|
|
Enron Mail |
AT ENRON, THAT RUN-DOWN FEELING
BusinessWeek, 10/29/01 PRESS RELEASE: Enron Corp Outlook Now Negative By S&P 2001-10-25 17:24 (New York) Concerned Energy Cos Make Few Changes In Enron Dealings Dow Jones Energy Service, 10/25/01 Enron woes fuel online energy trade jitters Reuters, October 25, 2001 Enron's Trading Partners Say It's Business as Usual (Correct) Bloomberg, 10/25/01 Kenneth Lay Resigns from i2 Board of Directors Business Wire, 10/25/01 Average Investors Need Access to Good Info About Bonds RealMoney.com, 10/25/01 Enron shares finish lower CBSMarketWatch.com, 10/25/01 Selective buying wipes out early losses Associated Press Newswires, 10/25/01 Stock of the Day: Enron CNNfn: The Money Gang, 10/25/01 In Business This Week AT ENRON, THAT RUN-DOWN FEELING Edited by John Protos 10/29/2001 BusinessWeek 40 (Copyright 2001 McGraw-Hill, Inc.) The good times are looking even farther away for Enron. The company's inability to extend its energy-trading model to some other commodities is proving increasingly costly. On Oct. 16, the nation's top natural-gas trader and leading wholesale electricity marketer reported a $1.01 billion charge. Among other things, that covers recent forays into broadband and water trading--as well as the unraveling of a pair of limited partnerships. Those partnerships had raised questions about conflicts of interest. Until recently, they had been overseen by the company's CFO, Andrew Fastow, even though they were outside entities that bought assets from Enron. The aftertax charge was one reason the company posted a $618 million loss in the third quarter, vs. a profit of $292 million in the year-ago period. Without the charge, Enron would have shown a profit of $393 million for the quarter. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. PRESS RELEASE: Enron Corp Outlook Now Negative By S&P 2001-10-25 17:24 (New York) Following is a press release from Standard & Poor's: NEW YORK (Standard & Poor's) Oct. 25, 2001--Standard & Poor's today affirmed its ratings on Enron Corp. (triple-'B'-plus/'A-2') and subsidiaries and revised its long-term ratings outlook to negative due to concerns that the significant drop in market capitalization in the past week has adversely affected the company's financial flexibility and could impede management's ability to pursue plans to rebuild its balance sheet. (A complete list of ratings is available on RatingsDirect, Standard & Poor's on-line credit research service, or by calling the Standard & Poor's Ratings Desk at (1) 212-438-2400.) Ratings for Portland General Electric Co. remain on CreditWatch with negative implications pending the announced acquisition of Portland by Northwest Natural Gas Co. Enron expects to use asset sales proceeds over the next year to restore its balance-sheet strength to a level that is consistent with the current ratings. The negative outlook acknowledges the potential for erosion of the company's credit quality as investor confidence in the company's management has waned and concerns have arisen about the possible long-term effects on their core marketing and trading business. Standard & Poor's is closely monitoring Enron's capital needs and liquidity position, which are crucial to the continued success of its core business operations, and does not believe the company is threatened by liquidity concerns. Enron will be challenged to economically convert its sizable portfolio of non-strategic assets into cash to reduce debt and strengthen its balance sheet. Despite the negative outlook, several factors supportive of Enron's credit quality have been sustained throughout the uncertainty surrounding the company. The fundamental strength of Enron's energy marketing and trading franchise has remained steady. Standard & Poor's has detected no lapses in the company's risk management practices and trading discipline. No significant deterioration in trading volumes or willingness of counterparties to transact with Enron has been revealed to Standard & Poor's in contacts with major energy market participants. Moreover, the strategic direction of the company is likely to become more credit-positive in the wake of recent management changes. The prior emphasis on growth initiatives and the constant need for new capital to fund those initiatives have constrained credit quality, and if the company is led to concentrate on its core energy businesses and refrain from committing capital to more speculative ventures in the future, the credit profile will improve as the company proceeds with the strengthening of its financial position. Assurances from the top levels of Enron management that the company will maintain its commitment to its credit quality and that no steps are being taken to support the company's common stock price at the expense of credit quality provide further support for Enron's ratings. OUTLOOK: NEGATIVE The negative outlook for Enron is based on the considerable challenges facing the company as it attempts to reduce balance-sheet leverage through asset dispositions in a timely manner. Any shortfall in the company's willingness or ability to restore