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Enron Mail |
US Power, Gas Companies Restrict Dealings With Enron
Dow Jones Energy Service, 11/08/01 USA: Enron provides financing data, restates earnings. Reuters English News Service, 11/08/01 Enron Thinks Ex-CFO Got More Than $30M Thru Partnerships Dow Jones Corporate Filings Alert, 11/08/01 Dynegy confirms in talks with Enron over possible tie-up AFX News, 11/08/01 USA: Dynegy says in talks with Enron over possible deal. Reuters English News Service, 11/08/01 U.S. Stocks Open Higher on Retail Sales Data, European Rate Cuts Dow Jones Business News, 11/08/01 Dynegy/Enron Talks -4: Follows SEC Inquiry Launch Dow Jones News Service, 11/08/01 Dynegy Confirms Discussions With Enron Business Wire, 11/08/01 USA: UPDATE 1-Before the Bell - Dynegy flat, Enron slips. Reuters English News Service, 11/08/01 FERC 'Watching With Interest' Enron's Woes, Chairman Says Dow Jones Energy Service, 11/08/01 Ripples From Enron's Troubles Hit Its Trading Partners Dow Jones Energy Service, 11/08/01 Enron in Talks With Dynegy; to Restate Earnings (Update8) Bloomberg, 11/08/01 Fitch Comment on Wessex Water Ratings Following Enron Downgrade Bloomberg, 11/08/01 NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update2) Bloomberg, 11/08/001 Dynegy May Offer at Least $8 Bln to Acquire Enron (Update5) Bloomberg, 11/08/01 Enron Bonds Gain as Dynegy Considers $8 Bln Buyout (Update1) Bloomberg, 11/08/01 Enron Confirms Dynegy Talks TheStreet.com, 11/08/01 Stocks Surge On Rate Cuts, Jobless Numbers TheStreet.com, 11/08/01 Some Glamour Stocks That Are Ugly Down Deep RealMoney.com, 11/08/01 Top Of The News Enron Trades Itself Forbes.com, 11/08/01 US Power, Gas Companies Restrict Dealings With Enron By Jon Kamp, Kristen McNamara and Mark Golden Of DOW JONES NEWSWIRES 11/08/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) (This article was originally published Wednesday.) NEW YORK -(Dow Jones)- Trading companies in Enron Corp.'s (ENE) key North American power and gas markets are restricting their dealings with the ailing Houston-based giant, people at those companies said Wednesday. Concerns have mounted because Enron, which accounts for about a quarter of the trade in the country's power and gas markets and which makes a market for those commodities on its Internet-based system EnronOnline, has seen its share price fall by about 75% and its credit ratings downgraded since mid-October due to uncertainties about its extremely complex financial structure. "We've restricted our business with them," said Mike Smith, chief financial officer for Mirant Corp. (MIR) unit Mirant Americas Group, a Top 10 trader of power and gas in the U.S. Smith wouldn't be more specific, but his comments echoed those of others in the business. "Our exposure to Enron is insignificant compared with the previous exposure," said Al Butkus, spokesman for Aquila Inc. (ILA), a Top 5 U.S. power and gas trader. Tractebel Energy Marketing, the North American subsidiary of the Belgian company Tractebel S.A., has limited the term of transactions with Enron to three years or less, a person at the company said. And a power broker said some medium sized western utilities have stopped trading with Enron even for near-term delivery. Enron didn't return calls seeking comment. The Wall Street Journal reported Wednesday that Enron was in talks for a capital infusion and possible acquisition by competitor Dynegy Inc. (DYN). Also, Enron said Thursday it was restating its financial statements from 1997 through the second quarter of 2001, saying its financial and audit reports are unreliable for all those periods. The company fired its treasurer and general counsel. Key Markets Enron's ability to transact in its core markets - North American wholesale gas and power - is essential if the company maintain the earnings and cash flow needed to emerge from its current credit crisis, Wall Street analysts and ratings agencies have said. Standard & Poor's and Moody's Investors Service downgraded Enron's credit to within two steps of junk-bond status last week and have it on watch for further downgrade. Enron still has its supporters. Exelon Corp. (EXC) is monitoring its own risk management, but hasn't changed its relationship with Enron, said Chief Financial Officer Ruth Ann M. Gillis. "We haven't changed our relationship," Gillis said. Enron is a very important factor in the vitality of the wholesale energy markets, she said. They're still the "largest, best" of the companies out there, she said. Likewise, a trading floor manager at one energy company said Enron called earlier in the week and asked that the company increase its trading on EnronOnline. The company's EOL volumes had fallen, but it honored Enron's request out of respect for Enron's still market-making power. PPL Corp. (PPL) moved to mitigate its exposure to Enron following the downgrades, a person in the marketing organization at PPL EnergyPlus said. "Enron would not be a first choice to do long-term transactions," the person said. "For shorter terms, deals, they wouldn't be considered equally with everyone else. There's just too much risk there." Since Enron's troubles began several weeks ago, energy trading partners had stood by the company in ways that stock and bond traders hadn't. Until this week, "business as usual" was an almost constant refrain. Energy companies' immediate exposure to Enron was limited to a maximum of seven weeks of receivables, and Enron was paying its bills. But for some of those companies, business as usual also meant not changing value-at-risk formulas, even though the formulas were generating ever lower allowable volumes of business with Enron as the company's credit quality deteriorated, one risk manager said Wednesday. Lower value-at-risk limits got most trading companies to flatten their portfolios by taking positions to offset currently profitable long-term positions with Enron. PPL, for example, is still following its credit policy and as a result has limited its dealings with Enron, which has seen its credit quality fall, the person at PPL EnergyPlus said. "We've taken a look at our book," the person said. "Based on the events of this and last week, we've taken some action to mitigate the risk based on their ratings downgrade." Trading companies constantly evaluate their counterparties' credit and adjust their dealings accordingly, but rarely have been required to address problems on the scale of Enron's recent difficulties. "It certainly ranks just behind California," the person at PPL said. Enron Claims Trading Normal An Enron spokesman, reached later, said the company continues to see a normal range of transactions, including long-term deals. "We've not seen closing out of positions," spokesman Eric Thode said. Susan Abbott, a managing director in corporate finance at Moody's, said the ratings agency wasn't aware of significant changes in trading companies' dealings with Enron. The agency continues to watch for new restrictions, in particular margin calls, which could quickly strain Enron's liquidity. A drop in new business with Enron isn't as much of a concern, she said. "If you're restricting new business with the company, what you're doing is moving the company out of the market in an orderly way," Abbott said. PPL is shying away from doing deals with Enron and is limiting the dollar amount and terms of the deals it will do with the company, but hasn't yet imposed margin calls or required additional collateral, the person in the marketing organization said. "Neither the credit thresholds nor our exposure threshold have been breached," the person said. PPL said it's limiting exposure to Enron for shorter-term deals too, the person said. "Their liquidity just isn't there anymore," the person said. No large company can afford to pull the plug on Enron, given the company's centrality to the power and gas markets. "Enron is such a large player and they're so important in terms of maintaining the liquidity of the markets," said Sandy Fruhman, spokeswoman for Reliant Energy Inc. (REI). "We see this as a situation that has potential downsides for the entire industry." Enron's North American wholesale trading unit brought in $1.9 billion in income before interest and taxes in the first nine months of the year, up from $1.1 billion in the same period last year. Reliant continues to do business, but Fruhman wouldn't say specifically whether it had restricted its dealings. "We're monitoring the situation carefully and making sure we follow prudent business practices," she said. "But we're trying to work with them, because it's in the best interest of the entire industry to overcome their current problems." -By Jon Kamp, Dow Jones Newswires; 312-750-4129; jon.kamp@dowjones.com (Kristen McNamara, Mark Golden and Andrew Dowell in New York, John Edmiston in Houston and Erik Ahlberg in Chicago contributed to this article.) