I'd be surprised if no heads rolled from this,'' said David Gilmore, who manages the $1.1 billion Federated Capital Appreciation Fund, which owns J.P. Morgan and Citigroup shares. J.P. Morgan shares lost $2.30, or 5.8 percent, to $37.50, after the transaction fell apart. Citigroup dropped $2.75, or 5.4 percent, to $47.80. J.P. Morgan spokeswoman Kristin Lemkau declined to comment, as did Citigroup's Salomon Smith Barney investment banking unit. Dynegy withdrew its bid, initially valued at $23 billion, after Standard & Poor's Corp. downgraded Enron debt to junk. For both banks, the takeover would have been the year's third largest. It ranked eighth among all announced takeovers this year. ``Sometimes the best deals are the ones you do not do,'' Dynegy Chairman Charles Watson said in a conference call. ``We know how to say no, and we did that.'' The deal's implosion today, with Enron shares at 61 cents, capped an epic that saw the Houston-based company turn itself from a natural gas pipeline carrier into the largest U.S. energy trader into an outfit with debts of $15 billion it couldn't pay. Enron's Plunge Enron stock began plunging in October -- after falling from its $90.75 peak -- with the disclosure of a Securities and Exchange Commission probe into how the company accounted for outside partnerships it created. Even before Dynegy made its bid on Nov. 9, Citigroup and J.P. Morgan tried to shore up Enron, agreeing to lend the company $1 billion. J.P. Morgan also enlisted Chairman William Harrison to make calls to keep the energy trader's credit above junk rating. Salomon Smith Barney drafted Chief Executive Officer Michael Carpenter in a similar effort. When the takeover was formally proposed, the banks not only made good on their loan commitment: They agreed to invest another $250 million each if other investors could be found. J.P. Morgan Vice Chairman James B. Lee headed a team that tried, and failed, to raise another $1.5 billion. Failed Strategy Among those who turned down Enron and its bankers were Saudi Prince Alwaleed Bin Talal, the Carlyle Group Inc. and Blackstone Group LP. The collapsed transaction may tarnish Citigroup and J.P. Morgan over a questionable strategy of extending commercial lending power to clients to gain higher-margin investment banking business, analysts said. Each bank was formed when a commercial bank took over an investment bank. Behind the formation of the larger banks was the notion they could attract investment banking business from stand-alone investment banks such as Goldman Sachs Group Inc. and Morgan Stanley Dean Witter & Co. that are limited in what they can lend. It was a strategy that failed, at great cost, when the Enron- Dynegy merger fell apart. As the purchase was still taking shape, Goldman Sachs refused to lend to Enron, a client whose credit rating was now falling and who was making less frequent use of Goldman's investment banking services, according to people familiar with the matter. Bankruptcy is `Inevitable' Morgan Stanley avoided Enron because it was perceived as too demanding a client and one that played investment banks off each other to reduce fees, a person familiar with the matter said. Lehman Brothers Holdings Inc. advised Dynegy and negotiated a fee of about $15 million. Enron, the worst performer this year in the Standard & Poor's index of 500 large U.S. companies, fell $3.50 or 85 percent, to 61 cents. Its 52-week high, reached Dec. 28, was $84.88. Now, with Dynegy backing out and no ready savior, Enron may quickly wind up in bankruptcy court, analysts and investors said. ``Bankruptcy is all but inevitable,'' said Michael Heim, an analyst with A.G. Edwards & Sons, who has a ``sell'' rating on Enron shares. Enron Online Trading Unit Stops Operating, Users Say (Update5) 2001-11-28 18:37 (New York) Enron Online Trading Unit Stops Operating, Users Say (Update5) (Adds Nymex Chairman's comment in 26th paragraph.) New York, Nov. 28 (Bloomberg) -- EnronOnline, which handled $2.8 billion a day in energy trading for parent Enron Corp., halted Internet transactions and quit posting prices for natural gas, electricity and oil products, said users of the Web site. Trading screens became useless about 11 a.m. New York time, around when Dynegy Inc. canceled plans to buy Enron. The decision may force Enron, once the country's largest energy trader, to file for Chapter 11 bankruptcy protection, analysts said. Enron was the buyer or seller of all transactions over EnronOnline. The company said yesterday that EnronOnline handled about 60 percent of its trading business, or about $2.8 billion a day in