the balance sheet through sales proceeds and new equity issuances would result in a ratings downgrade. Current ratings will be stabilized if the company can successfully reduce financial risk while maintaining the ability of its operations to produce sustainable cash flow and earnings without increasing its business risk. Concerned Energy Cos Make Few Changes In Enron Dealings By Mark Golden, Kristen McNamara, Jon Kamp and John Edmiston Of DOW JONES NEWSWIRES 10/25/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Energy trading companies have concerns about the credit quality of troubled Enron Corp. (ENE), but they have made almost no changes in policies concerning the top trader of North American power and gas, the companies said Thursday. The concerns have arisen because Enron, which accounts for about a quarter of the trade in the country's power and gas markets, has seen its share price fall by a third this week due to uncertainties about its extremely complex financial structure. Moody's has put Enron's credit on watch for possible downgrade, and some of the company's debt is trading like junk bonds in the secondary market this week. "We have made no changes to our credit policy concerning Enron," said John Sousa, chief spokesmann for Dynegy Inc. (DYN). "It's business as usual." Williams Cos. (WMB) spokesman Jim Gipson said that his company, too, has made no changes and has no concerns about Enron's credit. Another Top 10 power and gas trading company, Aquila (ILA), has also left Enron credit unchanged. Other companies expressed concern, though they've taken little if any action. "Like everyone else in the marketplace, we're proceeding with caution," said Lora Kinner, director of credit for Tractebel Energy Marketing, the North American subsidiary of the Belgian company Tractebel S.A. Kinner said the company is just looking for more information and doesn't expect to make any drastic changes. Like many utilities, the Public Service Co. of New Mexico (PNM) is "monitoring the situation." So is Aquila, said Mark Gurley, general manager of trading at the company. "We haven't altered our credit policy at all," Gurley said. But if Enron's credit rating slips, "our tolerances for risk with them would go down," he said. A trading manager for another energy company said that all energy and financial companies that have dealings with Enron are assessing their exposure. But that manager's company has made no changes and doesn't expect Enron to have cash liquidity problems. One large firm has been limiting the credit it extends to Enron for the past month. A gas trader with another firm has been encouraged to do more business on other energy trading platforms like the InterContinental Exchange. Enron, however, is far too big to cut off entirely, traders said. Energy trading companies depend on Enron as the major market maker for their commodities. Enron built the over-the-counter wholesale gas marketplace, and more recently its two-year-old electronic trading platform, EnronOnline, has become a major marketplace for gas and power, accounting for 25% of those markets, according to one recent estimate. Enron is the counterparty to every trade on the system. EnronOnline grew so quickly because of the company's policy that traders must offer aggressive two-way spreads - both bids and offers - on the commodities they trade. Any reduction in EnronOnline volumes could translate to an immediate liquidity problem for North American power markets. "If there is a problem with Enron, there's going to be domino effect through the industry," Tractebel's Kinner said. Uncertainties about Enron's financial situation have aggravated the volatility of gas futures on the New York Mercantile Exchange, a trader said. Gas and power traders said that Enron traders are moving to liquidate some positions and, because the company's problems are well known, it is getting squeezed in the market, which would discount the return on positive positions. Enron traders have few outstanding favors to call on with counterparties, because Enron traders have been so aggressive over the years, the trading manager said. Analysts have raised questions about Enron's difficulties on a number of conference calls held by other energy companies to discuss their quarterly earnings reports. One of those companies, Sempra Energy (SRE), said it was monitoring the situation but saw little risk so far. "At this point, there's no reason for concern," Sempra spokesman Doug Kline said. "We continue to trade with them, and they're covering their margins." -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com (Kristen McNamara, Jon Kamp in Chicago and John Edmiston in Houston contributed to this article.) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron woes fuel online energy trade jitters October 25, 2001 04:31 PM ET Reuters By Gelu Sulugiuc NEW YORK, Oct 25 (Reuters) - Enron Corp.'s (ENE.N <quotelogic.jhtml?ticker=ENE.N<) almost daily revelations of fresh troubles has prompted concerns its powerful position in online energy trading could prompt a credit crunch and rock the fast-growing industry. Though experts said on Thursday that EnronOnline, Enron's Web trading platform, should survive, investors are skittish about the No. 1 U.S. natural gas and electricity marketer. Since last week Enron has shed more than $13 billion in market value as shares plunged, forcing it on Wednesday to replace its chief financial officer, who was linked to transactions now under investigation by government regulators. In the latest blow, credit rating agency Fitch on Thursday placed Enron debt securities on negative credit watch, saying the erosion of investor confidence, if unabated, would impair the company's access to capital markets "We put them on a list of concerns two months ago and made sure our books were balanced just as the first stage of precaution," said one energy trader active on EnronOnline. About 60 percent of all transactions by Enron are captured through EnronOnline, and so far traders have kept faith. On Wednesday, EnronOnline -- in which trades always involve Enron as either the buyer or seller -- conducted 8,000 transactions through its site, with a notional value of $4 billion, more than daily its average of $3.5 billion. "People are transacting at higher levels as they prepare their portfolios for the winter and to protect themselves from price volatility," said Vance Meyer, an Enron spokesman. RUNAWAY SUCCESS Not even Enron itself anticipated the success of EnronOnline, which enjoys the highest volume of any platform in the cut-throat field of Internet energy trade. Initially, the company set a yearly trading volume target of $30 billion to 40 billion -- business it now does in 10 days alone. Yet traders worry Enron's spectacular fall from grace could make it a less solid counterparty in certain eyes after transactions with two limited parterships run by Andrew Fastow sparked investigations by the U.S. Securities and Exchange Commission. Enron replaced Fastow as its CFE on Wednesday in the hope it would restore investor confidence. Enron shares closed down 6 cents, or 0.4 percent, to $16.35 on Thursday. The stock has lost 80 percent so far this year. "I haven't seen any sign of them slowing down or not making a good market on EnronOnline, but until things get squared away, I will keep a tight leash on the credit issue," one trader said. "The only thing that bothers me is it takes a lot of capital to do what they're doing, and with the stock price down, I wonder how much credit they have left," he added. CREDIT LINE Enron said this week that it can tap a $3.35 billion credit line to support its trading and marketing business, which can experience wide swings in cash flow depending on commodity prices. "In the event of a 'push-comes-to-shove' liquidity crunch, we believe the company could generate substantial cash by selling a variety of other assets," said Ron Barone, an analyst at UBS Warburg. If EnronOnline does lose steam, the big winner will be its main rival Atlanta-based IntercontinentalExchange (ICE) -- which already routinely trades more than $1 billion a day. "This (recent news) shows there may be some kinks in the armor and some people may stop using EnronOnline," said Kyle Cooper, analyst at Salomon Smith Barney. "Clearly ICE could benefit or any other alternative online platform." EnronOnline is still a force to be reckoned with, experts said. "Enron clearly will survive and EnronOnline will still remain a dominant force" in Internet energy trading, said Barone. Nonetheless, traders are playing it safe. "Credit is the main game nowadays, so as long as you're not exposed too greatly to any one entity, you live to play another day if something happens," one trader said. REUTERS Enron's Trading Partners Say It's Business as Usual (Correct) 2001-10-25 16:36 (New York) Enron's Trading Partners Say It's Business as Usual (Correct) (Corrects Enron's commercial paper total to $1.85 billion in 19th paragraph.) Houston, Oct. 25 (Bloomberg) -- Concerns Enron Corp. will run short on cash haven't prevented commodities traders from doing business with the largest energy broker, customers say. Enron handles about 25 percent of U.S. power and natural-gas trading, said John Kilduff, vice president of energy risk management for Fimat USA. It's also a leader in complex derivatives that allow others to hedge against the risk of fluctuating commodities prices. So far, there are no signs that the Houston-based energy trader, the world's largest, is doing less business, Kilduff said. ``If they were unable to perform, it would be a major problem,'' Kilduff said. ``It could get like Long-Term Capital if things really broke down because the numbers are that big.'' Long-Term Capital Management, a private investment fund for the wealthy, incurred massive losses making bond trades during the 1998 Russian currency crisis. The fund's portfolio plunged. More than a dozen banks bailed out the fund at a cost of $3.6 billion to avoid a collapse. Enron's credit rating is on watch for possible downgrade at Moody's Investors Service after $1.01 billion in third-quarter losses from the declining value of some soured business investments. Cash Upfront? Falling