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron provides financing data, restates earnings. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Enron Corp. said on Thursday it has provided additional information about off-balance sheet and other transactions that led to an investigation by the U.S. Securities and Exchange Commission and a shattering of the energy trader's credibility. Houston-based Enron also confirmed it is in talks with its hometown rival Dynegy Inc. over a possible business combination. Terms of any transaction have not been agreed on, the two companies said. Enron said that it will restate its earnings from 1997 to 2000, and the first two quarters of 2001 as the company addresses concerns raised by the SEC and shareholders. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Thinks Ex-CFO Got More Than $30M Thru Partnerships 11/08/2001 Dow Jones Corporate Filings Alert (Copyright © 2001, Dow Jones & Company, Inc.) ISSUER: ENRON CORP. SYMBOL: ENE 10:02 DJ CFA SOURCE:SEC 8-K ISSUER: ENRON CORP. SYMBOL: ENE REASON CODES: 5 -- Other Materially Important Events WASHINGTON (Dow Jones)--Enron Corp. (ENE) said it believes the company's former chief financial officer, Andrew Fastow, received more than $30 million from managing and investing in several partnerships that did business with the energy giant. The company disclosed the information in a Form 8-K filing released Thursday by the Securities and Exchange Commission. Enron said it believes it committed $16 million in initial capital to one of the partnerships run by Fastow and paid $394 million in capital commitments to another partnership he managed. The partnerships were described to Enron's board as potential sources of capital to buy assets from Enron, potential equity partners for Enron investments, and counterparties to help mitigate risks associated with Enron investments, the filing said. As reported, shareholders and analysts have questioned whether the partnerships posed a conflict by putting Enron's CFO, who has a fiduciary duty to Enron shareholders, in a position of reaping financial rewards for representing partnership investors in business deals with Enron. On Oct. 24, Enron dismissed Fastow as its financial chief. As reported, the board of Dynegy (DYN) tentatively agreed last night to acquire Enron for about $8 billion in stock, or roughly $10 a share. Enron is a Houston-based energy and utilities company. -Dan Lowrey; Dow Jones Corporate Filings Alert; 202-393-7402; dan.lowrey@dowjones.com 10:30 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy confirms in talks with Enron over possible tie-up 11/08/2001 AFX News © 2001 by AFP-Extel News Ltd HOUSTON (AFX) - Dynegy Inc, a ChevronTexaco Corp affiliate, confirmed it is in talks with Enron Corp over a possible business combination. Dynegy said it has not agreed to the terms of any transaction with Enron. Dynegy added that it does not anticipate making any further announcement with respect to a possible transaction until a definitive agreement is reached or discussions are terminated. aw/shw For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Dynegy says in talks with Enron over possible deal. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Dynegy Inc. said on Thursday it is in talks over a possible combination with Enron Corp., the beleaguered energy-trading giant crippled by an SEC probe and investor doubts about its ability to raise cash. Dynegy has not agreed to the terms of any transaction with Enron, the Houston-based rival of Enron said. Dynegy said it does not anticipate making any further announcement with respect to a possible transaction until a definitive agreement is reached or discussions are terminated. A source close to the talks told Reuters on Wednesday that Dynegy is in talks to buy Enron in a deal that would involve a stock swap and $1.5 billion in capital from ChevronTexaco Corp., which has a big stake in Dynegy, The deal, which could be announced officially this week, was expected to give what the source called a "modest premium" to Enron shareholders, whose stock has plummeted in value as a fast-moving financial crisis enveloped the company. Enron shares, which traded as high as $90 in August of last year, dropped to a 10-year-low of $7 during Wednesday trading, before rallying on news of the Dynegy talks and closing at $9.05 a share. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. U.S. Stocks Open Higher on Retail Sales Data, European Rate Cuts By Erin Schulte 11/08/2001 Dow Jones Business News (Copyright © 2001, Dow Jones & Company, Inc.) The Wall Street Journal Online Stocks logged solid gains Thursday as investors focused on a few bright spots in sales reports from U.S. retailers. Interest-rate cuts from two European central banks also bolstered confidence. The Dow Jones Industrial Average was up 40 to 9595 soon after the opening bell, after losing 36.75 in the previous session. The Nasdaq Composite Index gained 21.20 to 1858.80, after inching ahead 2.45 points on Wednesday. Other indexes also lost ground on Thursday. The Standard & Poor's 500-stock index advanced 6.50 to 1122.30, the New York Stock Exchange Composite Index moved up 2.50 to 571 and the Russell 2000 Index edged up 1.90 to 442.70. Bonds were mixed and the dollar fell. Traders said interest-rate cuts by the European Central Bank and the Bank of England helped to underpin U.S. equities. Both banks lowered key rates by a half percentage point on Thursday, in an effort to keep the regional economy from slipping into recession. Investors are hoping October sales figures show that consumer spending is on the road to recovery and will gain steam during the holiday shopping season. Consumer spending slowed significantly in the wake of the Sept. 11 terrorist attacks. Wal-Mart Stores said sales at stores open at least a year rose 6.7%, including the results of its Sam's Club chain. The nation's biggest retailer, whose same-store sales topped analysts' expectations, also said total sales for the four weeks ended Nov. 2 jumped more than 14% to $16.62 billion. Its shares rose 1.4%. But Federated Department Stores posted a steeper-than-anticipated 8.7% drop in same-store sales. The company, which operates the Bloomingdale's and Macy's chains, said total sales also suffered, falling 8.9% to nearly $1.12 billion. Its shares slipped. Trendy discounter Target said same-store sales climbed 2%, while total sales for the week ended Nov. 3 increased 8.9%; its stock edged higher. And TJX, which owns popular discount clothier T.J. Maxx, said same-store sales climbed 4%, while total retail sales jumped 12% for the month. In addition to sorting through the retail-sales reports, investors also will have two economic indicators to scrutinize