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Enron Mail |
USA: Enron CEO sold $1.2 mln in Compaq shares.
Reuters English News Service, 11/09/01 'Arbs' Sit Out Possible Dynergy-Enron Deal, For Now Dow Jones News Service, 11/09/01 POWER POINTS: Does Dynegy Know What It's Getting Into? Dow Jones Energy Service, 11/09/01 USA: UPDATE 1-Enron's rating cut, woes finally hit trading floor. Reuters English News Service, 11/09/01 USA: U.S. stocks crawl higher but profit warnings weigh. Reuters English News Service, 11/09/01 UK: UK power prices gain, take strength from gas. Reuters English News Service, 11/09/01 Play of the Day: Dynegy Close To Buying Beleaguered Enron CNNfn: Halftime Report, 11/09/01 Indian court restrains Enron from serving termination notice over power project Associated Press Newswires, 11/09/01 Source: Dynegy close to deal to buy Enron Associated Press Newswires, 11/09/01 USA: UPDATE 1-Enron, Dynegy shares jump on talk deal is near. Reuters English News Service, 11/09/01 Indian Court Bars Enron From Terminating Power Project Dow Jones International News, 11/09/01 USA: Enron faces lawsuits seeking class action status. Reuters English News Service, 11/09/01 USA: ANALYSIS-Enron seen test of U.S. SEC's course under Pitt. Reuters English News Service, 11/09/01 USA: Dynegy close to complete deal to buy Enron-WSJ. Reuters English News Service, 11/09/01 Can Bandwidth Market Survive Without Independent Enron? Dow Jones Energy Service, 11/09/01 INDIA: Enron's Dabhol suffers legal setback in Indian row. Reuters English News Service, 11/09/01 Dynegy Nears Deal to Buy Enron in $7 Billion Stock Transaction Dow Jones Business News, 11/09/01 USA: UPDATE1-Moody's cuts Enron's ratings, may cut again. Reuters English News Service, 11/09/01 Enron long-term ratings cut to Baa3 from Baa2 - Moody's AFX News, 11/09/01 Enron, Dynergy very close to deal - CNBC AFX News, 11/09/01 Easton`s Call: Returns are No More CNNfn: Market Coverage - Morning, 11/09/01 USA: Enron shares slip on debt downgrade concerns. Reuters English News Service, 11/09/01 Moody's Diaz on Enron Credit Downgrade and Outlook: Comment Bloomberg, 11/09/01 Commerzbank Analyst Meade on Possible Buyout of Enron: Comment Bloomberg, 11/09/01 Kent Income Fund's Mitchell Stapley on Enron Bonds: Comment Bloomberg, 11/09/01 Harris Investment's Coxe on Possible Buyout of Enron: Comment Bloomberg, 11/09/01 Strong American Utilities Fund's Vuchetich on Dynegy: Comment Bloomberg, 11/09/01 Dynegy bid for Enron said to be possible bail-out deal Houston Business Journal, 11/09/01 Dynegy May Acquire Enron for $22 Bln in Stock, Debt (Update6) Bloomberg, 11/09/01 TransCanada PipeLines CEO on Dynegy and Enron Talks: Comment Bloomberg, 11/09/01 USA: Enron CEO sold $1.2 mln in Compaq shares. 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. WASHINGTON, Nov 9 (Reuters) - Enron Corp. Chairman and Chief Executive Kenneth Lay, who sits on the board of Compaq Computer Corp. , sold $1.2 million in Compaq stock last month, a regulatory filing on Friday said. Lay sold 124,596 common shares of Compaq on Oct. 29 for $9.25 a share, according to a filing with the Securities and Exchange Commission. He was left with 340,724 shares after the transaction, the filing added. Compaq shares were down 25 cents to $7.74 in afternoon trading on the New York Stock Exchange. Compaq, whose proposed $19.5 billion merger with Hewlett-Packard Co. looks to be in doubt following opposition from the Hewlett and Packard families, did not immediately return a call seeking comment on Lay's sale. News of the transaction comes as Lay's company, Enron, the embattled energy marketing and trading giant, is on the verge of a bailout by a smaller rival, Dynegy Inc. Enron has trimmed its earnings by $591 million, or 22 percent, from 1997 to 2000, and increased its debt by $628 million, or 6 percent, in a bookkeeping revision aimed at calming a firestorm that has engulfed the company in recent weeks. Enron stock and credit ratings have plunged following disclosures of off-the-balance sheet deals now under investigation by the Securities and Exchange Commission for possible conflict of interest. The deals contributed to a $1 billion third-quarter charge and $1.2 billion reduction in shareholder equity. Enron shares were up 54 cents to $8.95 in afternoon trading on the NYSE. An announcement of a possible Dynegy acquisition is expected later on Friday. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 'Arbs' Sit Out Possible Dynergy-Enron Deal, For Now By Janet Whitman Of DOW JONES NEWSWIRES 11/09/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- It's been a brutal year in the risk arbitrage business, and that has many arbitrageurs, also known as takeover traders, steering clear of bets on Dynergy Inc.'s (DYN) possible takeover of Enron Corp. (ENE). Some of their reluctance stems from the fact that the looming deal reported by Dow Jones Newswires has yet to be confirmed by the two Houston energy trading companies. More worrisome, however, is the possibility that Enron - already crippled by an equity probe and a restatement of four years of earnings - may have even deeper woes to report. "Unless Enron is providing significantly more disclosure to the buyer than to the rest of the world, I don't see how a buyer could get comfortable." said an arbitrageur with a New York hedge fund. What worries takeover traders is the likelihood that any agreement would likely have extensive material adverse change, or MAC, clauses, providing plenty of room for Dynergy to exit the deal should more problems arise at Enron. "As an investor, it's hard for me to own something when I don't know what it is," said the arbitrageur of Enron. "I take some comfort that someone is stepping up the plate, but that's not enough for me." Another arbitrageur added, "If it gets announced, it's a deal with a lot of issues, starting with who bears the risk if Enron has a lot of lawsuits because of alleged accounting fraud." According to the Wall Street Journal, Dynergy will swap nearly 0.27 of a share of its stock for each share of Enron. Also under the deal, ChevronTexaco Corp. (CVX), which owns 26% of Dynergy, will make an immediate cash injection of $1.5 billion into the deal, and then add another billion on closing. Shares of Dynergy jumped more than 10% in heavy trading, bolstered by the idea that the company is picking up Enron for a steal. Its shares traded recently at $39.61, up $3.06 a share. An acquirer's shares typically fall after a deal has been announced, in part because arbitrageurs sell the shares short, while going long the target. In this case, however, arbitrageurs are largely on the sidelines, which is perhaps alleviating some of the downside pressure on Dynergy. Enron, meanwhile, traded about 4% higher recently, swapping hands at $8.77 a share in heavy volume. The stock was buoyed by the reported bid from Dynergy as well as a new credit rating from Moody's. The firm downgraded Enron's rating a notch to just above speculative, not as bad as the junk rating some had feared. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. POWER POINTS: Does Dynegy Know What It's Getting Into? By Mark Golden 11/09/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- If I were an executive with Dynegy Inc. (DYN), I would want to know who was buying up my stock Thursday and Friday, encouraging me that Enron is a steal at $9.50 a share. After all, the market's initial reaction to the Dynegy/Enron Corp. (ENE) talks was negative. Dynegy's share price fell 9% to $33 on the Wednesday, the day that Dynegy was negotiating a possible acquisition of Enron were disclosed by CNBC. But Dynegy's stock rebounded sharply Thursday to recover that loss and then some, and it's up another $3 to near $40 Friday. Is this a case of average investors approving Dynegy's "steal" of formerly formidable Enron? Or were Wall Street banks, holding a lot of Enron debt, trying to encourage Dynegy to do a deal? About 75% of the 12 million Dynegy shares bought Thursday were purchased in a few hundred large blocks. Some usually talkative Wall Street bank sources refuse to say a word about Enron or Dynegy, even off the record. Wall Street may be biting its collective lip in the hopes that Dynegy signs the contracts to buy Enron and brings in a critical injection of cash. That cash would come from ChevronTexaco Corp. (CVX), which owns about a quarter of Dynegy. According to the Wall Street Journal, the terms of the deal call for ChevronTexaco to inject $1.5 billion immediately and another $1 billion into the combined companies if the deal goes through. Wall Street holds billions in Enron debt, which Dynegy is fully aware of. But Dynegy might be getting more than it's bargaining for, particularly regarding Enron's numerous obligations to deliver its own shares in the future at minimum values. SEC Probe Complicates Deals Based On Stock Any company that acquires Enron may have to make good on those commitments to issue stock pegged to values much higher than $9.50 a share, or perhaps to make up the difference in cash. In a publicly disclosed example, an Enron off-balance-sheet financial affiliate - Whitewing Associates - owns 250,000 shares of Enron convertible preferred stock, which are good upon conversion in January 2003 for 50 million shares of Enron common stock at a guaranteed minimum value of $48.55 a share. Enron's stock is currently trading below $9 a share. According to the terms of Whitewing's convertible preferred holding, Enron would have to deliver far more shares at current prices - 1,080 - for each of the 250,000 convertibles. But Enron can't issue new stock now because it's under investigation by the U.S. Securities and Exchange Commission, so it would be obliged to come up with the $40-per-share difference in cash. Since Enron owns 50% of Whitewing, it could tear up most of the convertibles, but not all of them. A rough estimate is that Enron - or Dynegy - would still owe the dozens of mutual funds that invested in Whitewing around $500 million cash. Dynegy is surely familiar with that deal, but highly leveraged Enron has similar share-settled arrangements floating around that haven't been so fully disclosed. The lesser-known deals are similarly troublesome due to the combination of Enron's stock-price crash and its inability to issue lots of new stock to make up the difference. Another Enron-related partnership, the Marlin Water Trust II, is part of Enron's disastrous venture into water companies through its Azurix affiliate and the later refinancing of huge losses related to the water investments. Enron has marked down the value of its direct holdings in Azurix, but not the assets of Marlin, even though Marlin's primary asset is supposed to be its half of Azurix. Prominent Enron short-seller Richard Grubman of Highfields Capital Management has asked Enron why Marlin's assets are still valued at $1 billion, when 50% of Azurix would seem to be a worth a fraction of that amount. Enron has declined to answer Grubman's question fully. Is Wall Street Short? Fitch credit rating agency said this July that Marlin's debt is ultimately supported by "an equity commitment from Enron in the form of mandatorily convertible preferred stock." Neither the number of shares nor the guaranteed minimum value for those shares has been disclosed. If Enron can't deliver those shares, it is obliged to make up the difference in cash, Fitch said. "In the event that the issuance of the preferred stock yields less than the amount required to redeem the senior notes, Enron is required to deliver additional shares," Fitch said. "If Enron cannot or does not deliver on this obligation, then the amount of the deficiency becomes a payment obligation of Enron, representing a general unsecured claim." In another partnership, disclosed in Enron's 2000 annual report but not named, Enron invested "the right to receive up to 18 million shares of outstanding Enron common stock in March 2003 (subject to certain conditions)." Do those conditions include a share value much higher than $9.50? Did Enron prudently purchase puts on its own stock from Wall Street to cover some of its positions? As part of that same deal, Enron paid $123 million to purchase unspecified options on 21.7 million shares of its common stock. Because these deals are done through private placements of debt, Enron doesn't have to answer questions, and it has declined to do so. Dynegy also refused to answer questions on the issue. One Wall Street equity derivatives trading manager indicated that all the banks have found themselves "unexpectedly short in-the-money puts" on Enron. Unexpectedly, perhaps, not just because Enron stock has fallen so far, but because the SEC investigation prevents Enron from issuing additional shares. Wall Street has been sweating for weeks, and millions don't make Wall Street sweat. Billions do, and the concern has to do with liabilities beyond Enron's fully disclosed traditional debt. The banks have told Enron they don't expect to get clobbered on a technicality that wouldn't have arisen without the SEC investigation Enron brought on itself, a person at a bank involved in the talks said. Enron agreed in principle, but the negotiations to make Wall Street whole were put on hold for the Dynegy talks. If Dynegy buys Enron, it may be stepping into the middle of those arrangements, letting Wall Street off the hook. Dynegy competitor El Paso Corp. (EPG) and ChevronTexaco rival Royal Dutch/Shell (RD) reportedly took a look at acquiring Enron last week and passed. Is Dynegy smarter than El Paso? Is Chevron smarter than Shell? True Dynegy believers better hope so. -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Enron's rating cut, woes finally hit trading floor. By Janet McGurty 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 9 (Reuters) - Enron Corp., on the verge of a bailout by rival Dynegy Inc., on Friday had its credit ratings cut to a notch above junk status and some energy traders became increasingly leery of dealing with the company. Moody's Investors Service cut Enron's long-and short-term ratings, affecting about $13 billion in debt, and warned the company's rating could be cut again to junk status on continued loss of investor confidence, impairing its ability to operate. A significant amount of debt coming due in the near term, and the potential for increased margin requirements from its counterparties in wholesale trading operation also puts further pressure on Enron, the ratings agency said. "The company may not be able to retain investment-grade characteristics," Moody's said. Enron's trading partners began to cast a more watchful eye on their relationship with their energy trading behemoth, which has seen almost $19 billion slashed from its market worth in the past month on mounting investor concerns. "Our people are definitely looking at our dealings with Enron after the downgrade ... We need to make sure our bills will be paid," one Texas-based spot trader said, adding his company was still conducting business with Enron. The stock, which has plummeted 89 percent this year, moved into the black on Friday after Enron confirmed talks regarding the acquisition of Enron by Dynegy are continuing. An announcement, which is expected later Friday, is expected to include a $1.5 billion injection of capital for Enron from ChevronTexaco Corp., the No. 2 U.S. oil company, and 26.5 percent holder of Dynegy. Shares of Enron rose 40 cents, or 4.8 percent, to $8.81 in afternoon trade on the New York Stock Exchange, and Dynegy gained $2.92, or 8 percent, to $39.42. The stock was the most actively traded on the NYSE. RESTATED RESULTS In recent weeks Enron's stock has plunged amid investor unease about disclosures of off-balance sheet deals involving its former chief financial officer. The deals are now under investigation by the Securities and Exchange Commission for possible conflict of interest. "People just don't want to