below investment grade would force Enron to risk more upfront cash for its trades, trading partners said, and substantially raise the cost of borrowing for a company dependent on affordable credit. Enron, based in Houston, ousted Chief Financial Officer Andrew Fastow yesterday, two days after the U.S. Securities and Exchange Commission began asking questions about partnerships he ran that invested in company shares. Those trades cost Enron $35 million. Enron shares have fallen 49 percent in the past week. They fell 6 cents to $16.35 today. The company also faces questions from investors about $3.3 billion in potential liabilities from affiliated companies formed to buy and sell Enron assets such as power plants. The affiliates owe payments to bond investors and plan to meet them by selling assets. Enron doesn't know if the sales proceeds will cover the debt. The company would have to make good on any shortfall. Needs Cash Daily Enron trades electricity, natural gas, coal and other commodities worldwide, as well as complex financial instruments to hedge against price swings in the goods. ``As of now, Enron is active in the markets,'' Kilduff said. ``No one is cutting trading lines that I can see, or demanding different terms than before.'' Companies that trade as heavily as Enron require cash every day to settle positions, said Kilduff, whose company swaps natural gas and other energy investments with Enron. Some days, Fimat will bet that natural gas prices will fall, while Enron bets that they will rise. Natural gas usually does one or the other every day, and someone pays the difference. ``The liquidity of your trading partners is a risk factor,'' Kilduff said. ``Someone is paying someone else every day.'' Enron said on a conference call Tuesday that it has enough money to operate normally, and can fall back on $3.4 billion in bank credit lines if necessary. It's determined to protect the credit rating, an Enron spokesman said. Little Time to Pacify Market Enron asked Citicorp Inc. on Tuesday to arrange a $750 million loan to ensure it would have access to credit if its cut out of the money markets. Based on Bloomberg composite ratings, most of Enron's long- term debt is rated at BBB2 and BBB1, two or three levels above investment grade. Fitch, Standard & Poor's and Moody's all rate the company's debt at investment grade. Enron had about $1.85 billion of commercial paper, or short- term unsecured debt, outstanding as of Tuesday, traders said. The company, which has a $3 billion program, has had difficulty finding buyers for new commercial paper sales since the SEC investigation was announced, the traders said. Today, Enron offered two-week commercial paper at a 3 percent yield, 10 to 15 basis points above comparably rated companies. ``There appears to be enough liquidity to give them enough time to get their house in order,'' said Jon Kyle Cartwright, senior energy credit analyst at Raymond James & Associates. ``There's a point where a credibility crisis becomes a self- fulfilling prophecy, so they have less time than they think to pacify the market.'' Ripple Effect Some investors are concerned that Enron's complex book of hedges, swaps, options and other derivative contracts involves so many partners, investors and companies that a failure would pose a risk to the economy, and force a bailout like Long-Term Capital Management's. ``The talk in the financial markets is that some counterparty to Enron could fail if Enron can't perform,'' said Jeff Caughron, manager of $400 million in investments for Tinker Federal Credit Union in Oklahoma City. ``If it goes down, there could be a big ripple effect.'' The effect has already spread as investors worry Enron won't be able to pay bills owed to power producers such as Calpine Corp., Dynegy Inc., Mirant Corp. and NRG Inc., said Chris Ellinghaus, an analyst at Williams Capital Group. As a group, shares of the four have fallen 11 percent in the past week. ``Rumors that these companies have receivables with Enron are fueling a sell-off,'' he said. ``Both traders and companies selling power to Enron are suffering.'' --Russell Hubbard in the Princeton newsroom at 609-750-4651, or at rhubbard2@Bloomberg.net and Liz Goldenberg in the New York Kenneth Lay Resigns from i2 Board of Directors 10/25/2001 Business Wire (Copyright © 2001, Business Wire) DALLAS--(BUSINESS WIRE)--Oct. 25, 2001--i2 Technologies, Inc. (Nasdaq:ITWO), the leading provider of dynamic value chain management solutions, today announced that Kenneth Lay has resigned from the i2 Board of Directors. Lay has recently reassumed the CEO position at Enron, necessitating that he limit his outside commitments. "This is a very painful decision," said Lay. "But now that I am again taking on the CEO responsibilities at Enron, I must reduce my outside activities." Lay joined the i2 Board of Directors in October of 2000. The remaining members of i2's Board of Directors are Sanjiv Sidhu, chairman; Romesh Wadhwani, vice-chairman and Greg Brady, CEO; from i2; Sandeep Tungare, chairman and CEO of Vistaar; Robert Crandall, former chairman and CEO, AMR Corporation/American