Thursday morning. The Labor Department reported initial jobless claims fell to 450,000 in the week ended Nov. 3 from 496,000 a week earlier. Economists surveyed by Thomson Global Markets anticipated 513,000 jobless claims for the latest period. A separate Labor Department report showed a 2.4% decline in prices of imported goods for October, following a 0.1% rise in September. Economists had forecast a 0.5% fall in prices. Among stocks to watch, Dynegy held talks to buy Enron for roughly $7 billion to $8 billion in stock, one-tenth of what Enron was worth 15 months ago. The energy trading and power firm also is expected to inject $1.5 billion into Enron. Exxon Mobil won a significant victory as an appeals court ruled that a jury's $5 billion punitive-damage verdict for the Exxon Valdez oil spill was excessive and should be reduced. Its shares rose 1.2%. Gains in key international markets may help put U.S. investors in a buying mood. Frankfurt's DAX index was up 1.6% in intraday trading, while London's Financial Times-Stock Exchange 100-Share Index was 0.6% higher. Earlier, Japan's Nikkei 225 average closed with a gain of 1.4% and Hong Kong's Hang Seng Index jumped 2.6%. On Wednesday, U.S. blue-chip stocks came under pressure from weakness in overseas markets, particularly in Tokyo, as well as profit-taking following the Federal Reserve's decision Tuesday to cut interest rates. In major U.S. market action Thursday: Stocks climbed. On the Big Board, where 32.2 million shares traded, 624 stocks rose and 259 fell. On the Nasdaq, 88.3 million shares changed hands. Bonds were mixed. The 10-year Treasury note slipped less than 1/8, or $2.50 for a $1,000 bond, pushing the yield to 4.19%. The 30-year bond rose almost 3/8 to yield 4.77%. The dollar fell. It traded at 89.84 U.S. cents to the euro, compared with 89.81 late Wednesday in New York. The dollar fell to 120.69 yen from 120.92. For continuously updated news from The Wall Street Journal, see WSJ.com at http://wsj.com. Copyright © 2001 Dow Jones & Company, Inc. All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy/Enron Talks -4: Follows SEC Inquiry Launch 11/08/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) The talks between Enron and Dynegy follow a sharp drop in Enron's stock over the past several weeks as controversy arose over the companies dealings with certain partnerships. The SEC later requested information from Enron related to the company's dealings with those partnerships, which were set up and run until recently by Andrew S. Fastow, who was recently replaced as Enron's chief financial officer. The investigation is centered on disclosure controversies that have damaged the Houston energy company's credibility. Internal partnership documents indicate Fastow and possibly a handful of associates made millions of dollars from the partnerships. Fastow severed his ties with those partnerships in July. Internal documents related to one of the Fastow partnerships disclose that Enron also did as much as hundreds of millions of dollars of business with an entity connected to another company official, who has since left Enron, the Wall Street Journal reported on Oct. 26. While Enron disclosed its Fastow-related transactions in SEC filings, a computerized search of the SEC's database of public filings produced no reference to this other employee-related entity known as Chewco. Over the past couple of days, Enron has been scrambling to line up quick financing from a prominent outside investor and has been in discussions with private-equity firms and power-trading companies. Discussions between Dynegy and Enron began about 10 days ago, but reportedly intensified last weekend. Also Thursday, Enron restated its earnings for 1997 through 2000 and the first half of 2001 due to the transactions and resulting account adjustments. -Thomas Gryta; Dow Jones Newswires; 201-938-5400 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy Confirms Discussions With Enron 11/08/2001 Business Wire (Copyright © 2001, Business Wire) HOUSTON--(BUSINESS WIRE)--Nov. 8, 2001--Dynegy Inc. confirmed today that it is engaged in discussions with respect to a possible business combination with Enron. Dynegy has not agreed to the terms of any transaction with Enron. Dynegy does not anticipate making any further announcement with respect to a possible transaction until a definitive agreement is reached or discussions are terminated. CONTACT: Dynegy Inc. 713/507-6400 09:36 EST NOVEMBER 8, 2001 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Before the Bell - Dynegy flat, Enron slips. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - Dynegy Inc. shares traded flat and Enron Corp. slipped as the market mulled news that the companies are in an advanced stage of talks for Dynegy to acquire Enron by means of a stock swap, according to a source familiar with the deal. Terms of the possible combinmation have not yet been decided, but Enron stockholders would likely receive an amount of Dynegy stock that would give them a "modest premium" over current Enron stock prices, said the source, who spoke on condition of anonymity. Enron shares traded at $8.50, down from $9.05, and Dynegy was at $33, in line with the price at the prior New York Stock Exchange close. More broadly, the U.S. stock markets were expected to gain at the open, based on the upward moves of equity-index futures. The Standard & Poor's 500 December contract rose 7.5 points to 1,127.00 and the Nasdaq 100 index contact added 19.00 points to 1,554.50. Shares in XO Communications Inc. rose to $1.38 per share from $1.17 in very active pre-open trade on Thursday as the voice and data services company posted a narrower third-quarter loss. Markets overseas rallied on back-to-back interest-rate cuts by the European Central Bank and the Bank of England on Thursday. The reductions follow the Federal Reserve's rate cut two days ago, the U.S. central's bank's 10th such move of the year. Among other issues active ahead of the regular trading session, Intel Corp. rose to $28.80 from $28.29, BEA Systems Inc. traded up to $15.25 from $14.71 and Cisco Systems Inc. improved to $19.40 from $18.93. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. FERC 'Watching With Interest' Enron's Woes, Chairman Says 11/08/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) (This article was originally published Wednesday) WASHINGTON -(Dow Jones)- The U.S. Federal Energy Regulatory Commission is "watching with interest" the problems confronting Enron Corp. (ENE), but isn't intervening in the matter, Pat Wood III, FERC's chairman, said Wednesday. "We're watching the impact Enron or other entities would have on the markets," Wood told reporters during a press conference following the commission's meeting Wednesday. "We are watching with interest," he said for emphasis. But the commission doesn't intend to intervene in the U.S. Securities and Exchange Commission's investigation of financial hedging instruments with partnerships overseen by Enron's former financial officer, Wood said. The dealings led to a $1.2 billion writedown in Enron shareholder equity earlier this year. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; Bryan.Lee@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Ripples From Enron's Troubles Hit Its Trading Partners By Sarah Spikes Of DOW JONES NEWSWIRES 11/08/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- Enron Corp.'s (ENE) financial troubles have created a new problem for U.K. power market players, and they don't quite know how to respond. Enron's significant presence in the U.K. market means there are many trading partners who are counterparties in deals with a company whose creditworthiness is now less secure than when those deals were struck. Companies are reluctant to cease doing business with a firm of Enron's size and stature, but they're also aware of the risk of becoming creditors to a bankrupt Enron. Since Enron revealed a $1.2 billion reduction in shareholder equity last month related to controversial transactions with entities connected to former Chief Financial Officer Andrew Fastow, the company's shares have tumbled; its senior unsecured debt has been downgraded by Fitch Inc., Standard & Poor's Corp. and Moody's Investors Service; and the U.S. Securities and Exchange Commission has launched a formal investigation into the matter. Already, many have backed off from trading power with Enron, citing the need to minimize exposure, but to what, exactly, they're not sure. Three Options For Enron's Trading Partners Enron's problems give rise to three major options for counterparties. They can wait, anticipating that Enron will go bust, and then terminate their contracts; they can try to invoke a controversial clause in their contracts and get Enron to put up more collateral; or they can back off from new forward trading and hope a company like Dynegy Inc. (DYN) will take Enron over and assume the contracts. One is available only if Enron goes bankrupt, and the other two are available right now, but most market-makers are still undecided. "No huge power merchant has ever had serious problems with their credit in the U.K. market before, so the viability of any theoretical option is uncertain," said a partner in a London-based law firm with an international energy practice. If a company takes the first option - continuing to trade with Enron - and Enron does go bankrupt, the trading partner would then be able to terminate existing contracts. Sarah Moynihan, an associate with Allen & Overy, the firm that wrote the Grid Trade Master Agreement - the contract used by most power trading parties in the U.K. - says the GTMA allows parties to terminate outstanding transactions with an insolvent company. "To terminate any transactions under one master agreement though, they would have to terminate all of them," she added. Terminating parties would be reimbursed, or charged, based on a marked-to-market value of their contracts. Power prices have been on a steep decline since the introduction of the New Electricity Trading Arrangements in March, so parties with majority selling positions through Enron would suffer financial penalties when they had to resell their power for less, but if they had bought through Enron, they would be able to get the same power for less money on the U.K. market today. "Market participants calculate the mark-to-market value all the time anyway, but particularly as this is the first NETA winter, the trust in price forecasting isn't as strong as it could be, so you may not be confident that (would be able to get) the equivalent of your contract...and you will live without peace of mind in the meantime," said the head of trading at a large generating and trading company. "Even if you were successful in terminating contracts, you might not get paid, and then who will trade with you, if you have a big debt owed to you by someone who can't pay it?" said a lawyer from a London law firm with an international energy practice. The only U.K. power-related company to go into insolvency recently was Independent Energy a small supply company. In that case, Innogy Holdings PLC (U.IOG), the company which took it over, assumed its contracts. Many Can't Afford To Lose Enron As A Partner Enron has always traded with a wide range of counterparties, some of which other big players wouldn't go near because of their relative lack of size and financial strength. This means there will be many companies that may not be able to afford to let Enron go. Not trading with Enron will make recovery harder, but a trading party will appear foolhardy if it continues to trade with a company that eventually goes under. The second option open to Enron's trading partners involves trying to invoke a muddied clause in the GTMA - the material adverse change, or MAC, clause. By asserting that the company's credit is not compatible with one with which they would normally agree to trade, they may be able get Enron to put up more collateral in support of the contracts. By asserting that Enron's credit isn't as secure as they expected when they agreed to the contracts, they may be able get Enron to put up more collateral in support of the contracts. The problem is that it's hard to be sure that a change in circumstances warrants invoking the MAC clause. However, this hasn't stopped some counterparties from asking their lawyers to investigate the feasibility of invoking MACs in their contracts with Enron, said lawyers who declined to be identified. "People are definitely talking about the chances of getting a MAC through these days," said one lawyer who declined to be named. Having to put up more capital would worsen Enron's situation, particularly if several counterparties were to ask for it, and most aren't interested in making Enron's situation worse. "Enron helps the U.K. market. It would be unhelpful for them not to be there and do what they do in terms of providing liquidity," said British Energy PLC (BGY) Chief Financial Officer Keith Lough in a conference call Wednesday. He said BE's dealings with Enron are two-way - Enron takes part of its baseload generation from BE's nuclear facilities while BE takes peak power from Enron for its direct sales unit. So far, the dilemma means most companies are taking the middle ground. They are reducing the number of new forward contract deals they do with Enron, but they aren't ceasing altogether and they aren't trying to get out of existing contracts. This partly reflects confidence that Enron will remain solvent, either on its own or through a merger. The company does have several things in its favor. First, Enron secured $1 billion in new credit lines using its gas pipeline assets as collateral. Second, there is no evidence that Enron is on the wrong side of the U.K. power market. Many traders say Enron has in fact gone into the first NETA winter short - a strategy that appears prescient in light of the warmest October in recent memory and low power prices. -Sarah Spikes, Dow Jones Newswires; (+44 20) 7842 9345; sarah.spikes@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron in Talks With Dynegy; to Restate Earnings (Update8) 2001-11-08 11:09 (New York) Enron in Talks With Dynegy; to Restate Earnings (Update8) (Updating to add stock movement.) Houston, Nov. 8 (Bloomberg) -- Enron Corp., the largest energy trader, restated and reduced its earnings for the past four years because of losses from partnerships that are under investigation by the Securities and Exchange Commission. Dynegy Inc. said it may acquire Enron, whose shares have plunged 89 percent this year. Dynegy's board last night weighed a proposal to pay $8 billion in stock, said people familiar with the situation. Concerns Enron may be lowered to a junk credit rating within days stalled the talks, the people said. Houston-based Dynegy is concerned that a reduction to junk status would precipitate a cash crisis by requiring Enron to repay early $3.3 billion of bonds. Enron's credit rating, currently rated ``BBB'' by Standard & Poor's Corp., or two levels above junk, is on review to be lowered. ``Merging with Enron is fraught with potential problems for Dynegy,'' said Commerzbank analyst Andre Meade. ``The bulk of Enron's value is in its trading business, and it's trading business is people.'' Enron shares were little changed after the announcement hich will result in a $96 million reduction in 1997 net income, $113 million in 1998, $250 million in 1999 and $132 million in 2000. In 2001, the changes result in an increase to net income of $17 million and $5 million in the first and second quarters, respectively, and reduction of $17 million for the third