deal with them anymore," said one trader, who heads the trading desk of one of the world's largest oil companies. On Thursday, Enron acknowledged it erred on past earnings reports and restated financial results going back to 1997. The restated earnings cut net income by $591 million over the period, or 22 percent, and increased its debt by $628 million, pulling some of its partnerships onto the balance sheet. Enron also fired its treasurer and a general counsel of one of its divisions on Thursday. Until now, Enron's trading operations appeared relatively sheltered from its financial troubles, especially in the daily markets contracts. Trading volumes on EnronOnline, the leading Internet-based trading system for electricity, actually increased over the rolling 30-day period. At the beginning of the week, EnronOnline dollar volumes averaged between $2.6 billion and $2.8 billion, compared with a 30-day rolling average of $2.6 billion, according to Eric Thode, a spokesman for EnronOnline. The number of transactions posted on the site averaged over 6,500 on Monday, well above the 5,800 average for the past 30 days. TRADING UNDER PRESSURE But Friday, trading volume appeared to wane slightly, according to one industry watcher "I've been watching the Enron board all morning and it hardly lit up at all," said one trader in the U.S. Northeast. The board lights up each time a transaction is made for delivery to a particular point. The hardest hit of Enron's energy trading operations appear to be natural gas trades and both natural gas and electricity forward contracts, which are trades for delivery from one month to five years ahead. "Starting today we are no longer doing forward deals with Enron on the gas side. We are still doing day-ahead deals though," one Southeast dealer said. He added he was unsure if his company was still trading forwards, or long-term deals, on the electricity side. "People are becoming much more cautious about entering into long-term energy deals with Enron, especially the one-to five-year delivery contract for gas or electricity," said one major Midwestern power trader. While many major traders watch online volumes and transactions, many bypass the system and make their deals over the telephone directly with Enron. Earlier this week. major natural gas producer Apache Corp. said it unwound most of its natural gas hedges due to concerns about increasing risks in the energy derivatives market as a result of Enron's recent problems. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: U.S. stocks crawl higher but profit warnings weigh. By Elizabeth Lazarowitz 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 9 (Reuters) - Stocks ticked higher in early afternoon trading on Friday as investors took a positive view of the latest economic news, but profit warnings from household names like H.J. Heinz & Co. and The Walt Disney Co. put a cap on their enthusiasm. Energy and oil services stocks helped carry the market higher, getting a boost after Russia's prime minister indicated Russian companies will join the Organization of Exporting Petroleum Countries, the oil cartel, in cutting production to lift oil prices. The market's ability to make up virtually all of the losses it made in the wake of the Sept. 11 attacks on New York and Washington has given investors courage, despite the dismal condition of corporate earnings, said said Nat Paull, portfolio manager at New Amsterdam Partners. "The current profit profit picture, I think everybody knows, is pretty weak, but the focus is turning to 2002, and that definitely is going to be a rebound year," Paull added. The market surged this week on a slew of interest-rate cuts in Europe and the United States, but Wall Street is still torn over whether the moves are enough to patch up the bruised global economy, traders said. The Dow Jones industrial average rose 13.69 points, or 0.14 percent, at 9,601.21, and the broader Standard & Poor's 500 Index edged up 2.49 points, or 0.22 percent, to 1,121.03. The technology-laced Nasdaq Composite rose 5.22 points, or 0.29 percent, to 1,832.99. Stocks got a fleeting boost on news Afghan that anti-Taliban forces entered the northern city of Mazar-i-Sharif, marking an advance in the war against the group suspected of masterminding the Sept. 11 attacks on the United States. Oil stocks were higher, including Amerada Hess, which gained $2.44 to $61.59, and Conoco Inc., up $1.29 at $26.81. The latest earnings news kept Wall Street's tone subdued, however, after entertainment giant Walt Disney and food manufacturer Heinz warned profits would likely be lower than expected. Disney, which said it was suffering from weak advertising and low ratings at its ABC TV network and lower attendance at its theme parks, all worsened after Sept. 11. Disney reversed an early loss and climbed 7 cents to $18.91. Heinz slumped $3.14 to $39.56 after cutting its earnings forecast, citing a slowdown in its food service business as a result of lower demand from restaurants. Traders said they expect volume to lighten after 2:00 p.m. 1900 GMT, when the bond market closes early in observance of the Veteran's Day holiday on Monday. The Nasdaq has surged this week following aggressive rate cuts by the European Central Bank, the Bank of England and the U.S. Federal Reserve. The hope is that lower borrowing rates will prompt companies to spend and expand, in turn expanding global economies and corporate earnings. But dismal corporate outlooks and mixed economic news stunted the market's gain. A report showing plunging U.S. wholesale prices weighed on stocks as investors began to question whether the drop will soon hurt earnings. The Producer Price Index had the sharpest drop on record in October as a slowing global economy sapped energy prices and American carmakers offered cut-rate financing to lure buyers into showrooms after Sept. 11 attacks. "People may be worried about deflation," said James Volk, co-director of institutional trading at D.A. Davidson and Co. in Portland, Oregon. Still, a consumer confidence indicator offered a bright note after sentiment strengthened in early November. Expectations and current conditions rose to 83.5 from 82.7 in October, according to the University of Michigan's index. Analysts had forecast the index to fall to 78.7. Enron Corp. was most active on the New York Stock Exchange for the 10th session of the past 13. The stock initially fell after Moody's Investors Service cut Enron's short-term and long-term rating because of a steep loss of investor confidence. Then it rose 56 cents to $8.97 as news trickled out that rival Dynegy Inc. is close to taking over Enron at about $10 a share. Enron's stock and credit ratings plummeted after off-the-balance-sheets deals, now under investigation, were disclosed in mid-October. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. UK: UK power prices gain, take strength from gas. 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Nov 9 (Reuters) - British electricity prices strengthened on Friday, playing catch-up to gas which is being lifted by firmer oil prices. Traders said volume was fairly light and continued uncertainty about Enron was muting the market to some degree. Day-ahead (Monday) baseload electricity rose to about 19.50 pounds per megawatt hour from 18 pounds or so on Thursday. Block five day-ahead (Monday) was heard done at about 50 pounds. Prompt gas prices rose by as much as six pence a therm on Friday on the back of cold temperatures. December baseload power was also stronger at about 18.80 pounds from 18.55 pounds while January baseload rose to 21.1 pounds and February baseload gained to 20.5 pounds. On Friday Enron's credit ratings were cut to a notch above junk status and some energy traders have become increasingly wary of dealing with the company. A report in the Wall Street Journal on Friday said Dynegy is close to buying Enron, currently under investigation after disclosures of off-balance sheet deals, for $7 billion. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Business Play of the Day: Dynegy Close To Buying Beleaguered Enron Deborah Marchini, Peter Viles 11/09/2001 CNNfn: Halftime Report © Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved. DEBORAH MARCHINI, CNNfn ANCHOR, HALFTIME REPORT: Enron (URL: http://.www.enron.com/) reportedly is close to a merger deal with rival Dynegy (URL: http://www.dynegy.com/) in what would be the implausible end to a remarkable corporate collapse. Peter Viles takes a second look at that collapse now in our "Play of the Day". Pete? PETER VILES, CNNfn CORRESPONDENT: This is really a costly lesson for investors, but it`s worth revisiting, painful at it is. And the lesson is this: Do not count on straight talk from a public company, especially if that company is in trouble. Let`s go back to October 22nd. Enron, on that day, confirms the SEC is looking into its various deals. And Enron issues this statement, saying, "We believe everything that needed to be considered and done in connection with these transactions was considered and done." At that point the stock is at $24.40, down from a peak of $82. I`m sure there were some investors who were thinking, gee, the company says the deals are OK. The stock has been beaten up and I`m going to trust the company on this one. Well, fast forward to yesterday, it turns out that everything that needed to be considered and done in those transactions-was not! The company says, "Certain off balance sheet entities should have been included in Enron`s consolidated financial statements; $591 million in earnings disappears, the stock closes $8.41. So, if you trusted and believed that a company in late October, just about three weeks ago, you would have lost 65 percent of your investment-just in the past three weeks, not going back to the $82. And to be clear-we`re not picking on the company here, they made that initial statement knowing full well this was a huge controversy. The government was looking into it, investors were losing faith in management. Still they said, we believe we did everything right. I think in that case it might have been better to say, we`re just looking into it. MARCHINI: Why would Dynegy want to risk exposing itself in fear that there might be still more to come? VILES: Well, this new information about earnings, this restatement did not come from the company. It came from a special board that was brought in just to look at this. And the lawyer for that board was Bill McLucas (ph). He used to be the chief enforcement officer from the SEC. So, a certain amount of credibility in the new set of numbers. Also the performance this year at Enron is not terrible. The earnings I think, are at $1.30 per share, through three quarters. So, you`re looking at maybe $1.50 for the year. An $8 stock, $1.50 in earnings. It`s really cheap, maybe there is a business here worth saving. But it is clear that current management does not have a whole lot of credit, is they`re bottom fishing and they`re bottom fishing at a pretty cheap price. I mean it was a $20 stock when the controversy erupted. It has only gone lower and I guess they think there is some value here. MARCHINI: You know, Moody`s downgraded it today. This is a business that is very heavily depend on looking good to counterparts, looking like its not much of a risk. VILES: Yes, and that`s what`s gone wrong in the last three weeks. People have just said, Geeze, there is just all kinds of stuff going on there. I don`t really understand it. The company hasn`t really explained it. I think I`ll stay away and just let the dust clear and see what happens when it does clear. I think what Dynegy is saying, they think they`ve seen enough to know that there is something left to the company. It has been premiere energy trading company in the United States. Energy trading is decent business. Dynegy knows that business. They would probably know better than bond investors and stock investors what is there and what`s of value. MARCHINI: At least their shareholders hope so, right? VILES: Hope so. MARCHINI: Thanks, Peter. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Indian court restrains Enron from serving termination notice over power project By N. SUNIL Associated Press Writer 11/09/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOMBAY, India (AP) - An Indian court Friday temporarily barred Enron Corp. from serving a final termination notice to the state utility in an ongoing tug-of-war over the American company's $2.9 billion power project, court officials said. The Bombay High Court restrained Enron subsidiary Dabhol Power Co. from serving the notice before the next hearing, scheduled for Dec. 3. The ruling came even as talks were being held in Singapore aimed at salvaging the power project, focusing on two potential buyers for Enron's controlling stake. Enron owns 65 percent shares of the Dabhol Power Co. Two of India's largest private power companies - Tata Power Co. and BSES Ltd. - are the only contenders vying to buy Enron's stake, V.K. Saxena, chief general manager of the Industrial Development Bank of India, told Dow Jones Newswires Friday. In Bombay, India's financial hub, DPC had served a preliminary termination notice on the state-run Maharashtra State Electricity Board in May 2001 following disputes over the payment of monthly power bills. According to the agreement between DPC and the utility, the Enron subsidiary can serve a final termination notice only six months after a preliminary notice. That initial notice was served in May, and DPC's six-month deadline is Nov. 19. But it would now be deferred until the court ruling. Lenders to the project have approached the high court seeking to prevent the DPC from serving the final notice over the 2,100 megawatt project, so that they can recover their money. In May, Enron stopped construction of the 90 percent completed project - India's biggest ever foreign investment. Enron, which has seen its share prices plunge 80 percent over the past three weeks over worries about its finances, is in talks with rival energy trader Dynegy Inc. over a possible merger. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Source: Dynegy close to deal to buy Enron By BRAD FOSS AP Business Writer 11/09/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. NEW YORK (AP) - Dynegy Inc. is close to finalizing a deal to buy its much larger, albeit troubled, rival Enron Corp., for between dlrs 7 billion and dlrs 8 billion in stock, a source familiar with the situation said. The deal could be announced Friday and would include an immediate infusion of about dlrs 1.5 billion from ChevronTexaco Corp., which owns more than a quarter of Dynegy, the source said on condition of anonymity. ChevronTexaco would contribute an additional dlrs 1 billion upon completion of the deal, though the source said talks could still fall apart. Both Dynegy and Enron have released statements confirming they were discussing a deal, but declined to provide any details. Neither company could immediately be reached for comment on Friday. In a related matter, Moody's Investors Service early Friday downgraded Enron's debt ratings to one level above junk bond status and said the company's long-term debt ratings remain under review for further downgrade. On Thursday, Enron Corp. acknowledged it overstated earnings by about 20 percent over the past four years and kept large amounts of debt off its balance sheets through business partnerships now under investigation by the Securities and Exchange Commission. Enron's stock price has been pounded in the past three weeks, falling roughly 80 percent over concerns that serious financial problems were not being disclosed to shareholders. Shares of Enron rose 9 cents to dlrs 9.19 in midday trading Friday on the New York Stock Exchange, where Dynegy's shares climbed dlrs 3.80, or about 10 percent, to dlrs 40.30. In a report on The Wall Street Journal's Web site on Friday, the imminent deal between Enron and Dynegy was valued at dlrs 7 billion, which would value Enron's shares at dlrs 9.50 each, according to unnamed sources. Enron, the top U.S. buyer and seller of natural gas and the top wholesale marketer in the United States, had become one of the nation's 10 largest companies, recording revenue of dlrs 100.8 billion in 2000. --- On the Net: http://www.enron.com http://www.dynegy.