Airlines; and Harvey B. Cash, general partner, InterWest Partners. About i2 For more than a decade, i2 has been a leader in supply chain management. i2 has extended its technology and expertise to Dynamic Value Chain Management -- solutions to help companies collaborate on decision-making processes not only across functions within a single company, but across multiple companies. i2 solutions span the value chain interactions, including customer relationship management, supply chain management and supplier relationship management. Established in 1988, i2 is the only software solutions provider that measures, audits, and reports total value provided to its customers, with a mission to deliver $75 billion in value by 2005. Learn more at www.i2.com. i2 is a registered trademark of i2 Technologies, Inc. and its subsidiaries. CONTACT: i2 Technologies, Inc. Brent Anderson, 469/357-7347 brent_anderson@i2.com 16:07 EDT OCTOBER 25, 2001 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Average Investors Need Access to Good Info About Bonds By Herb Greenberg <mailto:hgreenberg@thestreet.com< Senior Columnist RealMoney.com 10/25/2001 04:30 PM EDT URL: <http://www.thestreet.com/p/rmoney/herbonthestreet-rm/10003020.html< In my Enron (ENE:NYSE - news - commentary) piece Wednesday, I noted how the bond market can help stock investors avoid traps, because bond analysts and investors tend to be one step -- sometimes, many steps -- ahead of stock analysts and investors. (And, therefore, the column implied, their concerns should be in bond pricing.) In the process, and in retrospect, I left the wrong impression: that getting the information I got, on the likes of swap spreads or default insurance, is something every investor should be able to get. It isn't. Truth be told: I go through bond analysts and traders to get my info, and even they sometimes have to double-check information. (Other than bondsonline.com, I don't have access to current bids on bonds -- at least not that I know of.) That leads to the question -- one I've received quite a bit since: How can the average investor, without access to institutional products like Bloomberg or my sources, get that information? And once they do get it, what should they be looking for that will give them a leg up? And can they really trust bond-rating agencies, which often cut their ratings only after the trouble gets serious? (Why don't they always hoist the red flags first?) And what about finding quotes on publicly traded bank debt? Is there anywhere a regular investor can go? What other tips are there? Instead of trying to write a column on this, by interviewing a few pros, I thought I'd open up the floor to RealMoney.com subscribers and commentators (yes, Brian Reynolds, that means you!) who have proved to be a gold mine of intelligence on almost any subject. (Seriously, I wish you could see the quality of the people from whom I get emails.) If you happen to be a bond expert and have some spare time (LOL), tell me how you'd go about getting the kind of information I usually get without the luxury of the institutional tools or contacts you normally use. Is it possible? And while you're at it, feel free to pass along any other tips on the subject. If it's good enough, I'll include it in what I hope would be a list of helpful tips on the subject. Be sure to let me know if you don't want your name used. Thanks. Enron shares finish lower Fitch mulling downgrade; Lay resigns from I2 board CBSMarketWatch.com, 10/25/01 NEW YORK (CBS.MW) -- Shares of Enron finished lower for the 7th straight session Thursday, one day after the energy merchant replaced its chief financial officer in a move the company said should help restore shareholder confidence. On Thursday, Fitch placed Enron's securities on watch for a potential downgrade. The company's credit is already under review by Moody's Investors Service. Also Thursday, Chief Executive Ken Lay resigned from the board at I2 Technologies, citing increasing responsibilities at Enron. Enron, which traded as high as $17.95 during the session, closed at $16.35, down 6 cents, after 39 million shares changed hands. On Wednesday, a day after issuing a public vote of confidence in CFO Andy Fastow, Enron Chief Executive Ken Lay ousted him in the latest in a two-week series of events that have cut the company's share price by more than half. Enron named Jeff McMahon its new chief financial officer. The move follows Tuesday's conference call, a failed attempt by Enron to restore investor confidence in the company. "Andy Fastow was a very well-regarded, low profile individual at Enron, and he's been unfairly pilloried in the press," said John Olson, an analyst at Sanders Morris Harris in Houston. "But the weight of circumstantial evidence and the material stock price decline made this inevitable." Olson predicted Wednesday that the CFO swap would improve Enron's credibility with Wall Street. Fastow could not immediately be reached for comment. Analysts unsatisfied Enron has been under fire since last week as questions have surfaced about its accounting practices, especially in regard