quarter. Enron also fired Treasurer Ben Glisan and Kristina Mourdant, a lawyer for an Enron division. The company ``now believes'' Glisan, Mourdant and two other employees no longer working for Enron bought interests in subsidiaries of a partnership run by former Chief Financial Officer Andrew Fastow. Enron said it believes Fastow made more than $30 million from partnerships called LJM1 and LJM2 which he ran. `Running Out of Time' ``Enron is running out of time and that's what's pushing them to the bargaining table,'' said Zach Wagner, an analyst with Edward Jones & Co., who cut his recommendation on Enron to ``reduce'' from ``accumulate'' on Oct. 23. Dynegy would gain a wholesale energy business, the leading energy manager for commercial and small-industrial customers, and an Internet energy trading operation many times larger than its own, said UBS Warburg LLC analyst James Yanello. ChevronTexaco Corp., which owns about 27 percent of Dynegy, is also involved in the talks. ``If history is any guide, Dynegy is stingy when it comes to acquisitions, so I don't expect them to do anything stupid'' such as overpaying for Enron, said Yanello. ``A deal could provide Dynegy with tremendous opportunity.'' He rates Dynegy ``strong buy'' and doesn't own shares of either company. Enron Chairman and Chief Executive Officer Kenneth Lay wouldn't hold a management position with the combined company under terms being discussed Wednesday, the Wall Street Journal reported. He would get a seat on the board, the paper added. ChevronTexaco is considering adding $1.5 billion to the transaction to help Enron. It would provide another $1 billion when the purchase is closed, the New York Times and Wall Street Journal reported. The companies agreed on a breakup fee providing Dynegy with about $400 million if Enron accepts a higher offer, people familiar with the talks said. Dynegy spokesman Steve Stengel, Enron spokesman Mark Palmer and ChevronTexaco spokesman Fred Gorell declined to comment. Losing Confidence Companies that trade natural gas, electricity and other commodities with Enron may pull back if Enron's finances deteriorate to the point that it loses its investment-grade credit rating, investors say. ``Dynegy has to act fast,'' said Roger Hamilton, a money manager with John Hancock Advisers Inc., which sold its Enron shares in recent weeks. ``If Enron can't get financing and its bonds go to junk, they lose counterparties and their marvelous business vanishes.'' Moody's Investors Service lowered its rating on Enron's bonds to ``Baa2'' and Standard & Poor's cut the debt to ``BBB.'' in the past two weeks. Federal regulators may overlook antitrust concerns in order to keep Enron afloat, Hamilton said. Securities regulators are investigating trading by partnerships run by Fastow, the former financial director. The entities bought and sold Enron shares and assets, with trades costing Enron $35 million and $1.2 billion in lost shareholder equity. Enron ousted CFO Fastow last month. Shares of ChevronTexaco rose 34 cents to $87.80 in early trading. Dynegy, the fifth-largest U.S. natural gas marketer, rose 25 cents to $33.25. Enron shares and bonds have tumbled in the past month. One of its bonds, an issue paying 6.725 percent that matures in November 2008, fell to 69.11 cents on the dollar, according to Bloomberg data, down from 71.90 cents yesterday. ``We would be very surprised if Dynegy buys the whole company,'' said Tim Ghriskey, president of Ghriskey Capital Partners, which doesn't own Enron or Dynegy shares. ``All the (Dynegy) board has to do is look at what's happening to their stock price today, and you'd wonder why they would want to do it in the face of what's happening with the stock.'' Ghriskey made his comments on Wednesday. Enron Meets Creditors Enron is to meet with J.P. Morgan Chase & Co., Citigroup Inc. and other lenders on Friday to discuss merger plans and a possible increase in the amount the company pays for existing credit lines, according to bankers familiar with the matter. The company has invited more than 300 creditors to its offices in Houston to listen to presentations by Enron's financial team, led by its new chief financial officer, Jeffrey McMahon, the bankers said. Dynegy began in 1985 as Natural Gas Clearinghouse, a gas- trading company. In 1998, the company took the name Dynegy -- a combination of the words dynamic and energy -- to reflect its expansion beyond natural gas. Chuck Watson, the company's president from 1985, became chairman and chief executive in 1989. Watson is an investor with Enron CEO Lay in the Houston Texans, who begin playing in the National Football League next year, and is a board member at Baker Hughes Inc. As of an April filing with the SEC, Watson owned 12.3 million Dynegy shares, or about 5.1 percent of the common stock. Fitch Comment on Wessex Water Ratings Following Enron Downgrade 2001-11-08 10:48 (New York) FITCH COMMENT ON WESSEX WATER RATINGS FOLLOWING ENRON DOWNGRADE Fitch-London-08 November 2001: In light of the recent downgrade of the Senior Unsecured and Short-term ratings of Enron Corp ("Enron") to 'BBB-' and 'F3' respectively, Fitch has commented today on the ratings of the Azurix Europe Limited group of companies. Enron, in conjunction with Marlin Water Trust, owns Azurix Corp. ("AZX"), which in turn owns Azurix Europe Limited ("AEL", rated 'BBB+/F2'). AEL is the ultimate UK parent of Wessex Water Services Limited ("WWSL", rated 'A-/F2'). AEL owns WWSL via an intermediate holding company, Wessex Water Limited ("WWL"), rated 'BBB+/F2'. The Outlook for the ratings of AEL, WWL and WWSL is Stable. WWSL is one of the UK's 10 monopoly, regulated water and sewerage companies. Fitch has not changed the ratings of the AEL group companies but notes the deteriorating credit profile of Enron, the group's ultimate US parent. Ring-fencing provisions between AEL and AZX are not considered by Fitch to be entirely watertight, particularly as AEL is allowed to loan funds to subsidiaries of AZX, which can be used for acquisitions and for general corporate purposes within the acquired businesses. Notwithstanding, the companies remain largely insulated from potential negative events at Enron. Credit protection is derived from a GBP425 million banking facility to AEL, which prohibits the company from making dividends or loans directly to AZX. AEL is also prohibited from taking on additional indebtedness and engaging in any business other than owning WWSL. In addition, under the banking facility, the total amount that can be borrowed by AEL in its name, yet on-lent to AZX subsidiaries, is capped at GBP240m. The capped amount was originally earmarked to help fund AZX's growth aspirations. All loans from AEL to AZX subsidiaries are short-term, on commercial terms, are senior obligations of the SPV (AEL's direct counter-party) and are guaranteed by AZX. However, hypothetically, these loans may have been re-invested in a subordinated stake in a water project. Mitigating this risk profile, the bank facility has certain ratio thresholds measured on a consolidated AEL group and a de-consolidated AEL basis. Considering a worst case scenario, (assuming a failure to recover the maximum amount that could be on-lent to entities outside the AEL group), within the bank facility's ratio thresholds, Fitch calculates that the AEL group would be able to maintain its current rating category. Going forward, Enron has publicly stated that is does not view AZX as a core strategic asset. The latter has stated that it is pursuing the disposal of certain assets, including those in North America that have since been sold for USD150m. This deal, which is not expected to have any impact on AEL, is due to close soon. At this time Enron has made no public statement about the future of the AEL business although it is reviewing its