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Enron, Dynegy shares jump on talk deal is near. By Nichola Groom 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 9 (Reuters) - Shares of Enron Corp. climbed more than 9 percent on Friday on reports that the beleaguered energy marketing and trading giant is close to finalizing a deal to be acquired by Dynegy Inc. . The stock, which has fallen more than 73 percent since the company disclosed off-balance-sheet deals that are now under investigation by the U.S. Securities and Exchange Commission, was up 79 cents, or 9.4 percent, to $9.20 at midday on the New York Stock Exchange. The estimated $7 billion deal between the two Houston-based companies calls for Dynegy to swap 0.27 of its shares for each Enron share, The Wall Street Journal reported in its online edition on Friday. The deal would also include an immediate injection of $1.5 billion for Enron from ChevronTexaco Corp. , which holds a 26.5 percent stake in Dynegy, and an injection of additional $1 billion when the deal closes, the Journal said. "Clearly, Dynegy has them over a barrel," analyst John Olson of Sanders Morris Harris told Reuters. "This would basically quadruple Dynegy's size with a very accretive earnings contribution, too." Shares of Dynegy also rose, climbing $3.95, or 10.8 percent, to $40.45. Also on Friday, the debt-rating agency Moody's Investors Service cut its long-and short-term ratings on Enron and warned that another cut was possible because a substantial loss of investor confidence had hurt the firm's financial flexibility. Last month, Enron said it would take a charge of $1 billion in the third quarter and reduce shareholder equity by $1.2 billion. Enron on Thursday restated its financial statements since 1997, reducing its earnings by $591 million, or 22 percent, over the four years ending in 2000, and increasing its debt by $628 million, or 6 percent. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Indian Court Bars Enron From Terminating Power Project 11/09/2001 Dow Jones International News (Copyright © 2001, Dow Jones & Company, Inc.) BOMBAY, India (AP)--An Indian court Friday temporarily barred Enron Corp. (ENE) from serving a final termination notice to the state utility in an ongoing tug-of-war over the U.S. giant's $2.9 billion power project, court officials said. The Bombay High Court restrained Enron subsidiary Dabhol Power Co. from serving the notice before the next hearing, scheduled for Dec. 3. The ruling came even as talks were being held in Singapore aimed at salvaging the power project, focusing on two potential buyers for Enron's controlling stake. Enron owns 65% shares of the Dabhol Power Co. Two of India's largest private power companies - Tata Power Co. (P.TPW) and BSES Ltd. (P.BSX) - are the only contenders vying to buy Enron's stake, V.K. Saxena, chief general manager of the Industrial Development Bank of India, told Dow Jones Newswires Friday. In Bombay, India's financial hub, DPC had served a preliminary termination notice on the state-run Maharashtra State Electricity Board in May 2001 following disputes over the payment of monthly power bills. According to the agreement between DPC and the utility, the Enron subsidiary can serve a final termination notice only six months after a preliminary notice. That initial notice was served in May, and DPC's six-month deadline is Nov. 19. But it would now be deferred until the court ruling. Lenders to the project have approached the high court seeking to prevent the DPC from serving the final notice over the 2,100-megawatt project, so that they can recover their money. In May, Enron stopped construction of the 90% completed project - India's largest-ever foreign investment. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron faces lawsuits seeking class action status. By David Howard Sinkman 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 9 (Reuters) - Troubled Enron Corp. , under investigation by U.S. regulators and in talks to be acquired by a smaller rival, also must contend with a battery of lawyers smelling blood. At least seven law firms have filed suits against Enron and its principal officers on behalf of shareholders who bought the energy trading giant's shares from Jan. 18, 2000 to Oct. 17. The stock has plummeted about 89 percent this year. The lawsuits accuse the nation's largest energy trader of overstating operating results, failing to write-down assets on a timely basis in accordance with generally accepted accounting practices and concealing investments that may require Enron to issue large amounts of shares to cover losses. Houston-based Enron declined to comment. But on Thursday Enron restated financial statements from 1997 to 2000 and the first two quarters of this year, admitting it erred in reporting past results. The company also on Thursday fired its treasurer and the general counsel for one of its divisions, the latest executives to leave or be forced out of senior positions at Enron. The firms are actively seeking Enron shareholders to join their lawsuits, which seek class action status. The suits were filed in the United States District Court for the Southern District of Texas in Houston. Judge Lee Rosenthal is assigned to Newby vs. Enron Corp., which seeks $75 million in damages, according to Chief Deputy Clerk David Bradley. The suit also named Enron Chairman and Chief Executive Kenneth Lay, former CEO Jeffrey Skilling and former Chief Financial Officer Andrew Fastow Skilling, a long-time Enron executive, resigned in August as CEO after only six months in that position. Fastow abruptly left the company last month. DISCLOSURE AT HEART OF SUITS A scheduling conference is set for Jan. 25 and a judge will then determine if all the lawsuits should be consolidated and if the case should be certified as a class action lawsuit. Lawyer Arthur Stock of law firm Berger & Montague PC, one of the law firms filing a class-action suit, said the court would decide which firm would be lead attorney, a decision based on the firm that represents the largest shareholders. Since Enron released earnings on Oct. 16, U.S. regulators have launched a probe into some Enron transactions, its shares have fallen almost 75 percent and wiped off $19 billion in market capitalization, and ratings agencies have slashed its credit rating to near junk status. Enron posted charges of $1 billion in its third-quarter earnings, and announced the day after the earnings were released it would write down shareholder equity by $1.2 billion. "We are quite sure the impact of Enron's off-balance-sheet investments were material and not adequately disclosed," said Stock. "We allege that Enron's investments in Azurix and New Power were overvalued at the end of 2000, but Enron wrote them down at the end of the third-quarter in 2001. They knew or were reckless in failing to know - the information was available." New York University Law School Professor Marcel Kahan, who specializes in securities law, said class-action lawsuits are usually lawyer-initiated, with lawyers calling shareholders rather than shareholders calling them. But there is nothing wrong with this, said Kahan, because "if we waited for the clients to move first we would have virtually no suits." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: ANALYSIS-Enron seen test of U.S. SEC's course under Pitt. By Kevin Drawbaugh 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. WASHINGTON, Nov 9 (Reuters) - When they write the history book on Harvey Pitt's stewardship of the Securities and Exchange Commission, Enron Corp. will likely fill Chapter Two. If Chapter One was about the Sept. 11 attacks and Pitt's deft handling of the financial aftershocks, the next episode in the new SEC chairman's tale is sure to be how he treats the Enron affair, leading securities lawyers said this week. "It's going to begin to define the parameters of Pitt's approach. This is a tough one," said Bill Singer, a partner at the law firm of Singer Frumento in New York. America's market watchdog is investigating Enron, the Houston energy trading giant rocked recently by financial reversals, shareholder lawsuits and a plunging share price. At the heart of Enron's problems are some unusual and complex financial transactions involving company executives that appear to have been going on since 1997, but only came to wide public attention last month after they went sour. The fate of Enron may turn, lawyers said, on whether it tried to cover up the transactions and their impact or whether it has sincerely tried to expose them and fix the damage. SEC investigations can lead to fines, criminal charges, sometimes even ruin for the targeted company. Former SEC Chairman Arthur Levitt was known as an aggressive enforcement advocate who came after targeted companies with guns blazing. Pitt, too, is known as a legal bulldog. But he has been talking a lot about enforcement reform since his appointment by President George W. Bush this summer. CREDIT FOR DISCLOSURE In the name of streamlining securities law enforcement, the SEC on Oct. 23 issued informal guidelines on how firms could minimize damage from legal trouble by passing certain tests. "The message was sent loud and clear last month that clean-up efforts and good faith compliance will gain you points at the SEC," said Donald Langevoort, professor of securities law at Georgetown University in Washington. The guidelines laid out four tests of company cooperation: - Self-policing prior to discovery of misconduct; - Self-reporting of misconduct upon discovery; - Remediation, including dismissal or punishment of those responsible, improvement of preventative internal policies and procedures, and compensation of those hurt by the misconduct; - Wide-open cooperation with SEC investigators. Pass these tests, the SEC said, and benefits could range from taking no enforcement action at all to bringing reduced charges, lighter sanctions, or mitigating language in documents related to enforcement actions. "This does not mean that we have gone, or will go, 'soft' on securities violations or financial fraud," Pitt said in a speech on Thursday to securities lawyers in New York. How Pitt and the commission handle the Enron case, in light of the guidelines and Pitt's other statements, will say a lot about the SEC's future course, lawyers said. "It's going to be a test of whether the commission will look carefully to make sure that the four steps were really met," Langevoort said. For its part, Enron has ousted the chief financial officer who was instrumental in setting up two outside partnerships that were involved in the unusual transactions being probed. The company on Oct. 31 appointed a special committee to investigate the affair. The committee hired the high-profile law firm of Wilmer Cutler & Pickering and the accounting firm of Deloitte & Touche to assist it in its probe. On Thursday, Enron fired two more executives and restated its financial results back to 1997. "The company has from the outset, and will continue to cooperate fully with the SEC. We will also proceed with our own review of the transactions," said Enron spokesman Mark Palmer. While much remains to be seen, Langevoort said Enron's action "seems to be a set of efforts that goes very much in the direction" of satisfying the SEC's guidelines. SELF-POLICING SEEN KEY But he and other lawyers pointed out that the Oct. 23 guidelines on cooperation were issued in response to a case involving Kansas food and shipping group Seaboard Corp. , a much smaller company in a much smaller matter. Moreover, securities lawyers said, the first of the four tests - self-policing prior to discovery of misconduct - may be a difficult hurdle for Enron to surmount. "This is a serious case and the SEC guidelines don't provide the answer to it," said Richard Phillips, a partner at the law firm of Kirkpatrick & Lockhart in San Francisco. "Self-policing prior to discovery" means consistent vigilance over company finances. Securities lawyers said they found it difficult to imagine that Enron senior executives were in the dark for four years on the unusual transactions. "Cover-up with respect to public companies is really headed for the trash bin. You can't cover up anything," said Stanley Sporkin, a partner at Weil Gotshal and Manges in Washington who is a former U.S. District Court judge and top SEC official. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Dynegy close to complete deal to buy Enron-WSJ. 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 9 (Reuters) - Dynegy Inc. is close to finalizing a deal to buy beleaguered energy marketing and trading giant Enron Corp. for about $7 billion in stock, The Wall Street Journal reported in its online edition on Friday. The deal, likely to be announced later on Friday, calls for Dynegy to offer 0.27 of its shares for each Enron share, the Journal said, citing people familiar with the matter. The deal will also include an immediate injection of $1.5 billion for Enron from ChevronTexaco Corp. , which holds a 26.5 percent stake in Dynegy, with a similar injection of $1 billion when the deal closes, the Journal said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Can Bandwidth Market Survive Without Independent Enron? By Michael Rieke and Erwin Seba Of DOW JONES NEWSWIRES 11/09/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Can the telecommunications bandwidth market survive without an independent Enron Corp. (ENE), its biggest promoter? Some say the bandwidth market will shrink or disappear without Enron. Others say the fundamental advantages of risk management will enable the market to survive. Two industry analysts see a significant reduction in bandwidth trading if Enron merges with Dynegy Inc. (DYN) or even ceases to exist. "I think the bandwidth trading business just went 'poof'," said Susan Kalla, senior telecommunications analyst with Friedman, Billings & Ramsey, who earned the nickname "Dr. Doom" because of her dire predictions earlier this year for telecom companies and telecom equipment manufacturers. "I think it will be a severe step-down in the volume of trading from what it was six months ago," Kalla told Dow Jones Newswires. "It will be a shadow of its former self." Seth Libby, an analyst with Yankee Group in Boston, said the bandwidth market has yet to reach its potential. "The bandwidth market as envisioned by Enron has not materialized," Libby said. "Is it a viable market yet? No." But Enron has been able to get people to change their way of thinking about how bandwidth has traded in the past and how it will trade in the future, he said. Libby expects brokers and traders to continue to do bandwidth deals. But he also expects an increasing number of deals to get done through Internet-based exchange centers. "It may move down one level from carrier to carrier, to carrier to large buyers, with people in centralized centers selling Internet protocol capacity," he said. Craig Pirrong, director of the Center for Risk Management at Oklahoma State University, said the bandwidth market's problems are bigger than Enron's difficulties. "Is this really a viable market?" Pirrong asked. "Enron had the 'field of dreams' trading idea. 