to two limited partnerships created by Fastow in 1999 and since dissolved. "Fastow was integral to the transactions that are currently under scrutiny ... as such, his 'leave of absence' raises more questions than it answers," Banc of America Securities' analyst Will Maze told clients Thursday. Enron said Fastow had taken a leave of absence and that McMahon, most recently chairman and CEO of the industrial markets group and treasurer from 1998 to 2000, would take over. "In my continued discussions with the financial community, it became clear to me that restoring investor confidence would require us to replace Andy as CFO," said Lay, in a statement. Karen Denne, a spokesperson for Enron, said numerous discussions Tuesday and Wednesday led to the decision. She said she did not know when Fastow would return. "The management change was designed to instill some badly needed investor confidence, however, we find Fastow's departure unsettling given management's strong endorsement one day prior," Maze noted. He downgraded the stock Thursday to "market performer" from "strong buy." Morningstar analyst Rob Plaza said using Fastow as a scapegoat does nothing to address the issues at Enron. "Enron needs to be more forthcoming with its off-balance-sheet deals and transparent with its financial statements in order to answer its critics," Plaza said. More criticism Olson called Tuesday's conference call a "missed opportunity," saying Enron had a real opportunity to show the investing public that it had become more "forthright and open." "Unfortunately Enron is overloaded with lawyers," said Olson, who has not recommended the stock until recently. "This company has been very much abused and maligned by people on Wall Street. They have some excellent businesses, and they have been carrying some losers." Enron has "an excellent growth profile and tremendous profitability in their growth businesses, and excellent surplus cash flow," Olson said. Enron expects to generate $3 billion of cash flow this year, and with $500 million devoted to dividends and $1 billion to maintenance capital spending, the company will have $1.5 billion free. Several Wall Street firms cut their ratings on Enron shares Wednesday, including Prudential Securities. The firm advised clients to sell the stock, a rare recommendation. Prudential had rated the company's shares a "hold." "After much consideration, we are lowering our rating ... not because of things we know but because of things we potentially don't know about the company," wrote Prudential analyst Carol Coale in a note. On Monday, Enron announced that related-party transactions within the limited partnerships are under review by the Securities and Exchange Commission. Several shareholder lawsuits have subsequently been filed. Olson said it's unlikely that Enron, with its coterie of lawyers, would allow the creation of illegal investment vehicles, but as to whether it the decision was "right," he conceded it was probably not. UBS Warburg Ron Barone on Thursday raised the idea of Enron as an acquisition target, if further deterioration is seen in the share price. Enron would be a good catch for larger and better-capitalized companies that want to make inroads in the unregulated wholesale and retail energy markets, he said. Enron's strength lies in those areas. Fitch weighs in Fitch said Thursday it's reviewing the ratings on Enron's debt, preferred stock and commercial paper. The agency also placed the debt of two Enron subsidiaries on "rating watch negative." Fitch said its action is in response to Enron's recent disclosures concerning the limited partnerships. "The loss of investor and counterparty confidence, if it continues, would impair Enron's financial flexibility and access to capital markets, therefore, impacting its ability to conduct its business," Fitch wrote. Fitch also voiced concern about two limited liability companies - Marlin Water Trust II and Osprey - which have combined debt of $3.2 billion. "Enron has not verified that the underlying assets have adequate market value to fully pay down the associated debt," Fitch said. Denne said the company plans to use proceeds from asset sales to pay off the debt. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. Selective buying wipes out early losses By SETH SUTEL AP Business Writer 10/25/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. NEW YORK (AP) - Selected buying of technology and energy shares pulled the stock market higher Thursday, reversing a morning slide triggered by a pair of grim economic reports. Shares of semiconductor makers and equipment manufacturers did particularly well, as did energy traders, led by a surprisingly strong performance from Williams Cos., a Tulsa-based energy firm that had an 83 percent jump in third quarter net earnings. By late afternoon, the Dow Jones industrial average was up 103.16 at 9,448.78, reversing an earlier deficit of 167 points. The Nasdaq composite index was up 36.29 at 1,767.83 and the Standard & Poor's 500 index was up 12.79 to 1,097.99. Earlier, a pair of dismal economic reports had compounded worries about the