Enron Corp is working to survive history's biggest Chapter 11 reorganization, Monday lining up a US$1.5 billion loan, getting permission to spend money to keep operating and firing 4,000 workers.
Enron's bankruptcy attorney told US Bankruptcy Judge Arthur Gonzalez the company is negotiating with several potential financial backers to help revive its crippled wholesale energy trading business under new ownership. Enron's trading operation, once the most profitable aspect of its business, unraveled after the Houston-based company in mid-October reported a third-quarter loss of US$1.01 billion.
Securing the bankruptcy loan eliminated an immediate threat to Enron though other challenges remain. The company may have difficulty finding trading partners, it's swapping lawsuits with Dynegy Inc, which is seeking to wrest an Enron pipeline, and federal authorities are investigating the events that sent the biggest energy trader rushing to bankruptcy court.
"We do not today have every `i' dotted and every `t' crossed," in crafting a strategy to work through Chapter 11, Enron's attorney Martin Bienenstock said in court.
Shares of Enron Monday rose US$0.14 to US$0.40. The stock traded as high as US$90.75 last year. Shareholders are last in line to be paid in Chapter 11 cases, and typically get nothing if other creditors aren't fully reimbursed.
In an indication unsecured creditors don't expect to be paid nearly all they're owed, Enron's 6.375 percent bonds due in 2003 traded around US$0.24 on the dollar, according to Bloomberg Data.
Enron is talking with JP Morgan Chase & Co, Citigroup Inc's Salomon Smith Barney and UBS AG about a possible joint venture that would pump money into the energy-trading operations, the Wall Street Journal said, citing people familiar with the matter.
The joint venture may lead to one of the banks controlling a new trading company, the paper quoted the people as saying.
At EnronOnline, the Web site that once handled US$2.8 billion in commodity transactions a day, trading has plunged, raising doubts that Enron will be able to rescue the business. Enron customers such as Mirant Corp and Aquila Inc have taken business elsewhere.
"Until we've seen the fallout from this bankruptcy, I don't think you're going to find a lot of entities that are prepared to trade with" Enron, said Daniel Gordon, head of commodities trading at Hagerstown, Maryland-based Allegheny Energy Inc, which owns utilities in five states.
Lawsuits and federal investigations are adding to Enron's difficulties. The US Department of Justice has started a criminal probe of Enron's dealings, the Wall Street Journal reported Monday, citing unidentified sources.
Dynegy is suing in a Texas court to gain control of Enron's Northern Natural Gas Co pipeline. Enron went to court first, seeking US$10 billion over its rival's withdrawal of a US$23 billion bid to purchase the energy trader.
Enron's shares have lost 99 percent of their value placing a spotlight on Arthur Andersen LLP, the company's auditor. Enron said last month it overstated its 1998 income by US$113 million.
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