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Enron Mail |
Fall of a Power Giant: Bailout Is Unlikely if Enron Goes Under, As U.S. Thi=
nks Impact Would Be Limited The Wall Street Journal, 11/29/01 Enron's Woes May Ripple Out to Others --- If Energy Company Files For Bankr= uptcy, Results Are Likely to Be Messy The Wall Street Journal, 11/29/01 Fall of a Power Giant: Bailout Is Unlikely if Enron Goes Under, As U.S. Thi= nks Impact Would Be Limited The Wall Street Journal, 11/29/01 Enron's Meltdown May Also Be Felt By Big Mutual Funds The Wall Street Journal, 11/29/01 Why Credit Agencies Didn't Switch Off Enron --- S&P Cries `Junk,' But the W= arning Comes Too Late The Wall Street Journal, 11/29/01 Why Credit Agencies Didn't Switch Off Enron --- Energy Trading Bears the Br= unt Of Enron Woes The Wall Street Journal, 11/29/01 Fall of a Power Giant: Chairman's Deep Political Connections Run Silent The Wall Street Journal, 11/29/01 Dynegy and ChevronTexaco Slide Along With Plunge in Enron Stock The Wall Street Journal, 11/29/01 Dollar Declines Against Yen and Euro Amid Growing Doubts on U.S. Economy The Wall Street Journal, 11/29/01 Dynegy's Move to Disconnect Enron Merger Powers Volatility Spike as Investo= rs Seek Cover The Wall Street Journal, 11/29/01 Enron Asks Staff to Drop 401(k) Suits for Severance The Wall Street Journal, 11/29/01 Nvidia to Replace Enron in S&P The Wall Street Journal, 11/29/01 ENRON COLLAPSES AS SUITOR CANCELS PLANS FOR MERGER The New York Times, 11/29/01 A Bankruptcy Filing Might Be the Best Remaining Choice The New York Times, 11/29/01 An Implosion on Wall Street The New York Times, 11/29/01 Citigroup and J.P. Morgan Are Left With Bruised Egos and Exposure to Loans The New York Times, 11/29/01 In Turbulent Bond Market, Enron's Woes Exacerbate Turmoil The New York Times, 11/29/01 A Big Fall Evoking Nasty Old Memories Of a Run on a Bank The New York Times, 11/29/01 Foundation Gives Way On Chief's Big Dream The New York Times, 11/29/01 Market That Deals in Risks Faces a Novel One The New York Times, 11/29/01 Investors Pull Back as Enron Drags Down Key Indexes The New York Times, 11/29/01 Debt Rankings Finally Fizzle, but the Deal Fizzled First The New York Times, 11/29/01 GLOBAL INVESTING - Bond mutual funds suffer as Enron's troubles deepen. Financial Times, 11/29/01 COMPANIES & FINANCE THE AMERICAS - SEC filing triggered merger crisis. Financial Times, 11/29/01 COMPANIES & FINANCE THE AMERICAS - Financial system braces for a chain reac= tion. Financial Times, 11/29/01 COMPANIES & FINANCE THE AMERICAS - Traders avoid exposure to junk status fa= llout. Financial Times, 11/29/01 COMPANIES & FINANCE THE AMERICAS - Downgrade is the final straw for Enron. Financial Times, 11/29/01 Collapse of Merger Pushes Enron to Brink of Ruin Energy: Bankruptcy filing = is likely as stock value withers and bonds fall to 'junk' status. Los Angeles Times, 11/29/01 Enron Failure's Ripple Effects Analysis: Observers say consequences could b= e severe for energy prices as well as banks and other investors. Firm's tra= ding rivals see opportunities. Los Angeles Times, 11/29/01 Markets Enron Troubles, Uncertainty Send Stocks Tumbling Wall St.: Sellers = gain the upper hand, but many analysts say markets were due for a pullback. Los Angeles Times, 11/29/01 Enron on edge of collapse=20 Houston Chronicle, 11/29/01 Enron trading screens go bland; other firms reasuring investors=20 Houston Chronicle, 11/29/01 Bankruptcy filing by Enron could be largest ever Houston Chronicle, 11/29/01 Ballpark Place project stopped dead in tracks Houston Chronicle, 11/29/01 Fall of a Power Giant: Bailout Is Unlikely if Enron Goes Under, As U.S. Thi= nks Impact Would Be Limited By Greg Ip and Jathon Sapsford Staff Reporters of The Wall Street Journal 11/29/2001 The Wall Street Journal A10 (Copyright © 2001, Dow Jones & Company, Inc.) WASHINGTON -- If Enron Corp. goes under, the government is unlikely to thro= w it a lifeline.=20 At its peak, Enron was a major participant in the country's financial and e= nergy markets. But economic and financial policy makers say they aren't wor= ried about any broader blow to markets or business activity. Despite freque= nt comparisons to Long-Term Capital Management, the hedge fund whose 1998 n= ose dive panicked global financial markets and triggered an unusual bailout= brokered by the Federal Reserve, there has been so far no public sign of a= ny attempt by the Fed, the Treasury or energy regulators to take similar ac= tion on behalf of Enron or its creditors. Officials from a range of economic and regulatory agencies have insisted in= recent days that while they have been closely monitoring Enron's situation= , they haven't seen any reason to be concerned about possible ripple effect= s. Enron "is just one piece of a very big market," said John Mielke, chief = of market surveillance at the Commodity Futures Trading Commission. Mr. Mie= lke said he saw no evidence that Enron's problems have disrupted trading on= the futures exchanges monitored by the CFTC.=20 "These are deep and pretty big markets that Enron is in," echoed William Gi= lmer, an economist at the Federal Reserve Bank of Dallas.=20 It is too soon to say exactly what the total damage from Enron's potential = demise will be. One danger is that a blowup in the company's complex, large= ly unregulated portfolio of derivatives could infect financial markets in w= ide and unpredictable ways, just as LTCM's did. Another worry: that the col= lapse of a major middleman in natural-gas and power markets could disrupt s= upplies.=20 Enron does share some characteristics with LTCM, including widespread activ= ities in complicated financial instruments in numerous markets, with little= detailed public explanation of those activities, and little regulatory ove= rsight of those trades.=20 Its public disclosures suggest Enron's exposures are substantial. A quarter= ly filing listed $18.7 billion in assets and an equal amount of liabilities= related to "price risk management activities" as of Sept. 30. The filing g= ives no description or breakdown of those amounts and little detail about t= he derivatives in which Enron transacts as a normal part of business. (A de= rivative is a financial contract whose value is designed to track the retur= n on stocks, bonds, currencies or other benchmark.) An Enron spokeswoman di= dn't return a call seeking comment.=20 As Enron's woes deepened, the government's hands were tied in even assessin= g the situation, in part because the company was part of a coalition of ene= rgy companies and banks that lobbied successfully three years ago against C= FTC efforts to expand regulation of the over-the-counter energy market. Enr= on also worked behind the scene to head off CFTC's direct regulation of the= energy concern's EnronOnline trading operation.=20 There have been some signs in markets of concerns about Enron fallout. Inte= rest rates on bonds of utilities and energy companies rose by one- to two-t= enths of a percentage point relative to Treasurys yesterday. By day's end, = the Dow Jones Industrial Average was off 160.74 points, a decline blamed in= part on the Enron news.=20 Those are relatively small hiccups. The betting is the impact of Enron's tr= oubles on the financial system will be widespread but thin. Enron was a fav= orite borrower among lenders, and its loans were among the most widely synd= icated among the banking system, both at home and abroad. For example, a $2= .25 billion credit facility arranged for Enron in May by Citigroup Inc. and= J.P. Morgan Chase & Co. was distributed to 50 different institutions, acco= rding to Loan Pricing Corp., a credit-market research company. Those syndic= ation members sold off chunks of that debt to other investors, according to= a banker at one of the underwriters.