fallout from last month's terror attacks to send stocks lower. But as in recent sessions investors absorbed the bad news and focused on good news regarding individual companies. The Williams Cos. surpassed analysts' estimates for the third quarter and raised its forecasts for full-year earnings for 2001 and 2002. Investors rewarded the company by driving its shares up $1.42 to $27.32, bringing several other parts of the energy sector along with it. Even the shares of Enron rose, a day after the embattled company dismissed its chief financial officer and replaced him with an another executive from within the company. Enron was up 28 cents to $16.69. Semiconductor shares also rebounded, led by industry bellwether Intel, up 44 cents at $25.92 and Applied Materials, up $1.35 at 36.69. Leading data storage maker EMC was also up $1.06 at $13.54. Traders said that afternoon passage by the Senate of an anti-terrorism legislation was also helping to lift investor sentiment. Late Wednesday, the House passed a $100 billion economic stimulus package to combat the effects of the terrorist attacks on the economy. A surprisingly large drop in orders for durable goods had weighed heavily on the market in the morning, as did poor earnings results from American International Group and WorldCom. The Commerce Department reported orders plunged in September for the fourth consecutive month. The 8.5 percent decline was far worse than the 1.3 percent dip many analysts had forecast. The Labor Department also reported that the number of newly laid-off Americans filing for unemployment benefits rose by 8,000 last week to 504,000, the second-highest figure in nearly a decade and a level that is generally associated with recessions. The Russell 2000 index, the barometer of smaller company stocks, rose 6.97 to 434.62. Advancing issues outnumbered declining ones by a 9-to-7 margin on the New York Stock Exchange, where volume came to 1.02 billion shares, slightly below Wednesday's pace. Overseas, Japan's Nikkei stock average ended the day up 0.7 percent. In afternoon trading, Germany's DAX index was down 2.9 percent, France's CAC-40 fell 2.4 percent percent, and Britain's FT-SE 100 declined 1.6 percent. --- On the Net: New York Stock Exchange: http://www.nyse.com Nasdaq Stock Market: http://www.nasdaq.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Date October 25, 2001 Time 01:30 PM - 02:00 PM Station CNNfn Location Network Program Money Gang Ali Velshi, co-anchor: Coming up next, Enron tries to improve its credibility by replacing its chief financial officer. But is this going to help steady the stock? (Graphic: Enron sign) We'll take a closer look at the energy trader. Enron is our "Stock of the Day." (Commercial Break) Velshi: Enron announced late yesterday its CFO would take a leave of absence. This move comes after questions surrounding the executive's conduct have contributed in part to the tremendous decline in Enron shares. We've decided to take a closer look at the energy trader. So we've made Enron our "Stock of the Day." Let's bring in our stocks editor Fred Katayama who has more on the company. Fred. Fred Katayama (Stocks Editor): Well, Ali, we've already seen the turnaround in the stock today. It was down about sixty cents earlier, it's now up about fifty cents. This all after yest--after the close of the markets yesterday. (Graphic: Enron (ENE) 16.94 up .53) Enron put its CFO Andrew Fastow on a leave of absence; this after defending him over the past few days. (Graphic: Enron (ENE) CFO Andrew Fastow takes leave of absence) And named Jeff McMahon to take his place. (Graphic: Enron names Jeff McMahon new CFO) Now the company says it did this in order to restore investor confidence, that's no surprise. Well the stock has plummeted ever since reports said that the CFO had invested in controversial partnerships and the SEC is inquiring into those partnerships that were led by Andrew Fastow. (Graphic: Enron (ENE) down 52% last 2-weeks) Now, you can see what's happened to the stock over the last two weeks. A tailspin since its third-quarter earnings release and the SEC inquiry. But if you look at it over the past year, it's down even more; down eighty percent. (Graphic: Enron (ENE) down 80% year-to-date) It was just a few months ago in August when the CEO Jeff Skilling suddenly resigned and other senior managers had left the company even before that. The steps that were taken by rena--putting a new CFO on the spot, re--Ron Baron (?) an analyst at UBS Warburg says it's a step in the right direction. (Graphic: Enron (ENE) up 87% in 2000) But Carole Cole (?) over at Prudential says sell. And she says it's because of the things we don't know about the company. What we do know about the company is that the stock was up eighty-seven percent in the year 2000. It was a Wall Street darling back then. It was basically an old-economy pipeline that was transformed into a new-economy company with pipes of fiber. Yes, the company got into online wholesale trading of energy products and into the broadband business. It formed a sexy partnership with Blockbuster Video in which it would