trading on average over the past 30 days. The halt in service left users unable to value or make trades. Some switched to competitors such as Atlanta-based Intercontinental Exchange Inc., an online exchange run by a consortium of banks and energy companies. ``We can log in, but there is nothing there, nothing to buy and nothing to sell'' at EnronOnline, said Juha Laiho, an energy trader at Finland-based Fortum Oyj in Houston. Leslie Vandagriff, manager of natural gas trading at Highland Energy Co., was sitting at her desk in Dallas when ``everything went blank.'' Vandagriff was using EnronOnline prices to compare the value of trades she was making with other companies. She switched to prices published by the Intercontinental Exchange. No Future? Enron temporarily suspended ``all payments other than those necessary to maintain core operations,'' the company said in a statement. Enron officials didn't return numerous phone calls seeking comment on the status of EnronOnline. When the news of the collapse of the acquisition reached Enron traders, many left the trading floor saying that without Dynegy, they had no future, an Enron trader said. Traders outside the company had already been wary of making new contracts with Enron because of concern about its credit rating, which today was slashed to junk status by Standard & Poor's and Moody's Investors Service. ``I don't think anybody is trading with Enron right now,'' Fortum Oyj's Laiho said. ``Even late last week, people were not making new positions with them. It was an unstable situation.'' Small Exposure Some of Enron's biggest trading partners said their exposure to losses from an Enron bankruptcy is small. El Paso Corp., owner of the biggest U.S pipeline network, and American Electric Power Co., the biggest electricity generator, and Aquila Inc., an energy trader, said each faced a possible loss of $50 million. Mirant Corp. said it wouldn't lose more than $60 million, and Dynegy said its exposure was limited to $75 million. ``I don't anticipate a string of bankruptcies to follow this one,'' said Tim Evans, senior energy analyst at IFR Pegasus in New York. ``The energy markets are bigger than any one company, including Enron,'' American Electric spokesman Pat Hemlepp said. ``We don't expect any disruption.'' Energy buyers and sellers have been concerned for weeks that Enron's financial problems may disrupt markets such as the New York Mercantile Exchange, the largest energy marketplace. Enron is the largest trader of natural gas. ``If they have to go to bankruptcy protection now, which may even happen by the end of the day, then Nymex positions will have to be liquidated,'' said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. The Nymex is ``very comfortable that all of our customers are safe from any financial losses suffered by a single entity,'' spokeswoman Nachamah Jacobovits said when asked about Enron. Cover for Losses Enron's positions in futures markets are guaranteed first by the member, or members, that clear its trades on the exchange. If the clearing member couldn't cover losses, the exchange has a $70 million guarantee fund, followed by another $425 million that it could draw on from other members. While natural gas futures surged as much as 8 percent after the news of Dynegy's pullout, prices later declined 11 percent on the Nymex. Gas for December delivery fell 29 cents to $2.316 per million British thermal units. Financial safeguards like those on the Nymex aren't available in most over-the-counter energy markets, including forward and swaps transactions. Few transactions have the backing of an intermediary. ``This will have a near-term chilling effect on forward energy trading business,'' said Tom Knight, director of trading at Truman Arnold Cos., a wholesale fuel supplier in Texarkana, Texas. ``If you're not willing to trade with a company that was the size of Enron, then who are the companies you are going to be willing to deal with?'' Other Exchanges Other online energy exchanges benefited as traders avoided doing business with Enron. NGX Canada Inc., an Internet exchange for natural gas in Canada, has traded about 300,000 terajoules of gas so far this month, worth about $750 million at current prices. Trading is about 50 percent higher than in October. ``Yesterday was our third or fourth best day ever,'' said Dan Zaftawny, a spokesman for NGX, which is owned by OM Gruppen AB, parent of the Stockholm Stock Exchange. Another beneficiary has been Atlanta-based Intercontinental Exchange, which is owned by a consortium that
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