=20 J.P. Morgan Chase said in a statement that it has $500 million of unsecured= exposure to Enron entities, including loans, letters of credit and derivat= ives. It said it also has secured exposures, including $400 million in loan= s secured by Enron pipelines. While this exposure is expected to smart, it = represents a small fraction of J.P. Morgan Chase's total assets of $715 bil= lion. Citigroup declined to comment on its exposure to Enron, but officials= familiar with the matter said the bank's exposure is similar to that of J.= P. Morgan Chase.=20 Beyond financial fallout, a concern is the potential impact on energy marke= ts and what that could do to the economy. Enron's troubles could hamper eff= orts to end the recession if the company's difficulties make it impossible = for it to deliver natural gas or electricity to its customers.=20 Natural-gas prices rose sharply yesterday in the minutes after three major = credit-rating agencies downgraded Enron's rating and Dynegy Inc. said it wa= s calling off its purchase. But the move quickly reversed when traders dige= sted gas-inventory numbers released in the afternoon that showed utilities = have stored enough gas to meet demand ahead of the winter heating season.= =20 "We've seen no interruptions in physical deliveries and no pricing reaction= in the futures markets that you could attribute to Enron," said Scott Mill= er, director of market development for the Federal Energy Regulatory Commis= sion. "Revenues and transactions are occurring normally as far as we can te= ll."=20 ---=20 Michael Schroeder, Chip Cummins and John Fialka contributed to this article= . Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's Woes May Ripple Out to Others --- If Energy Company Files For Bankr= uptcy, Results Are Likely to Be Messy By Henny Sender and Richard B. Schmitt Staff Reporters of The Wall Street Journal 11/29/2001 The Wall Street Journal A3 (Copyright © 2001, Dow Jones & Company, Inc.) The sudden, deep financial troubles of Enron Corp., the once aggressive, ma= ny-tentacled energy conglomerate, could have widespread consequences for sc= ores of companies across the economy.=20 If Enron files for protection under Chapter 11 of the federal Bankruptcy Co= de, as many investors and financial experts now expect, it is likely to be = one of the messiest, most complex bankruptcy cases ever, lawyers say. That is because of the multifaceted nature of Enron's once highflying opera= tions, which combined a global energy business with a massive financial-tra= ding operation involving tens of billions of dollars in complex contracts. = Yesterday, amid the unraveling of a last-ditch merger with Dynegy Inc., the= company's credit was downgraded to "junk" status by rating agency Standard= & Poor's Corp. Enron has about 800 trading partners or creditors.=20 The stock market, signaling that a bankruptcy filing is expected, hammered = Enron stock, which was halted for a time yesterday, and knocked lower some = of its financial backers' shares. Enron shares closed at 4 p.m. in New York= Stock Exchange composite trading at 61 cents, down $3.50, or 85%. Enron bo= nds also fell sharply, dropping to 50 cents on the dollar from around 55 ce= nts, reflecting concerns over how much creditors might receive if the compa= ny does seek bankruptcy-court protection. J.P. Morgan Chase and Citigroup, = which have invested hundreds of millions of dollars in hopes of keeping the= Enron-Dynegy deal alive, also saw their stocks fall. At 4 p.m. in NYSE com= posite trading, J.P. Morgan shares were down $2.30 to $37.50, while Citigro= up shares were down $2.75 to $47.80.=20 J.P. Morgan Chase said in a statement it has about $500 million of unsecure= d exposure to Enron entities, including loans, letters of credit, and deriv= atives. It said it also has secured exposures, including $400 million in lo= ans secured by Enron pipelines.=20 Other companies also disclosed their exposures to Enron. Exelon Corp., an e= nergy concern in Chicago, said its power-trading arm has a direct net expos= ure to Enron of less than $10 million, based on its current book of busines= s and existing market prices. Exelon said its direct gross exposure based o= n sales to Enron is less than $20 million. Exelon said this is partly offse= t by $10 million that it owes to Enron.=20 Still, while the fallout from a potential bankruptcy filing would be widesp= read, federal regulators appear little concerned that it could inflict sign= ificant damage to the U.S. economy. (See related article on page A10.)=20 The scale of the Enron collapse is huge, experts say. "There is nothing to = compare it to," said Edward Tillinghast, a bankruptcy specialist with Coude= rt Brothers in New York. "The business was so large. There were so many dif= ferent kinds of operating entities under the Enron umbrella."=20 In a way, he added, a filing would represent all the challenges of two of t= he biggest bankruptcies in recent years -- this past spring's Chapter 11 fi= ling by PG&E Corp.'s Pacific Gas & Electric utility unit, and the demise of= Drexel Burnham Lambert, the Wall Street securities firm that failed more t= han a decade ago. A filing by Enron, with about $13 billion in debt, would = rank among the largest bankruptcy filings ever.=20 Bankruptcy lawyers and creditors' rights specialists, already swamped with = a wealth of work from a boom in Chapter 11 filings during the last 18 month= s, said they had been contacted by worried banks and other lenders to Enron= , seeking to retain them in the event of a Chapter 11 filing. Enron spokesw= oman Karen Denne said the company is exploring its options and wouldn't com= ment on whether it has retained bankruptcy counsel.=20 But lawyers said the company was already in discussions about retaining its= own counsel. Among the likely advisers is New York law firm Weil Gotshal &= Manges, which has been doing mergers work for Enron but also specializes i= n representing debtors in Chapter 11 proceedings. Lawyers at Weil Gotshal d= idn't return phone calls yesterday.=20 Ironically, Enron's trading arm, which fueled huge profits over the years, = could end up creating some unusual problems in any Chapter 11 case. One of = the messiest aspects of any potential filing would be unwinding the myriad = swaps, repurchase agreements and forward agreements that Enron entered into= with bankers, Wall Street and numerous municipalities and utilities. Such = transactions aren't subject to the automatic freeze that governs most contr= acts when a company files for Chapter 11; the idea is to protect all partie= s from market risk as the value of those contracts can fluctuate from day t= o day, and to avoid a larger financial meltdown.=20 That means Enron's counterparties are free to close out such transactions, = rather than file claims in a bankruptcy proceeding reflecting the total not= ional amount of any trades. In other words, a securities firm that is a cou= nterparty to Enron in many financial contracts would tally up how much it o= wes Enron under such contracts and how much Enron owes it, offsetting the a= mounts against each other. But this process is ripe for conflicts, as dispu= tes easily could arise over the value of the contracts.=20 "It is an incredibly complex piece of financial engineering," Andrew Rahl, = a bankruptcy lawyer at Anderson Kill & Olick in New York, said of the proce= ss.=20 How much collateral those counterparties could seize isn't at all clear, ei= ther. Enron was considered very aggressive in negotiating agreements such a= s swaps, where a party trades an obligation to pay a floating interest rate= for a fixed interest rate on given securities. The speed with which the co= mpany's finances have deteriorated further reduces the odds that its tradin= g partners will be able to get paid anytime soon. Without any security, cou= nterparty claims would go into the probably massive general pool of claims = from unsecured creditors.