Beleaguered energy company Enron Corp has filed for Chapter 11 bankruptcy protection, the company said Sunday. Enron also filed a lawsuit against would-be suitor Dynegy Inc for wrongful termination of its US$8.4 billion proposed merger.
In a statement, the company said it was suing Dynegy for wrongful termination of the merger and seeking at least US$10 billion in damages. Both actions were filed in US Bankruptcy Court for the Southern District of New York.
In the statement, Houston-based Enron said it is in "active discussions" with several financial institutions to secure credit for the continued operation of its wholesale energy trading business, as well as additional funding to keep the rest of the company operating.
In its lawsuit, Enron claimed that Dynegy terminated the merger agreement "when it had no contractual right to do so." It also claimed Dynegy had no right to exercise an option to acquire Enron's northern natural gas pipeline because it "can only be triggered by a valid termination" of the merger agreement.
Enron said it would ask the court to consider several motions to continue payments for its workers' payroll and health benefits, as well as keeping vendors paid.
Chapter 11 bankruptcy frees a company from the threat of creditors' lawsuits while it reorganizes its finances. The debtor usually retains control of the business and its assets.
The bankruptcy filing had been expected by several analysts and stockholders, many of whom were stunned by the company's fall from grace.
Enron's loss of credibility in the market stemmed from revelations that its chief financial officer was running partnerships that allowed the company to keep half a billion dollars in debt off its books. In early November, Enron restated its earnings back to 1997, eliminating more than US$580 million in reported income.
RSS