options internally. Fitch will continue to monitor developments in this respect and would expect to review the ratings of AEL and WWSL in the context of clear announcements from Enron. A key factor in assessing the remaining AEL group would be the level of debt "crystallised", or assumed, by that entity. The assigned ratings reflect Fitch's approach to rating regulated utilities in the UK, which starts with the consolidated debt and income profiles of the ultimate UK holding company, (in this case AEL), while considering both intermediate holding companies (here, WWL) and the operating business (WWSL). The ratings of AEL and WWL are supported by strong operating performance in the monopoly business of WWSL, which is regulated by Ofwat, and delivers relatively predictable cash flows within the context of its regulatory price controls. NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update2) 2001-11-08 10:38 (New York) NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update2) (Adds job cuts in fourth paragraph.) Purchase, New York, Nov. 8 (Bloomberg) -- NewPower Holdings Inc., a venture formed by Enron Corp. to compete with traditional gas and electric utilities, said its third-quarter loss narrowed after cutting costs and adding customers. The loss was $67.1 million, or $1.15 a share, compared with a loss of $69.9 million, or $2.96, a year earlier. Revenue tripled to $54.7 million from $18.2 million, the company said. NewPower was forecast to have a loss of $1.16 a share, the average estimate of three analysts polled by Thomson Financial/First Call. NewPower added 80,000 customers in the third quarter and expects to have 840,000 to 860,000 customers by the end of the year. The company, based in Purchase, New York, reduced sales, general and administrative costs by 41 percent, primarily by cutting systems-development and professional expenses. The company is eliminating 40 jobs, or 22 percent of its workforce, to cut costs, Chief Financial Officer William Jacobs said on a conference call. The company expects severance costs of $16 million in the fourth quarter. Enron, the largest energy trader, owns about 44 percent of NewPower. Houston-based Enron, whose shares have fallen 73 percent since Oct. 16 amid concern over affiliated partnerships run by its former chief financial officer, said it had $544 million in losses on investments including NewPower in the third quarter. Shares of NewPower rose 39 cents to $1.20 in midmorning trading. The company went public in October 2000 for $21 a share. Fourth-Quarter Excluding severance costs, NewPower expects a fourth-quarter loss of $41 million to $46 million, or 65 cents to 73 cents a share, and a full-year loss of $210 million to $215 million, or $3.55 to $3.63. The company was expected to lose 74 cents in the fourth quarter, according to First Call's average of three analysts' estimates. The full-year's loss was expected to be $3.71, the average of four analysts' estimates. In 2002, NewPower expects to have a loss of $100 million to $125 million, or $1.59 to $1.99 a share. The average estimate of four analysts polled by First Call was $2.26. NewPower expects to be profitable in 2003 with 1.5 million customers. The company is focusing more on small businesses. It now has 25,000 small-business customers and expects to have more than 35,000 by the end of the year. International Business Machines Corp. owns 1.5 million shares of NewPower, less than 5 percent of the company. Dynegy May Offer at Least $8 Bln to Acquire Enron (Update5) 2001-11-08 10:17 (New York) Dynegy May Offer at Least $8 Bln to Acquire Enron (Update5) (Updates with Dynegy statement.) Houston, Nov. 8 (Bloomberg) -- Dynegy Inc.'s board last night failed to agree to pay $8 billion in stock to acquire Enron Corp. in part because of concerns the biggest energy trader may be lowered to a junk rating within the coming days, people familiar with the situtation said. Dynegy, a Houston-based energy trader, said the talks were continuing. The company is concerned that Enron's ``BBB'' credit rating may be lowered by Standard & Poor's Corp. The rating company is reviewing the company, which it downgraded Nov. 1. ChevronTexaco Corp., which owns about 27 percent of Dynegy, is also involved in the talks. The prospect of a lower credit rating, which would force Enron to repay $3.3 billion of bonds that mature in 2003 early, along with an investigation by the Securities and Exchange Commission investigation into partnerships run by former Chief Financial Officer Andrew Fastow prompted Enron's board to consider selling the company. Enron today said it would restate its financial statements since 1997 after concluding some of the accounting for its partnerships didn't comply with generally accepted accounting principles. ``Enron is running out of time and that's what's pushing them to the bargaining table,'' said Zach Wagner, an analyst with Edward Jones & Co., who cut his recommendation on Enron to ``reduce'' from ``accumulate'' on Oct. 23. Shares of Enron fell 45 cents to $8.60 cents in early trading on the news, which was previously reported by the Wall Street Journal and New York Times. The stock reached a record $90.75 in August 2000. With 850 million shares outstanding, the company has a market value of about $7.7 billion. Dynegy would gain a wholesale energy business, the leading energy manager for commercial and small-industrial customers, and an Internet energy trading operation many times larger than its own, said UBS Warburg LLC analyst James Yanello. `Stingy' Buyer ``If history is any guide, Dynegy is stingy when it comes to acquisitions, so I don't expect them to do anything stupid'' such as overpaying for Enron, said Yanello. ``A deal could provide Dynegy with tremendous opportunity.'' He rates Dynegy ``strong buy'' and doesn't own shares of either company. Enron Chairman and Chief Executive Officer Kenneth Lay wouldn't hold a management position with the combined company under terms being discussed Wednesday, the Wall Street Journal reported. He would get a seat on the board, the paper added. ChevronTexaco is considering adding $1.5 billion to the transaction to help Enron. It would provide another $1 billion when the purchase is closed, the New York Times and Wall Street Journal reported. The companies agreed on a breakup fee providing Dynegy with about $400 million if Enron accepts a higher offer, people familiar with the talks said. Dynegy spokesman Steve Stengel, Enron spokesman Mark Palmer and ChevronTexaco spokesman Fred Gorell declined to comment. Losing Confidence Companies that trade natural gas, electricity and other commodities with Enron may pull back if Enron's finances deteriorate to the point that it loses its investment-grade credit rating, investors say. ``Dynegy has to act fast,'' said Roger Hamilton, a money manager with John Hancock Advisers Inc., which sold its Enron shares in recent weeks. ``If Enron can't get financing and its bonds go to junk, they lose counterparties and their marvelous business vanishes.'' Moody's Investors Service lowered its rating on Enron's bonds to ``Baa2'' and Standard & Poor's cut the debt to ``BBB.'' in the past two weeks. Federal regulators may overlook antitrust concerns in order to keep Enron afloat, Hamilton said. SEC Probe Securities regulators are investigating trading by partnerships run by Fastow, the former financial director. The entities bought and sold Enron shares and assets, with trades costing Enron $35 million and $1.2 billion in lost shareholder equity. Enron ousted CFO Andrew Fastow last month. Shares of ChevronTexaco rose 34 cents to $87.80 in early trading. Dynegy, the fifth-largest U.S. natural gas marketer, rose 25 cents to $33.25. Enron shares and bonds have tumbled in the past month. One of its bonds, an issue paying 6.725 percent that