=20 Besides banks and bondholders, dozens of companies, municipalities and util= ities that had signed multiyear power contracts with Enron may be left in t= he lurch. Over the years, the likes of retailer J.C. Penney Co., and shoppi= ng-mall company Simon Property Group, of Indianapolis, signed on with Enron= , as it undercut local utilities in newly deregulated markets.=20 Any bankruptcy also is likely to trigger collateral lawsuits, as aggrieved = parties look for alternative deep pockets. One possible target, analysts sa= id, could be advisers that helped Enron establish off-balance-sheet vehicle= s and other debt related to troubled investment partnerships, which have tr= iggered massive losses in recent weeks. Moreover, Enron directors themselve= s could be vulnerable, too.=20 Yesterday, Enron named Raymond S. Troubh, a New York financial consultant, = to its board as chairman of a newly formed Special Litigation Committee to = evaluate claims in shareholder and other derivative lawsuits.=20 At the same time, any filing would give Enron some advantages, most notably= greater ease in securing financing. This is because once companies file fo= r protection, any new cash infusion from the banks has an overriding claim = on any of the company's assets, at the expense of previous lenders.=20 In addition, potential buyers for Enron businesses may be more likely to em= erge once the company is operating with court protection and the depth of i= ts problems are known.=20 "There is a certain comfort level that buyers have when buying a business i= n a Chapter 11 case that doesn't exist when a company is struggling outside= of bankruptcy," said Keith Shapiro, a bankruptcy lawyer at Greenberg Traur= ig in Chicago. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Fall of a Power Giant: Bailout Is Unlikely if Enron Goes Under, As U.S. Thi= nks Impact Would Be Limited By Greg Ip and Jathon Sapsford Staff Reporters of The Wall Street Journal 11/29/2001 The Wall Street Journal A10 (Copyright © 2001, Dow Jones & Company, Inc.) WASHINGTON -- If Enron Corp. goes under, the government is unlikely to thro= w it a lifeline.=20 At its peak, Enron was a major participant in the country's financial and e= nergy markets. But economic and financial policy makers say they aren't wor= ried about any broader blow to markets or business activity. Despite freque= nt comparisons to Long-Term Capital Management, the hedge fund whose 1998 n= ose dive panicked global financial markets and triggered an unusual bailout= brokered by the Federal Reserve, there has been so far no public sign of a= ny attempt by the Fed, the Treasury or energy regulators to take similar ac= tion on behalf of Enron or its creditors. Officials from a range of economic and regulatory agencies have insisted in= recent days that while they have been closely monitoring Enron's situation= , they haven't seen any reason to be concerned about possible ripple effect= s. Enron "is just one piece of a very big market," said John Mielke, chief = of market surveillance at the Commodity Futures Trading Commission. Mr. Mie= lke said he saw no evidence that Enron's problems have disrupted trading on= the futures exchanges monitored by the CFTC.=20 "These are deep and pretty big markets that Enron is in," echoed William Gi= lmer, an economist at the Federal Reserve Bank of Dallas.=20 It is too soon to say exactly what the total damage from Enron's potential = demise will be. One danger is that a blowup in the company's complex, large= ly unregulated portfolio of derivatives could infect financial markets in w= ide and unpredictable ways, just as LTCM's did. Another worry: that the col= lapse of a major middleman in natural-gas and power markets could disrupt s= upplies.=20 Enron does share some characteristics with LTCM, including widespread activ= ities in complicated financial instruments in numerous markets, with little= detailed public explanation of those activities, and little regulatory ove= rsight of those trades.=20 Its public disclosures suggest Enron's exposures are substantial. A quarter= ly filing listed $18.7 billion in assets and an equal amount of liabilities= related to "price risk management activities" as of Sept. 30. The filing g= ives no description or breakdown of those amounts and little detail about t= he derivatives in which Enron transacts as a normal part of business. (A de= rivative is a financial contract whose value is designed to track the retur= n on stocks, bonds, currencies or other benchmark.) An Enron spokeswoman di= dn't return a call seeking comment.=20 As Enron's woes deepened, the government's hands were tied in even assessin= g the situation, in part because the company was part of a coalition of ene= rgy companies and banks that lobbied successfully three years ago against C= FTC efforts to expand regulation of the over-the-counter energy market. Enr= on also worked behind the scene to head off CFTC's direct regulation of the= energy concern's EnronOnline trading operation.=20 There have been some signs in markets of concerns about Enron fallout. Inte= rest rates on bonds of utilities and energy companies rose by one- to two-t= enths of a percentage point relative to Treasurys yesterday. By day's end, = the Dow Jones Industrial Average was off 160.74 points, a decline blamed in= part on the Enron news.=20 Those are relatively small hiccups. The betting is the impact of Enron's tr= oubles on the financial system will be widespread but thin. Enron was a fav= orite borrower among lenders, and its loans were among the most widely synd= icated among the banking system, both at home and abroad. For example, a $2= .25 billion credit facility arranged for Enron in May by Citigroup Inc. and= J.P. Morgan Chase & Co. was distributed to 50 different institutions, acco= rding to Loan Pricing Corp., a credit-market research company. Those syndic= ation members sold off chunks of that debt to other investors, according to= a banker at one of the underwriters.=20 J.P. Morgan Chase said in a statement that it has $500 million of unsecured= exposure to Enron entities, including loans, letters of credit and derivat= ives. It said it also has secured exposures, including $400 million in loan= s secured by Enron pipelines. While this exposure is expected to smart, it = represents a small fraction of J.P. Morgan Chase's total assets of $715 bil= lion. Citigroup declined to comment on its exposure to Enron, but officials= familiar with the matter said the bank's exposure is similar to that of J.= P. Morgan Chase.=20 Beyond financial fallout, a concern is the potential impact on energy marke= ts and what that could do to the economy. Enron's troubles could hamper eff= orts to end the recession if the company's difficulties make it impossible = for it to deliver natural gas or electricity to its customers.=20 Natural-gas prices rose sharply yesterday in the minutes after three major = credit-rating agencies downgraded Enron's rating and Dynegy Inc. said it wa= s calling off its purchase. But the move quickly reversed when traders dige= sted gas-inventory numbers released in the afternoon that showed utilities = have stored enough gas to meet demand ahead of the winter heating season.= =20 "We've seen no interruptions in physical deliveries and no pricing reaction= in the futures markets that you could attribute to Enron," said Scott Mill= er, director of market development for the Federal Energy Regulatory Commis= sion. "Revenues and transactions are occurring normally as far as we can te= ll."=20 ---=20 Michael Schroeder, Chip Cummins and John Fialka contributed to this article= . Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's Meltdown May Also Be Felt By Big Mutual Funds 11/29/2001 The Wall Street Journal C13 (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -- Some of the largest mutual funds in the country that jumped on = Enron Corp. shares when they were soaring now may be feeling the pain of th= e stock's meltdown.