'If we build it they will come'." Before Enron's recent problems developed, the bandwidth market was already handicapped by financial problems in the telecom sector, he said. Few telecom companies had sufficient credit to trade. The market is also handicapped by lack of connectivity among networks. The bandwidth market's problems will probably be found to be part of Enron's difficulties, Pirrong said. "I think they realized there wasn't going to be a pot of gold at the end of the rainbow, or...they realized they weren't going to reach (it) anytime soon." Still, some on Wall Street have accepted the value of managing risk through bandwidth contracts, said Yankee Group's Libby. Some analysts are starting to agree with Enron that the economy is evolving into an information economy, which relies on telecommunications networks. "In that type of economy, can you afford to be exposed to risk without bandwidth contracts?" he asked. Some are looking to Dynegy to rescue the bandwidth market just as it is expected to rescue Enron. Dynegy is in discussions to invest in Enron or acquire it. While Dynegy has a small bandwidth trading desk, it has emphasized telecom assets over trading. It lit a high-speed national telecom network last month and is now seeking to fill the network with telecom customers. Dynegy has been very smart in developing its bandwidth operation, Libby said. It hasn't been pushing the traded bandwidth market to the exclusion of other forms of sale, especially long-term contracts. Dynegy wants to be a viable telecom first, he said. "They will be a wholesale player and they're going to introduce risk management as part of their deals." A source with a traditional telecom carrier company who didn't want to be identified had a similar opinion of Dynegy. "I think they've been much more willing to help this market move along," he said. "We work very closely with them to farther the market." Enron was becoming too difficult to deal with, the carrier official said. He thought the deals Enron presented to him were "ridiculous." As a result, he hasn't talked to them recently. "(Enron) thought they had the model for the way the world should work and the carriers would have to accept it." Because the bandwidth market isn't liquid yet, Enron wasn't able lay off risk in that market as it does in the more liquid gas and power markets. "The lack of liquidity is not as annoying to us as it is to Enron," he said. Without a liquid market in bandwidth, companies have to separate trading from risk management. While the carrier can't hedge its entire position in the bandwidth market, it can structure deals so it isn't giving away services that customers would be willing to pay for. It can also make sure it has the proper credit procedures in place. If Enron disappears and the bandwidth market does develop, there will be more opportunity for the survivors, he said. "If we get to the point where we can (trade), then I become the default market maker." -By Michael Rieke, Dow Jones Newswires, 713-547-9207; michael.rieke@dowjones.com; and Erwin Seba, 713-547-9214, erwin.seba@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Enron's Dabhol suffers legal setback in Indian row. 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. BOMBAY, Nov 9 (Reuters) - U.S. energy major Enron Corp's Indian unit, Dabhol Power Company (DPC), on Friday said a court had stopped it from pulling out of its beleaguered $2.9 billion power project until December 3. The Bombay high court, which on Friday heard a petition against Dabhol by a clutch of Indian lenders to the project, prevented the company from issuing a final notice to terminate its contract with the Maharashtra State Electricity Board, a Dabhol official told Reuters. The court order is a blow to Enron, which owns 65 percent of Dabhol. General Electric Co and Bechtel Corp own 10 percent each, with the Board holding the remaining 15 percent. The U.S. energy giant's attempts to exit the project by either selling its stake or terminating the contract has become more urgent in the face of its financial troubles at home. The Houston-based company has been plagued by investor doubts and is under the gun to shore up its crumbling finances. The first phase of Enron's controversial Indian project has been completed, but work on the second phase was abruptly stopped in June following a bitter dispute between Enron and the local utility, the plant's sole buyer. The cash-strapped Indian utility had in 1995 contracted to buy all the power from Dabhol's 2,0184 MW plant on the western coast of India, the country's largest foreign direct investment. But it later said it did not need all the power and that it was too costly. While Dabhol has said it would prefer to resolve its dispute with the Board amicably, it felt the discussions with the power plant's Indian lenders and the government were not progressing. In that case, it may be forced to terminate the contract, and file for damages in the International Court of Arbitration in London. But the Bombay high court has said it will hear the case again on December 3. The case against Dabhol was filed by Indian lenders, led by the country's largest term lender, the Industrial Development Bank of India , as they want to salvage their loans to the power project. They fear that if Enron is unable to sell its stake and terminates its contract with the utility, it could end up defaulting on its loans. WHICH WAY OUT? The dispute between Dabhol and the Indian utility came to a head in June, when Enron decided it would stop work on the second phase of the project even though it was almost complete, after the Board defaulted on payments. The dispute, which has hurt India's attempts to attract more foreign investment in the power sector, also cast a cloud over the loans advanced by Indian banks and financial institutions, which have an exposure of 48 percent of the total project cost. Dabhol served a preliminary notice in May to terminate the project and can serve a final notice if a six-month cooling-off period fails to produce a solution. That six month deadline ends on November 19. Analysts said there are only two ways for Enron to pull out of the project. Wait for the Bombay high court to lift the stay on December 3, or hope that its stake is bought out by one of the two potential suitors - India's Tata Power Company Ltd or BSES Ltd . Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy Nears Deal to Buy Enron in $7 Billion Stock Transaction By Robin Sidel 11/09/2001 Dow Jones Business News (Copyright © 2001, Dow Jones & Company, Inc.) Staff Reporter of The Wall Street Journal Dynegy Inc. is close to finalizing a deal to buy beleaguered Enron Corp. for about $7 billion in stock, according to people familiar with the matter. The deal, which is likely to be announced Friday, calls for Houston-based Dynegy to swap nearly 0.27 of a share for each share of its crosstown rival, these people said. Based on current trading prices on the New York Stock Exchange, that would value Enron at about $9.50 a share. Enron shares traded at $8.41 at 4 p.m. Thursday on the Big Board, meaning the Dynegy deal amounts to a 13% premium. Terms call for ChevronTexaco Corp. (CVX) to inject $1.5 billion into the deal immediately, and another $1 billion upon closing. Other parties also may inject cash into the deal, although it was unclear if all those details had been finalized. If approved by regulators, the deal would be a stunning development for Enron, which transformed itself from a staid natural-gas-pipeline company into a highflying power-trading giant only to see its share price -- and hefty market valuation -- plummet in a matter of weeks. Dynegy is one-fifth Enron's size. Enron's stock price, which traded near $85 at the beginning of the year, has been pounded in the past three weeks, falling roughly 80%, over concerns that serious financial problems weren't being disclosed to shareholders. Shares of Enron (ENE) fell 26 cents to $8.67 Friday morning on the New York Stock Exchange, where Dynegy's (DYN) shares climbed $1.90 to $38.50. Enron has been scrambling for days to line up quick financing from a prominent outside investor and has been in discussions with private-equity firms and power-trading companies. The company desperately needs to win back its credibility on Wall Street following the disclosure that the Securities and Exchange Commission was investigating partnerships Enron created to serve as a hedge against fluctuating market conditions. On Thursday Enron reduced its previously reported net income dating back to 1997 by 20%, mostly due to improperly accounting for the partnerships. Concerns over Enron's financial condition are vexing investors and analysts, including those at major credit-rating agencies. On Friday, Moody's Investors Service lowered Enron's debt rating to one level above junk-bond status and said the company's long-term debt ratings remain under review for further downgrade. Late last month, Fitch put Enron on review for a possible downgrade, while another, Standard & Poor's, changed Enron's credit outlook to negative from stable. Write to Robin Sidel at robin.sidel@wsj.com Copyright © 2001 Dow Jones & Company, Inc. All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE1-Moody's cuts Enron's ratings, may cut again. 