matures in November 2008, fell to 69.11 cents on the dollar, according to Bloomberg data, down from 71.90 cents yesterday. ``We would be very surprised if Dynegy buys the whole company,'' said Tim Ghriskey, president of Ghriskey Capital Partners, which doesn't own Enron or Dynegy shares. ``All the (Dynegy) board has to do is look at what's happening to their stock price today, and you'd wonder why they would want to do it in the face of what's happening with the stock.'' Ghriskey made his comments on Wednesday. Enron Meets Creditors Enron is to meet with J.P. Morgan Chase & Co., Citigroup Inc. and other lenders on Friday to discuss merger plans and a possible increase in the amount the company pays for existing credit lines, according to bankers familiar with the matter. The company has invited more than 300 creditors to its offices in Houston to listen to presentations by Enron's financial team, led by its new chief financial officer, Jeffrey McMahon, the bankers said. Dynegy began in 1985 as Natural Gas Clearinghouse, a gas- trading company. In 1998, the company took the name Dynegy -- a combination of the words dynamic and energy -- to reflect its expansion beyond natural gas. Chuck Watson, the company's president from 1985, became chairman and chief executive in 1989. Watson is an investor with Enron CEO Lay in the Houston Texans, who begin playing in the National Football League next year, and is a board member at Baker Hughes Inc. As of an April filing with the SEC, Watson owned 12.3 million Dynegy shares, or about 5.1 percent of the common stock. Enron Bonds Gain as Dynegy Considers $8 Bln Buyout (Update1) 2001-11-08 10:12 (New York) Enron Bonds Gain as Dynegy Considers $8 Bln Buyout (Update1) (Updates note prices in second and fourth paragraphs.) New York, Nov. 8 (Bloomberg) -- Enron Corp. bonds gained as Dynegy Inc. considered paying about $8 billion in stock for the biggest energy trader. An acquisition would bolster Enron's credit rating, which was recently lowered, traders said. Enron's 7.88 percent coupon notes due in 2003 rose 5 cents to be bid at 82 cents on the dollar this morning from 77 cents yesterday, traders said. The yield declined to 22 percent from 27 percent. The debt was trading near 100 last month. ``Enron bonds have been in free fall,'' said Joe Walker, who follows Dynegy bonds for SWS Securities in Dallas. Enron's bondholders ``now have the opportunity of going to a much stronger source.'' Enron's 6.4 percent notes due in 2006 traded at 84 cents on the dollar today, up 10 cents to 12 cents from yesterday, traders said. The company's longer-dated debt, bonds with maturities of 10 years or more, rose as much as 10 cents. While Moody's Investors Service rates Enron's credit as ``Baa2'', one rung higher than its ``Baa3'' grade for Dynegy, other ratings companies including Standard & Poor's and Fitch Inc. have assigned Dynegy a higher rating. Also, Enron's ratings have been cut in recent weeks and face further reduction, while Dynegy's credit outlook is stable. Enron bonds and shares have fallen in recent weeks on concern about partnerships run by the company's former chief financial officer and concerns the company's trading business will be hurt by the downgrades. Dynegy and Enron, both based in Houston, met yesterday to negotiate terms of a buyout, said people familiar with the situation. Enron Confirms Dynegy Talks By TSC Staff <<mailto:letters@thestreet.com<< TheStreet.com 11/08/2001 08:00 AM EST Enron (ENE:NYSE - news - commentary) and rival energy trader Dynegy (DYN:NYSE - news - commentary) confirmed Thursday they were in merger talks. According to reports, Dynegy held talks to acquire Enron for up to $8 billion in stock and to make an immediate cash infusion of up to $2 billion to help relieve Enron's debt crisis. The possible agreement is said to have the backing of ChevronTexaco (CVX:NYSE - news - commentary) , which owns about a quarter of Dynegy. Enron shares continued their recent fall, dropping 16 cents to $8.89, while Dynegy jumped $1.83 to $34.83. Stocks Surge On Rate Cuts, Jobless Numbers By Kevin Burke <<mailto:kburke@thestreet.com<< Staff Reporter 11/08/2001 09:42 AM EST TheStreet.com Updated from 8:49 a.m. EST Stocks surged at the open following surprising moves by two European central banks and a positive report from the Labor Department. The Dow was recently gaining 39 points, or 0.41%, to 9594. The Nasdaq was up about 17 points, or 0.95%, to 1855, and the S&P 500 was unchanged at 1116. Both the Bank of England and European Central Bank announced half-point reductions in their key lending rates Thursday, the BOE dropping its to 4% and the ECB lowering to 3.25%. The cuts were larger than expected and reflected increased economic risk in a low-inflation environment, the banks said. Overseas markets were uniformly higher on the moves. London's FTSE 100 was gaining fractionally at 5219, while Germany's Xetra DAX was up 1.5% to 4936. In Asia, Japan's Nikkei gained 1.4% to 10,432 while Hong Kong's Hang Seng added 2.6% to 10,539. The Labor Department said initial claims for jobless benefits fell unexpectedly by 46,000 to 450,000 in the week ended Saturday. Retail sales reports for October were also pouring in Thursday, with Wal-Mart (WMT:NYSE - news - commentary) posting a slightly higher-than-expected gain in same-store sales. Limited (LTD:NYSE - news - commentary) said same-store sales fell 6% while Gap Stores' (GPS:NYSE - news - commentary) fell 17%. The Enron (ENE:NYSE - news - commentary) saga continued with news that rival energy trader Dynegy (DYN:NYSE - news - commentary) has held talks to buy the company for up to $8 billion in stock. The possible deal is said to have the blessing of ChevronTexaco (CVX:NYSE - news - commentary) , which owns 27% of Dynegy. The price of crude oil was rising Thursday after Saudi Arabia's oil minister warned of impending OPEC production cuts. Prices were up almost 4% on the news, the biggest jump since just after the terrorist attacks. The 10-year Treasury note was recently losing 6/32 to 106 11/32, yielding 4.20%. Some Glamour Stocks That Are Ugly Down Deep By Brett Messing <<mailto:bmessing@oscarcap.com<< Special to TheStreet.com 11/08/2001 08:16 AM EST RealMoney.com I know it's tempting. I know what you're thinking: If I can catch a big ride on one of these beaten-down stocks, I can get my portfolio back to where it was in March 2000. Forget it. Rip up those old statements. Treat them like UFOs. Instead, think singles and doubles instead of homers. While a number of glamour stocks have been decimated, they deserve to be decimated. I am an opportunist. I've looked at all of them. They are a collective disaster, and they are not worth the risk. Let's start with Jim Cramer's favorite punching bag, Enron (ENE:NYSE - news - commentary) . As bad as this situation is, it is going to get worse before it is over. And while the Bushies may have been willing to help out Bill Gates with his little Justice Department problem, they will not go near this one with a 10-foot pole. Enron is not an energy company. It is a trading company. Moreover, it appears they are not particularly good traders. Instead of Enron, invest your money with the best trading company in the world, Goldman Sachs (GS:NYSE - news - commentary) . These guys have probably been picking Enron's pockets for years. Isn't it interesting that Goldman Sachs was unwilling to participate in the recent short-term loans to Enron, an investment banking client? They might actually know what's behind the curtain. I worked at Goldman Sachs for eight years, and I have tremendous respect for them. They know how to trade. They made a ton of money handling Sid Bass' recent 125 million-share block of Walt Disney (DIS:NYSE - news - commentary) stock. Forget about the 6-cent-per-share fee they charged. How