=20 The energy-trading company's stock was held in funds managed by Fidelity In= vestments, Stilwell Financial Inc.'s Janus Capital Corp., Alliance Capital = Management and Putnam Investments, according to the funds' most recent Secu= rities and Exchange Commission filings. Vanguard Group held the stock in va= rious portfolios, including its giant passively managed index funds, accord= ing to its filings. One of the biggest supporters of the stock has been Alliance Premier Growth= Fund, an $11 billion portfolio that had about 4% of its assets in Enron sh= ares as of Sept. 30, according to fund tracker Morningstar Inc. Based on th= e Sept. 30 filing, the fund's stake had dropped in value by about $445 mill= ion through yesterday.=20 Of course, Alliance Premier and other funds may have sold or bought Enron s= hares since they made their latest government filings. An Alliance spokesma= n declined to comment.=20 Other funds reporting big stakes in Enron recently included Janus Mercury F= und, which had 3.6% of its assets invested in Enron stock on April 30. A Ja= nus spokeswoman said its funds had sold all of their Enron shares by mid-No= vember. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Credit Markets Why Credit Agencies Didn't Switch Off Enron --- S&P Cries `Junk,' But the W= arning Comes Too Late By Gregory Zuckerman and Jathon Sapsford Staff Reporters of The Wall Street Journal 11/29/2001 The Wall Street Journal C1 (Copyright © 2001, Dow Jones & Company, Inc.) At 10:57 a.m. EST yesterday, an announcement came out that effectively scut= tled Dynegy Inc.'s proposed takeover of Enron Corp. It was issued not by th= e two companies or their bankers, but by a behind-the-scenes player that wa= s pivotal in the deal from the start.=20 The news came from Standard & Poor's, which lowered Enron's credit rating t= o "junk" status, because of concern about the energy trading company's fina= ncial condition. The move, followed by similar downgrades by Moody's Invest= ors Service Inc. and Fitch Inc. several hours later, prompted Dynegy to ann= ounce that it was walking away from the multibillion dollar deal. The downgrades highlight the key role that credit-rating agencies -- which = are sometimes only bit players -- are having in one of the biggest Wall Str= eet dramas in years. Before they became deal breakers, the ratings agencies= had emerged as unlikely deal makers just a few weeks ago, by leaving Enron= little choice but to seek a merger partner or face a downgrade that would = have made it difficult to keep running its business.=20 Throughout the Enron saga, the rating agencies found themselves the target = of repeated and intense lobbying by Enron, Dynegy and their bankers at J.P.= Morgan Chase & Co. and Citigroup Inc. All tried -- and ultimately failed -= - to come up with assurances that the merger would bolster Enron and thus p= rotect bondholders and lenders from suffering losses.=20 The dramatic downgrades are sure to increase scrutiny over the role of the = rating agencies in the Enron situation. Critics say that, in waiting until = Enron's bonds already had plummeted in value, the ratings agencies failed i= n their job of anticipating a company's financial problems and giving inves= tors an early warning.=20 It now seems clear that the rating agencies, like most securities analysts,= seem to have too easily accepted Enron's murky financial reporting, which = gave the impression that the company's balance sheet was stronger than it w= as. As recently as late October, both Moody's Corp.'s Moody's and McGraw-Hi= ll Cos.' S&P had a solid investment-grade rating on Enron's debt.=20 But since credit-rating agencies often have access to company information t= hat securities analysts often don't have, the rating agencies could take so= me heat for not anticipating the financial difficulties. Bond investors, fo= r instance, say S&P was prematurely upbeat about Enron's outlook earlier th= is month, and long ago should have demanded more information from the compa= ny. "If the rating agencies were privy all along to information that, as ne= ar as I can tell, was nonpublic regarding these off-balance-sheet liabiliti= es, then their judgment looks even more faulty," says Carol Levenson of Gim= me Credit, a Chicago-based analyst.=20 Others wonder whether the ratings executives should have lowered the rating= to junk days ago, when Enron's problems became obvious. While such a move = would have crippled the company's ability to find a suitor, holding off on = the ratings move hurt stock and bond investors left holding the securities.= =20 "I don't think the consequences of a rating action should have anything to = do with whether one takes that rating action or not, if one feels it's warr= anted," Ms. Levenson says. "I don't think there was any doubt Enron was a j= unk credit."=20 The ratings agencies counter that Enron's financial condition, while weaken= ed, became precarious only in the past few days, and given the consequences= of a downgrade they needed to be prudent.=20 Indeed, every party to the deal -- until yesterday -- kept working to provi= de financial infusions to Enron to keep the deal alive. Enron executives we= re particularly desperate to hold off a ratings downgrade. Once the debt wa= s lowered to junk status from investment grade, a whopping $3.9 billion of = debt immediately became due, jeopardizing Enron's ability to stay afloat.= =20 Worries about such a debt downgrade weeks ago pushed Enron into the merger = with Dynegy, despite reservations from some Enron executives about whether = the deal was right. Enron pledged some of its best assets to secure a $500 = million investment from J.P. Morgan Chase and Citigroup's Citibank, and agr= eed to strict terms demanded by banks to get an emergency $1 billion credit= line from various banks. In recent days, the two companies worked to restr= ucture their merger and to raise still more liquidity for Enron.=20 By 4 p.m. Tuesday, the credit agencies agreed to hold off on a downgrade, c= onvinced the two sides were making progress in restructuring the deal and d= rumming up new money for Enron. In a conference call, Ron Barone, a managin= g director at S&P, told Enron executives he was willing to wait on a decisi= on, aware of the serious consequences of a downgrade.=20 "We'll be very patient and diligent" because of the progress being made, he= told them, according to someone familiar with the conversation.=20 As late as 10:30 p.m. Tuesday, a new deal still seemed in sight. But at abo= ut 2 a.m. yesterday, the talks broke down. Instead of being briefed about t= erms of a new merger agreement, the credit-agency executives became doubtfu= l a resolution would ever be reached.=20 In a late morning phone call to Jeff McMahon, Enron's chief financial offic= er, Mr. Barone broke the news that the company's credit would be downgraded= . "We lost confidence the deal would be consummated in a way that would kee= p the rating intact," Mr. Barone says in an interview. "Enron's credibility= and viability continued to diminish. They were aware of our concerns."=20 S&P downgraded Enron's corporate-credit rating two full grades to single-B-= minus, near the lower end of the junk-bond world, from triple-B-minus, the = lowest investment-grade level. Moody's lowered the debt to B2 from Baa3.=20 In a late-afternoon conference call with investors, S&P executives said the= rating could still be lowered further, on the heels of the official announ= cement that the merger with Dynegy was off.=20 Responding to criticism that the credit agencies should have downgraded Enr= on's debt sooner, Mr. Barone of S&P notes that the rating agency wasn't "pr= ivy to everything." Still, he adds, until yesterday "we were confident it w= as an investment-grade company, and that the merger would give it the secur= ity to enable Enron to function at an investment-grade level."=20 On the flip side, of course, if Enron is forced into bankruptcy, the rating= agencies may well catch heat that their impact was too drastic, effectivel= y killing the deal.