basically stream bought Blockbuster's videos into the home using its own fibers (sic). That deal fell apart. And then later on, the tech boom went bust and this stock that used to trade like a tech stock went south. Now here are some of the issues that are facing the company. One, it--there are 3.3 billion dollars in notes that are due in the next twenty months. Now according to the Wall Street Journal, the company thinks it can pay them back without having to issue new stocks. Some analysts think otherwise. Is the company overly diversified? It's in businesses such as broadband, which by the way extended its losses to eighty million dollars in the third quarter from twenty million last year; and it's in the water and waste water company in the company Xurex (?). It's facing an SEC inquiry; an inquiry that Prudential's Carole Cole says could lead to probes of other partnerships transactions. And if other partnerships end up being dissolved, the company could face a stock hit of at least one billion dollars. Finally, the company faces lower energy prices on power and gas. So customers are trying to renegotiate their contracts so they can get a better deal. Some of the many issues that are facing Enron. (Graphic: Issues Facing Enron) Pat and Ali. Pat Kiernan, co-anchor: Fred, thank you. Stay with us here. Let's get more on Enron from an analyst who follows the company. Velshi: Curt Launer covers natural gas and oil companies for Credit Suisse First Boston. He joins us now from the firm's New York office. Curt, thanks for being here. Curt Launer (Credit Suisse First Boston): Good afternoon. Thank you. Velshi: Curt, I'm just looking at--at some of the--the chart stuff on Enron. I mean, this stock was in a sixty to eighty-dollar band from February of 2000 almost for more than a year until May of this year. Even this year's fifty-two-week range about seventeen dollars to eighty-five dollars; now trading at--from fifteen dollars to eighty-five dollars. Now trading about sixteen dollars and change. What are your thoughts on the stock's performance? Launer: Well clearly it's had a horrific decline and there are a lot of reasons behind it. Just the way that it was probably unreal for a lot of reasons for Enron to trade at fifty times earnings a little bit more than a year ago, I think it's equally unreal for it to be trading at about eight times earnings right now. That was an everything-going-right scenario a year and a little bit ago. The scenario we have right now is the one that says the price is telling us everything is going to go wrong. I didn't think that everything was going to go right, nor do I think that everything is going to go wrong at this point. Katayama: Curt, what should the company do about broadband? I mean, that was highly touted a year ago. It's losses are mounting, demand is weakening. Launer: Broadband is really not part of the story very much anymore. Part of the write-offs taken with Enron during the third-quarter earnings report that you referred to before really got the company to a level where the broadband investment on the books is very, very small. There probably are some additional tag-in write-offs that could be taken in the broadband business, but in large measure, the bro--broadband portion of the business for bandwidth trading has been moved into Enron's wholesale business and the content services business, which was at one time high flying with that Blockbuster deal, has basically been dismantled. Kiernan: Curt, has the company addressed the problems here in the past twenty-four hours? I mean, are they building some credibility back with investors? Launer: I--it's going to be a long stretch before they build what I would call real credibility back. (Graphic: Enron (ENE) 16.91 up .50) But you've got to start somewhere. The placing of the leave of absence of Andy Fastow is a step of the right direction. Clearly he had lost his credibility personally. There's a lot of questions remaining relative to these partnerships; how they were put in place and why. I don't see anything untoward in them from an accounting point of view. And I don't believe that the SEC inquiry is going to come up with anything untoward because there's been extensive reporting about these partnerships over the last couple of years that they've been in existence. The questions come up now because of the financial ramifications that you referred to before; 3.3 billion dollars of asset value that to some degree is unaccounted for currently in terms of the assets that are in those partnerships. Ultimately, we think this is going to be resolved, perhaps partially with the issuance of some equity that--to the debt holders behind those partnerships. But once they get cleared up and the credibility is restored, this is a very attractive valuation with which to own Enron. Velshi: All right. Curt, thanks very much for joining us today. Launer: Thank you. Velshi: Curt Launer is a natural gas analyst at Credit Suisse First Boston. Fred Katayama is our stocks editor. Enron, our "Stock of the Day." # # # <Embedded Picture (Metafile)< <Embedded Picture (Metafile)<
|