about the 10 million to 20 million shares that they kept for themselves? I imagine that Goldman made more than $30 million on this one trade. Not a bad day's work. Stay away from Qwest (Q:NYSE - news - commentary) . Taken in the best light, the company is way too aggressive with its accounting; Qwest bullies the analyst community and it overpromises and underdelivers. Qwest has justifiably lost the trust of the investment community. It will take years of execution and fence-mending to earn this trust back. Ask Cendant CEO Henry Silverman. He is still paying for the damage inflicted upon him by former Cendant Chairman Walter Forbes, who has pleaded not guilty to conspiracy and wire fraud charges. Go with WorldCom (WCOM:Nasdaq - news - commentary) instead. These guys actually get it. They are among the telecom industry's best operators, and they are the best dealmakers. Like everyone else, they goofed, but they have found religion. This quarter's operating results show some promise. Previously skeptical analysts at Lehman and Merrill had some nice things to say about the company. I think WorldCom is an up stock from here. It is not going back to the $60s, but I could see it above the driving age by year-end. I know it's also tempting to think that if the economy rebounds, consumer finance stocks will scream. You are turned on by Providian (PVN:NYSE - news - commentary) and Conseco (CNC:NYSE - news - commentary) . Providian recently hired my pals at Goldman Sachs to help them out. Forget this, too. Providian feels like a doughnut to me. Their balance sheet is a mess. We do not know how bad it is. They may not know how bad it is. Moreover, they were not candid with the investment community. Conseco announced that Gary Wendt and other senior managers bought a bunch of stock with their own money. While I love to see management buying stock, this one feels too staged to me. Pre-Wendt, Conseco had a long history of management buying stock with loans from the corporate treasury. Moreover, 1 million shares (or $3 million) is not that much money to Wendt. I would like to see him buy $25 million of restricted stock directly from the company. Conseco is probably the best speculative bet of the bunch, but I would still pass. It is a very high-risk situation, given the leveraged state of its balance sheet. Wendt is a tremendous manager, and he did a great job with GE Capital. However, he would not be the first guy to have a sequel that bombs at the box office. Go with Citigroup (C:NYSE - news - commentary) instead. Citigroup is the biggest and best financial services company in the world. While Wendt is something special, I would draft Weill and Rubin ahead of him in my CEO Rotisserie League. The best way to make money is to stay out of trouble. Stick with singles and doubles. Don't be tempted. Top Of The News Enron Trades Itself Dan Ackman , Forbes.com , 11.08.01, 8:47 AM ET NEW YORK - Enron, once a star, has lately looked more like a truck racing down a Texas highway with a load of burning lumber: no one knew where it was going or why. Finally, it seems to be nearing a rest stop as Enron (nyse: ENE) is reportedly about to sell itself to its much smaller rival Dynegy (DYN ) for $8 billion in stock, a fraction of its former value. As part of the deal, ChevronTexaco (CVX ) , which owns 27% of Dynegy, would pump at least $1.5 billion in cash into Enron upon the inking of an agreement and an additional $1 billion when the deal closed. The deal, if consummated, represents a possible way out for Enron, which has been humbled by an accounting scandal, the resignation and firing of top executives, the defection of investors, and massive losses. The rough outlines of what humbled Houston-based Enron are known, but the details remain a mystery, as well as the subject of a Securities and Exchange Commission investigation and at least one major lawsuit, with more to come. Once basically an oil and natural gas pipeline company, Enron expanded into energy trading, broadband telecommunications and other businesses. It was often said to be at the center of a "revolution," perhaps several revolutions, with telecommunications, the Internet, and energy deregulation among them. But a revolution is not a tea party. For a while, the fact that few investors understood what Enron did was probably a plus. Between 1997 and the end of 2000, Enron's share price climbed steadily from less than $20 per share to over $80 per share. It had a $70 billion market value as recently as a year ago. During the run-up, Enron's financial conditions don't seem to have justified the surge. Revenues were growing wildly, from $20 billion in 1997 to $101 billion in 2000. But much of that increase was due to the fact that Enron was now a trading company, and revenues were of a different type altogether. In any event, profits, after a huge jump between 1997 and 1998, increased much more slowly, from $878 million in 1998 to $1.4 billion. Of course, whether these profits were real is now very much in doubt. Last quarter, Enron reported a $618 million loss, mostly due to accounting charges. The road down has been a lot steeper. Over the last 12 months, the stock fell all the way back and closed Wednesday at $9.05, wiping out all the gains and then some. Today, the inscrutability of Enron's finances is considered a bad thing. Jeffrey Skilling, the company's new chief executive officer, resigned in August after just six months at the helm. Kenneth Lay, 58, the former C.E.O. and a close friend of President George W. Bush, was brought back in. Lay will have a seat on the combined company's board, but no day-to-day job, according to reports. Lay earned $12 million in total compensation from Enron in 2000, not counting his profits from the exercise of $123 million in options. Other Enron executives also exercised tens of millions in options in 2000, when the stock was flying high. Enron paid Skilling, once Lay's top lieutenant, $84.5 million over the last five years. Last month, the company's problems became public. It disclosed $1 billion in write-downs and a $1.2 billion reduction in shareholder equity. The reduction in equity arose from "related party" transactions that turned out to be with investment partnerships involving Andrew Fastow, the chief financial officer. Fastow was forced to resign on Oct. 24. The Securities and Exchange Commission is investigating. Today, Enron is expected to send the S.E.C. answers to questions the agency has posed in its investigation. Dynegy officials have seen those answers already, and the public should see them soon. Enron will meet Friday with its creditors about the company's continuing crisis and the proposed merger. The hope is a deal with Dynegy, also based in Houston, will lead Enron out of the storm and cause its trading partners to have enough confidence to do business with the company. Enron's credit rating is in jeopardy. Both Moody's Investors Service and Standard & Poor's have already cut it to two rungs above junk status. On Nov. 5, Fitch cut it to one notch above junk. As part of the deal, Dynegy, which had 2000 revenues of $29.5 billion, would be taking on Enron's $12.8 billion debt load. But this figure does not include billions of dollars of other debt, accumulated off the balance sheet, that has played a major role in Enron's current problems. Some of Enron's assets will likely be sold to pay down the debt. The acquisition would combine Enron, a dominant player in the trading of electricity and natural gas in the U.S., but which has been selling off hard assets such as utilities, with Dynegy, a company that uses trading to maximize earnings from its power plants. Dynegy will pick up the pieces of Enron, hoping it can make some sense of it. After that it may make some money, too.
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