=20 Treasurys=20 Treasurys ended slightly higher. At 4 p.m., the benchmark 10-year Treasury = note was up 1/32 point, or 31 cents per $1,000 face value, at 100 15/32 to = yield 4.938%. The 30-year Treasury bond's price also was up 1/32 point, at = 100 9/32 to yield 5.355%.=20 The Dow Jones Industrial Average ended with a loss of 160.74 points. Invest= ors often shift funds to the relative safety of the government securities m= arket at times when stocks are weak. A Treasury sale of $21 billion of two-= year notes drew less demand than expected. The bid-to-cover ratio, a gauge = of demand comparing the dollar value of bids received with those awarded, w= as 1.51, well below the 2.53 average of the past 12 auctions.=20 Also somewhat bearish for the bond market was release of the Fed's beige bo= ok report, an assessment of economic conditions around the country in advan= ce of policy meetings. Policy makers are to meet again Dec. 11.=20 Although the report cited weakness in the economy, it didn't encourage peop= le in the bond market to expect further rate cuts by the Fed, analysts said= . "Not everybody is in the camp that the Fed's going to ease again," said K= evin Flanagan, market strategist at Morgan Stanley.=20 TWO-YEAR NOTES Here are results of yesterday's Treasury auction of two-year notes. All bids are awarded at a single price at the market-clearing yield. Rates are determined by the difference between that price and the face=20 value. Applications ........................ $31,761,220,000 Accepted bids ....................... $21,000,020,000 Bids at market-clearing yld accepted 14.96% Accepted noncompetitively ........... $774,120,000 Accepted frgn noncomp ............... $0 Auction price (Rate) ................ 99.985 (3.008%) Interest rate ....................... 3% CUSIP number ........................ 9128277G1 The notes are dated Nov. 30, 2001, and mature Nov. 30, 2003.=20 (See related article: "Commodities: Energy Trading Bears the Brunt Of Enron= Woes" -- WSJ Nov. 29, 2001) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Commodities Why Credit Agencies Didn't Switch Off Enron --- Energy Trading Bears the Br= unt Of Enron Woes By Peter A. McKay Staff Reporter of The Wall Street Journal 11/29/2001 The Wall Street Journal C1 (Copyright © 2001, Dow Jones & Company, Inc.) Less than a month ago, Enron Corp.'s electronic trading system was the larg= est of its kind in the world, accounting for a quarter of all the natural g= as and electricity delivered in the U.S.=20 Yesterday, the system was shut down, a victim of Enron's failed deal with D= ynegy Inc. While the rise and sudden fall of Enron rippled throughout financial market= s yesterday, nowhere was it more immediately evident than in energy trading= , an arena utterly transformed by Enron in recent years.=20 Since the late 1990s, EnronOnline had established itself as the dominant el= ectronic energy marketplace -- and major competitor of the traditional futu= res exchanges -- as it grew to handle an average of 5,400 trades a day, wit= h a value of about $2.8 billion.=20 But a flight away from Enron began weeks ago, as initial news of the compan= y's woes began to spread. Because Enron itself guaranteed trades on its pla= tform, fears grew that the company might not be able to complete many of th= e transactions.=20 The exodus of trading activity from EnronOnline accelerated throughout the = day yesterday, culminating in the system's shutdown around midday, when quo= tes on the system's Internet trading screens simply went blank.=20 By 3:30 p.m. EST, some trading had resumed in natural gas, though spokesman= Eric Thode declined to say whether Enron's markets would be open today. "T= hat's part of an evaluation that's ongoing," he said.=20 On the floor of the New York Mercantile Exchange, a traditional floor-based= futures market, natural-gas trading volume almost doubled yesterday to 116= ,000 contracts. While Enron's woes were the main driver behind the surge, t= he market also reacted to important storage data from the American Gas Asso= ciation.=20 Natural-gas prices jumped about 25 cents yesterday morning on an initial re= action to the Enron news, near $3 per million British thermal units, then s= lipped back as the AGA announced that gas storage had grown by 16 billion c= ubic feet to an all-time high. The nearby December contract fell 29 cents t= o $2.315 per million BTUs.=20 "Anyone who jumped into the gas market on the Enron news is praying right n= ow [that prices recover]," Guy Gleichmann, senior energy trader at Barkely = Financial. "It should only be a short-term factor in the market."=20 He said Enron's collapse has helped gas prices because it is mainly seen as= a threat to the overall gas supply. Traders assume EnronOnline's problems = won't affect actual energy deliveries, because whoever takes over Enron's a= ssets is expected to honor those commitments.=20 Meantime, anticipating potential fallout from the Enron problems, energy fi= rms also have been reducing their financial risk in the energy markets by u= nwinding complex derivatives bets, either by hedging against them or taking= delivery of the physical commodity.=20 In the future, those firms are likely to favor straightforward cash transac= tions for energy as a result of the Enron meltdown. "If anything, the Enron= situation has really simplified this market," Mr. Gleichmann said.=20 Yesterday on the IntercontinentalExchange, Enron's primary electronic rival= , traders waited up to five minutes to log in, said Jeff Sprecher, the onli= ne market's chief executive.=20 He said it seemed most traders were just jockeying for position at first, a= ssessing the newfound risk before actually making any trades. Within the fi= rst 15 minutes after Standard & Poor's initial downgrade of Enron, Mr. Spre= cher said, the number of bids and offers on IntercontinentalExchange droppe= d by almost a third, to 2,200.=20 "By the end of the day, though, we expect this will probably be a record da= y for us," said Mr. Sprecher, who estimated the system's overall volume is = up 45% this month.=20 He expects much of that gain to be permanent on ICE, although he cautioned = that a loss of EnronOnline from the marketplace would have a downside, sinc= e its presence created opportunities to trade spreads between the two platf= orms.=20 Nymex President J. Robert Collins warned it is still too early to declare E= nronOnline dead. But he said its difficulties bode well for his exchange's = Internet-based system, dubbed eNymex, now in development.=20 "Because of credit issues involving Enron, companies might be more hesitant= to trade there," he said. "So we have a better shot with eNymex than we di= d three or four months ago."=20 Ronald J. Barone, managing director for energy research at UBS Warburg, sai= d EnronOnline's value to prospective acquirers will drop quickly in coming = days, if the business continues to decline.=20 "Dynegy really liked EnronOnline, but look at how much business the platfor= m's been losing," said Mr. Barone, who downgraded Enron's stock yesterday t= o a hold. "There's also a question of how many more skeletons there are in = the closet."=20 In commodity trading yesterday:=20 GRAINS: Futures prices on corn, wheat and soybeans all fell again at the Ch= icago Board of Trade as what was described as a technical-based selloff acc= elerated. December-delivery corn futures sank to $1.9850 a bushel late in t= he session, which wiped out the old contract low. The contract ended up set= tling down five cents at $1.9875 a bushel.=20 CRUDE OIL: Crude-oil futures slipped 26 cents to $19.22 a barrel after week= ly inventory data showed a larger-than-expected five-million-barrel build i= n distillates supplies, which include heating oil. High refinery runs and i= mports were behind the build, analysts said. The contract might have fallen= even more, except for a modest drop reported for crude-oil stocks.=20 ---=20 Dyanna DeCola contributed to this article.