11/09/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 9 (Reuters) - Ratings agency Moody's Investors Service on Friday cut its long-and short-term ratings for embattled energy trader Enron Corp. and warned another cut is possible because a substantial loss of investor confidence had hurt the firm's financial flexibility. Moody's cut Houston-based Enron's senior unsecured debt ratings to "Baa3," its lowest investment grade, from "Baa2." It also cut the company's commercial paper rating to "Not Prime" from "Prime-2." If Moody's cuts Enron's long-term rating again, it would take it to a junk level, making it tougher for Enron to issue debt and run its day-to-day business. Friday's downgrade also adds uncertainty to a potential merger with rival Dynegy Inc. , which has been in talks to acquire Enron. Sources told Reuters on Thursday that Dynegy's board was waiting for word from major credit rating agencies to determine whether acquiring Enron would result in a significant downgrade of its debt. Dynegy has asked for an expedited review from Moody's and Standard & Poor's on how the merger would affect its ratings. Seeking to calm fears that it faces a credit crunch, Enron in late October said it had drawn on its committed lines of credit to provide more than $1 billion in cash liquidity. Despite that move, Enron faces "significant debt maturities over the near term, as well as the potential for increased margin requirements from counterparties of its wholesale trading operation," Moody's said. "The company may not be able to retain investment-grade characteristics," Moody's said. Enron's stock and credit ratings have plunged since disclosures of off-balance-sheet deals now under investigation by the U.S. Securities and Exchange Commission for possible conflict of interest. The deals contributed to a $1 billion third-quarter charge and $1.2 billion reduction in shareholder equity. On Thursday, Enron restated its financial statements since 1997, trimming earnings from 1997 to 2000 by $591 million, or 22 percent, and increasing its debt by $628 million, or 6 percent. S&P last week cut Enron's corporate credit rating to "BBB," two notches above junk, from "BBB-plus," and warned it may cut the ratings again. Enron shares traded Friday on the New York Stock Exchange up 34 cents at $8.75. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron long-term ratings cut to Baa3 from Baa2 - Moody's 11/09/2001 AFX News © 2001 by AFP-Extel News Ltd NEW YORK (AFX) - Moody's Investors Service said it downgraded the senior unsecured debt ratings of Enron Corp to Baa3 from Baa2. Enron's long-term debt ratings remain under review for further downgrade. Moody's said the rating actions reflect Enron's "reduced financial flexibility as a result of a substantial loss of investor confidence." Enron drew down its bank credit facilities in order to shore up near-term liquidity, but faces significant debt maturities over the near term, as well as the potential for increased margin requirements from counterparties of its wholesale trading operation. In addition, uncertainty surrounding the firm's contingent obligations creates increased risk for debtholders, it said in a statement. Moody's said that Enron's well-established wholesale trading franchise and its regulated pipeline businesses have solid operating attributes and generate good cash flow. However, the rating agency concludes that the company may not be able to retain investment grade characteristics. Moody's review will focus on Enron's ability to further improve its liquidity and capital position. The rating agency would view a substantial near term injection of equity capital as a stabilizing event. lj/cmr For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron, Dynergy very close to deal - CNBC 11/09/2001 AFX News © 2001 by AFP-Extel News Ltd NEW YORK (AFX) - ChevronTexaco Corp affiliate Dynegy Inc and Enron Corp are "very close" to reaching a deal for Dynegy to buy out Enron, CNBC television reported. The two companies are "very close to reaching a deal... they could make an announcement very soon", said CNBC's David Faber. Yesterday, the companies confirmed they were in talks over a possible tie-up but said they would refrain from making any further statements until a definitive agreement is reached. According to reports, Dynegy offered 7-8 bln usd for Enron. vog/lj For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Business Easton`s Call: Returns are No More Rhonda Schaffler 11/09/2001 CNNfn: Market Coverage - Morning © Copyright Federal Document Clearing House. All Rights Reserved. RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: We`re going to turn to Tom Easton our guest host once again. Enron (URL: http://.www.enron.com/) one of the many stories, I guess. Companies that were flying high and then just brought down to earth quickly. Different story with Enron because it`s an SEC matter as well. TOM EASTON, SR. CORRESPONDENT, "THE ECONOMIST": But let`s be clear about Enron. Enron understood that it`s commercial paper was going to downgraded. That`s why it drew on it`s back up facilities last week. The fact that it`s been downgraded to one step above junk for it`s longer term debt, was also known. What is not known is what really remains inside this company. They know they have a pipeline. That old, obsoltete - it was the history of the company kind of thing, and that has be only thing really to have definable value. And that`s why they used it to refinance with last week. The question is what is left? In all their derivative contracts and all their partnerships, where is their value? You know, you have to assme there`re pronbably a lot of very smart financial buyers sniffing around right now to see if they can buy and actually pull some value out of those contracts. I wouldn`t be surprised if there were some sort partnership that came up with a Berkshire (URL: http://www.berkshirehathaway.com/) or an AIG (URL: http://www.aig.com/) or some very, very clever financial buyer that would try to separate out the pipeline and these other things and extract some of the value. SCHAFFLER: You know, we were talking about the overall value of the market earlier. That you think P/Es are running a little high. Historically they are running high. And what the argument that we`re hearing now with what`s going on in the bond market, with what`s going on in Japan? We talked about Latin America before. The argument people are saying, is well where else will you put you money if you want get some sort of return? EASTON: You know, that is an argument that a lot of brokers use when they sell stocks. There is no return that can be gained if your stock falls. So, the question is... SCHAFFLER: Yes, that is true. EASTON: .you know, you have a low commercial paper return, you have a low savings account return, but as stocks go down you`ve lost. And, in fact, the concern is not the P/Es are high. It`s that they are going to get higher. And they`
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