=20 (See related article: "Credit Markets: S&P Cries `Junk,' But the Warning Co= mes Too Late" -- WSJ Nov. 29, 2001) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Fall of a Power Giant: Chairman's Deep Political Connections Run Silent By Bob Davis Staff Reporter of The Wall Street Journal 11/29/2001 The Wall Street Journal A10 (Copyright © 2001, Dow Jones & Company, Inc.) For years, Enron Corp. Chairman Kenneth Lay has been George W. Bush's best = friend in the board rooms of America's top corporations.=20 Since 1993, Mr. Lay and Enron have donated nearly $2 million to Mr. Bush's = political career, making them Mr. Bush's biggest backers. When Mr. Bush was= Texas governor, Mr. Lay, a Houston resident, helped him win passage of a s= tate education-reform plan that brought Mr. Bush national acclaim. During t= hat fight, Mr. Lay got to know aides who became power players in the Bush W= hite House. Mr. Lay was confident enough of his friendship with Mr. Bush that he even n= eedled him for needing arthroscopic surgery to repair a jogging injury. "I = want you to know that at least one jogger [me] got past 50 without that sur= gery," Mr. Lay scribbled in a note to then governor in 1997.=20 Still, as Enron faces its greatest crisis, Mr. Lay's influence and personal= relationships with the administration have amounted to little. There appea= rs to be no effort by the White House or Congress to bail Enron out of its = difficulties, which are widely seen as self-inflicted. The White House had = no comment on Mr. Lay's predicament, a spokeswoman said. Indeed, short of a= n actual bailout to help Enron meet its obligations -- such as an aid packa= ge approved by Congress or organized by government officials from private s= ources, similar to the rescue of the Long Term Capital Management hedge fun= d -- there is little Washington can do at this stage to help the company. N= or is there likely to be a bailout, since Enron has burned many bridges on = Capitol Hill with its history of strong-arm lobbying tactics, some congress= ional aides say.=20 That may reassure a cynical public, says Robert Mosbacher, Commerce Secreta= ry in the first Bush administration and a longtime friend of the current pr= esident as well as Mr. Lay. "I don't see anybody being let off the hook," h= e said.=20 Mr. Mosbacher says he introduced Mr. Lay to the Bush family around 1987, wh= en he persuaded Mr. Lay to help raise money for George H.W. Bush's successf= ul presidential bid in 1988. Mr. Lay contributed $461,000 to the younger Mr= . Bush's two successful gubernatorial campaigns. He also made Enron's fleet= of corporate jets available to Mr. Bush and won his help in lobbying offic= ials in other states considering Enron projects.=20 His influence with then-Gov. Bush was based on more than money. Mr. Lay was= one of the state's leading business executives and deeply involved in Texa= s politics. Under Mr. Bush's predecessor, Democrat Ann Richards, Mr. Lay he= aded the Governor's Business Council, a state advisory board. Mr. Bush aske= d him to stay on the job to help develop an educational reform plan and sel= l it to the Texas Legislature.=20 In that capacity, Mr. Lay became close to several Bush aides, including pol= itical guru Karl Rove and communications adviser Karen Hughes, who have tak= en positions at the White House. He also got to know another leading Texas = businessman: Dick Cheney, then CEO of Dallas oil concern Halliburton Co., w= ho would become Mr. Bush's pick for vice president.=20 Against this backdrop, Mr. Lay was widely considered a top candidate for Tr= easury Secretary in the younger Bush's administration. Ultimately though, h= e was disqualified, Bush insiders say, as too closely identified with Mr. B= ush, Mr. Cheney and others who worked in the Texas energy business for an a= dministration that wanted to show it wasn't in the pocket of big oil compan= ies.=20 Early on, Mr. Lay had unrivaled access to the administration. When the pres= ident's advisers debated a new energy policy in the spring, Mr. Lay was the= only energy executive to be invited for a one-on-one session with Mr. Chen= ey, who led the effort. Mr. Lay also worked with Mr. Rove and others to suc= cessfully push for appointments to the Federal Energy Regulatory Commission= , which oversees much of Enron's business.=20 As Enron's problems multiplied and its fortunes plummeted, however, the Whi= te House was silent. During a several-hour long interview in the spring, Mr= . Lay mused that his Bush connections could boomerang someday. "It could hu= rt, from the standpoint that, at some point, they lean in the other directi= on to make sure they don't face criticism," he said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Fall of a Power Giant: Chairman's Deep Political Connections Run Silent By Bob Davis Staff Reporter of The Wall Street Journal 11/29/2001 The Wall Street Journal A10 (Copyright © 2001, Dow Jones & Company, Inc.) For years, Enron Corp. Chairman Kenneth Lay has been George W. Bush's best = friend in the board rooms of America's top corporations.=20 Since 1993, Mr. Lay and Enron have donated nearly $2 million to Mr. Bush's = political career, making them Mr. Bush's biggest backers. When Mr. Bush was= Texas governor, Mr. Lay, a Houston resident, helped him win passage of a s= tate education-reform plan that brought Mr. Bush national acclaim. During t= hat fight, Mr. Lay got to know aides who became power players in the Bush W= hite House. Mr. Lay was confident enough of his friendship with Mr. Bush that he even n= eedled him for needing arthroscopic surgery to repair a jogging injury. "I = want you to know that at least one jogger [me] got past 50 without that sur= gery," Mr. Lay scribbled in a note to then governor in 1997.=20 Still, as Enron faces its greatest crisis, Mr. Lay's influence and personal= relationships with the administration have amounted to little. There appea= rs to be no effort by the White House or Congress to bail Enron out of its = difficulties, which are widely seen as self-inflicted. The White House had = no comment on Mr. Lay's predicament, a spokeswoman said. Indeed, short of a= n actual bailout to help Enron meet its obligations -- such as an aid packa= ge approved by Congress or organized by government officials from private s= ources, similar to the rescue of the Long Term Capital Management hedge fun= d -- there is little Washington can do at this stage to help the company. N= or is there likely to be a bailout, since Enron has burned many bridges on = Capitol Hill with its history of strong-arm lobbying tactics, some congress= ional aides say.=20 That may reassure a cynical public, says Robert Mosbacher, Commerce Secreta= ry in the first Bush administration and a longtime friend of the current pr= esident as well as Mr. Lay. "I don't see anybody being let off the hook," h= e said.=20 Mr. Mosbacher says he introduced Mr. Lay to the Bush family around 1987, wh= en he persuaded Mr. Lay to help raise money for George H.W. Bush's successf= ul presidential bid in 1988. Mr. Lay contributed $461,000 to the younger Mr= . Bush's two successful gubernatorial campaigns. He also made Enron's fleet= of corporate jets available to Mr. Bush and won his help in lobbying offic= ials in other states considering Enron projects.=20 His influence with then-Gov. Bush was based on more than money. Mr. Lay was= one of the state's leading business executives and deeply involved in Texa= s politics. Under Mr. Bush's predecessor, Democrat Ann Richards, Mr. Lay he= aded the Governor's Business Council, a state advisory board. Mr. Bush aske= d him to stay on the job to help develop an educational reform plan and sel= l it to the Texas Legislature.=20 In that capacity, Mr. Lay became close to several Bush aides, including pol= itical guru Karl Rove and communications adviser Karen Hughes, who have tak= en positions at the White House. He also got to know another leading Texas = businessman: Dick Cheney, then CEO of Dallas oil concern Halliburton Co., w= ho would become Mr. Bush's pick for vice president.=20 Against this backdrop, Mr. Lay was widely considered a top candidate for Tr= easury Secretary in the younger Bush's administration. Ultimately though, h= e was disqualified, Bush insiders say, as too closely identified with Mr. B= ush, Mr. Cheney and others who worked in the Texas energy business for an a= dministration that wanted to show it wasn't in the pocket of big oil compan= ies.=20 Early on, Mr. Lay had unrivaled access to the administration. When the pres= ident's advisers debated a new energy policy in the spring, Mr. Lay was the= only energy executive to be invited for a one-on-one session with Mr. Chen= ey, who led the effort. Mr. Lay also worked with Mr. Rove and others to suc= cessfully push for appointments to the Federal Energy Regulatory Commission= , which oversees much of Enron's business.=20 As Enron's problems multiplied and its fortunes plummeted, however, the Whi= te House was silent. During a several-hour long interview in the spring, Mr= . Lay mused that his Bush connections could boomerang someday. "It could hu= rt, from the standpoint that, at some point, they lean in the other directi= on to make sure they don't face criticism," he said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Abreast of the Market Dynegy and ChevronTexaco Slide Along With Plunge in Enron Stock By Robert O'Brien Dow Jones Newswires 11/29/2001 The Wall Street Journal C2 (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -- The collapse of Enron dominated stock trading yesterday, as a h= ost of the power generators and energy merchants exposed to the firm tumble= d.=20 Shares of Dynegy, the suitor for Enron that pulled out of a deal after debt= -rating agencies lowered their ratings on Enron's bonds, fell 4.92, or 12%,= to 35.97. ChevronTexaco, which owns 26% of Dynegy, slid 1.07, or 1.2%, to = 84.55. Shares of Enron itself were ground down more than 85%. The loss of $3.50 br= ought the closing price of each Enron share down to 61 cents. This from a s= tock that, as recently as August 2000, commanded more than $90 a share.=20 A host of other energy merchants, such as El Paso, which lost 3.59, or 7.4%= , to 44.91, Williams, which shed 1.80, or 6.2%, to 27.05, and American Elec= tric Power, which fell 2.03, or 4.8%, to 40.44, all got caught in the backl= ash against the energy market.=20 The Dow Jones Utility Average finished the session down 8.48 points, a drop= of 2.94%, to 279.95, which brought it down to a 52-week low.=20 Shares of two giant financial-services providers also got caught by their e= xposure to Enron, and paid the price. Shares of Citigroup fell 2.75, or 5.4= %, to 47.80, while J.P. Morgan Chase slid 2.30, or 5.8%, to 37.50.=20 With those two components in decline, the Dow Jones Industrial Average fini= shed the session 160.74 points lower, a loss of 1.63%, to 9711.86. The Nasd= aq composite slid 2.48%, or 48 points, to 1887.97.=20 The Dow industrial average's finish at 9711.86 represented the lowest close= the average has posted in more than two weeks, since ending at 9554.37. Tr= aders insisted that the speed and apparent ease with which market averages = have managed to lard on gains over the past several weeks has stretched val= uations, and left equities vulnerable to events, like the Enron sell-off, t= hat a sturdier market might have more handily absorbed.=20 "One of the most important overriding factors has been the performance of t= he market itself," Arthur Hogan, chief market analyst at Jefferies, said. "= The market has moved straight up seven weeks in a row, and when it moves up= in a straight line like that, it doesn't take much in the way of a catalys= t to tip it over."=20 Whether it was excuse-making or profit-taking, the market did have to absor= b some fundamental challenges in the session, including an especially pessi= mistic assessment of economic conditions from the Federal Reserve. The cent= ral bank released its Beige Book report on economic conditions, which showe= d, overall, the economy tilted more toward further slowing than it did towa= rd recovery.=20 That helped further puncture shares of some of the retailers that got wayla= id in Tuesday's trading by a bearish consumer sentiment reading. Shares of = Gap, stung by a reduction in its investment rating by Prudential Securities= , lost 79 cents, or 5.5%, to 13.61. Shares of another apparel retailer, Ame= rican Eagle Outfitters, lost 1.3, or 5.9%, to 24.40, while Talbots dropped = 1.25, or 3.6%, to 33, and discounter Kohl's fell 84 cents, or 1.2%, to 67.8= 6.=20 Meanwhile, some of the classic cyclical stocks that have had good runs over= the past several weeks as investors bet on an eventual economic recovery g= ave ground. Shares of Boeing fell 1.33, or 3.7%, to 34.17, after J.P. Morga= n reduced its earnings forecasts for 2002 and 2003. Whirlpool lost 1.12, or= 1.7%, to 64.98. Auto-parts maker Eaton declined 1, or 1.4%, to 69.60. Gene= ral Electric, also subject to some downbeat comments from J.P. Morgan, fell= 1.72, or 39.35.=20 Continental Airlines lost 2.40, or 10%, to 21.70. The air carrier completed= a public offering of 6.74 million shares of stock priced at $22.50, a disc= ount to Tuesday's closing price of 24.10.=20 Coca-Cola declined 1.06, or 2.2%, to 46.75. J.P. Morgan said it expects slo= wer volume growth ahead for the beverage maker's bottlers. Shares of Coca-C= ola Enterprises, Coke's biggest bottler, eased 40 cents, or 2.3%, to 17.=20 Magna International rose 1.54, or 2.6%, to 61.51. Salomon Smith Barney star= ted coverage of the Canadian auto-components maker with a buy rating.=20 Medtronic gained 1.74, or 4%, to 45.78. The Minneapolis medical-device make= r reported fiscal second-quarter results that matched Wall Street's project= ions, and said it expected to live up to third-quarter forecasts.=20 Foot Locker eased 19 cents, or 1.2%, to 15.70, after mixed views from rival= brokers. RBC Capital Markets started coverage of the stock with a strong b= uy rating, but Jefferies reduced its coverage of the stock to accumulate fr= om buy. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Foreign Exchange Dollar Declines Against Yen and Euro Amid Growing Doubts on U.S. Economy By Grainne McCarthy Dow Jones Newswires 11/29/2001 The Wall Street Journal C14 (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -- Growing doubts about the U.S. economy's ability to rebound quic= kly from recession weighed heavily on the dollar, pushing the currency down= almost a full yen and helping the euro regain some lost ground.=20 Weakness in U.S. stocks -- due partly to news that Dynegy Inc. decided to w= alk away from its deal to buy Enron Corp. -- also put pressure on the dolla= r, while Enron's debt woes added to general skittishness about the ability = of U.S. business to bounce back quickly. "We know there are companies out there in trouble," said Lara Rhame, econom= ist at Brown Brothers Harriman in New York, who said that while the Enron d= evelopments weren't having a direct impact on foreign-exchange markets, suc= h reports do "limit the kind of superdollar that we saw back in 1999."=20 The dollar selloff kicked off in Asian trading, when dealers used a Standar= d & Poor's downgrade of Japan's sovereign rating as an excuse to buy the ye= n. The downgrade to double-A from double-A-plus was better than the market'= s expectations of a two-notch downgrade, rendering it good news of sorts.= =20 The selling continued in New York trading, as traders continued to price in= the possibility that they may have been far too optimistic about the dolla= r.=20 The two-pronged catalyst for this change of heart was the weak November con= sumer confidence index released Tuesday, and subsequent gloomy comments fro= m Federal Reserve Governor Laurence Meyer pointing to more downside risks t= o the economy. The release of the Federal Reserve's beige book report yeste= rday served only to flame this pessimism.=20 The Fed said that further slowing outweighed signs of recovery for the U.S.= economy this autumn, noting that economic activity generally remained soft= in October and the first half of November.=20 "People wanted greater signs of recovery than they got from the Fed," said = Alan Ruskin, research director at the 4Cast financial consultancy in New Yo= rk.=20 The beige book, a summary of economic activity prepared for use at the cent= ral bank's next Federal Open Market Committee meeting Dec. 11, is widely vi= ewed as an indicator of future monetary policy decisions and the report hel= ped to solidify expectations of a rate cut of at least a quarter percentage= point.=20 Late yesterday in New York, the euro was at 88.84 U.S. cents, its high for = the session and up from 88.34 cents late Tuesday in New York. The dollar wa= s at 123.11 yen -- around its intraday low -- and almost a full yen down fr= om 123.96 yen late Tuesday in New York. The dollar was also at 1.6460 Swiss= francs, down from 1.6484 francs in London and 1.6560 francs Tuesday. Sterl= ing was at $1.4261, up from $1.4185 earlier in London and $1.4153 late Tues= day.=20 Elsewhere, the Canadian dollar climbed to its highest levels in almost a mo= nth, confounding the view that bad news for the U.S. is bad news for Canada= .=20 The Canadian currency has tended to suffer from an association with the U.S= ., given that 85% of Canada's exports head south of the border. However, a = 0.50-percentage-point rate cut by the Bank of Canada on Tuesday was quickly= followed by the gloomy consumer confidence report in the U.S., which under= cut faith in the dollar and appeared to give the Canadian unit just the opp= ortunity it was seeking.=20 Late in the New York day, the U.S. dollar was at C$1.5842, down from C$1.59= 39 late Tuesday. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Options Report Dynegy's Move to Disconnect Enron Merger Powers Volatility Spike as Investo= rs Seek Cover By Kopin Tan Dow Jones Newswires 11/29/2001 The Wall Street Journal C14 (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -- Anxiety crept back into the options market, as investors watche= d the major stock indexes slip and Enron's already-decimated stock slide be= low $1 in record trading volume.=20 The Chicago Board Options Exchange's market-volatility index, or VIX, rose = 2.54 to 27.75. The 10.1% increase marks the largest one-day percentage jump= for the options fear gauge's since Oct. 12, a long spell during which vola= tility had subsided while stocks rallied. Strike prices on Enron options had tumbled to once-unimaginable levels as t= he energy company's woes mounted and its stock skidded. Yesterday, as Dyneg= y called off its proposed acquisition, volatility of Enron options spiked t= o well over 300%, mirroring the instability of the underlying stock. Many i= nvestors scrambled to sell calls -- either to unwind prior positions or to = pocket any income they could -- while others bought puts for downside prote= ction. Calls and puts are options to buy or sell a security at a specific p= rice, usually within a limited period.=20 Dynegy's implied volatility also jumped, as its stock fell $4.92, or 12%, t= o $35.97. The near-month calls traded more heavily than the puts, likely be= cause the high premiums made it costly for investors looking to buy puts. S= ome investors sold out-of-the-money calls to take advantage of the volatili= ty level. At the CBOE, Dynegy's out-of-the-money December 40 calls fell $2.= 25 to $1.35 on volume of 6,581 contracts, while 3,241 contracts traded at t= he American Stock Exchange.=20 As investors sought downside protection, the ratio of equity puts traded to= calls at the CBOE continued to rise, from 0.53 Monday to 0.66 Tuesday to 0= .7 yesterday, the highest reading this month.=20 In recent months, investors have treated market pullbacks as opportunities = to hunt for bargains; in fact, such "buying on the dip" has helped propel s= tock prices. With stocks up substantially from their September lows, invest= ors still are browsing but are seeking added insurance, with many buying de= fensive puts to lock in a minimum selling price for the stock.=20 Sprint's January 25 puts traded more than 13,000 contracts at the Amex as a= n investor bought stock along with those puts. Specifically, the investor b= ought about 5,000 contracts of the puts, then bought a put spread by buying= 8,000 contracts of January 25 puts that expire 2002 and selling the same n= umber of January 25 puts that expire 2003.=20 Shares of Sprint's PCS unit fell $1.14 to $25.90. At the Amex, the January = 25 puts were at $1.15 on volume of 13,005 contracts, compared with open int= erest of 2,799. The January 25 puts that expire in 2003 were at $4.40 on vo= lume of 8,005 contracts, compared with open interest of 8,826. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Asks Staff to Drop 401(k) Suits for Severance 11/29/2001 The Wall Street Journal C13 (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -- Enron Corp., the subject of four lawsuits filed over losses in i= ts employees' 401(k) retirement plan, is asking laid-off workers to waive l= egal claims against it in exchange for some of their severance payments.=20 Attorneys for some of the employees sought to block that requirement. Plain= tiffs are seeking an "immediate preliminary injunction prohibiting Enron fr= om soliciting any releases which would affect the participants' rights vis = a vis the plan," according to an amended complaint filed by Seattle firm Ca= mpbell Harrison & Wright. The complaint, filed in federal district court in Houston, asks the court "= to appoint a neutral fiduciary to manage the plan." The suit claims Enron i= s laying off as much as 60% of its staff in some departments.=20 An Enron attorney, in a statement, said laid-off employees aren't required = to sign the waiver to get severance pay, but will get "additional severance= in exchange" for signing. She said Enron hadn't modified the waiver "in re= sponse to the current economic circumstances of the company," but added tha= t Enron "continues to evaluate its options regarding the severance-pay plan= ." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Nvidia to Replace Enron in S&P 11/29/2001 The Wall Street Journal C13 (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -- Standard & Poor's said Nvidia Corp., a Santa Clara, Calif., gra= phic-chip maker, will replace Enron Corp. in the S&P 500-Stock Index after = today's regular trading. S&P said Enron, the Houston energy concern whose m= erger with Dynegy Inc. unraveled yesterday, is being removed for lack of re= presentation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section A ENRON'S COLLAPSE: THE OVERVIEW ENRON COLLAPSES AS SUITOR CANCELS PLANS FOR MERGER By RICHARD A. OPPEL Jr. and ANDREW ROSS SORKIN 11/29/2001 The New York Times Page 1, Column 1 c. 2001 New York Times Company Enron, the champion of energy deregulation that grew into one of the nation= 's 10 largest companies, collapsed yesterday, after a rival backed out of a= deal to buy it and many big trading partners stopped doing business with i= t.=20 Enron, based in Houston, was widely expected to seek bankruptcy protection.= With $62 billion in assets as of Sept. 30, it would be the biggest America= n company ever to go bankrupt, dwarfing the filing by Texaco in 1987. Late = in the day, though, Enron's chief financial officer, Jeff McMahon, said tha= t the company was still talking to banks about a restructuring and consider= ing other options. Talks with its would-be rescuer Dynegy, also of Houston, about salvaging th= e deal ended in acrimony.=20 Dynegy, which had agreed on Nov. 9 to buy Enron but had second thoughts as = Enron disclosed more financial problems and investors pummeled its stock, a= ccused Enron of misrepresenting the health of its business.
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