|
|
Enron Mail |
Fitch Puts Enron On Rating Watch Negative
Bloomberg, 10/25/01 STOCKWATCH Enron higher after dismissing CFO Fastow AFX News, 10/25/01 DJ Concerned Energy Cos Make Few Changes In Enron Dealings 2001-10-25 14:13 (New York) Calif Guarantees Allow Williams To Book Power Revenues Dow Jones Energy Service, 10/25/01 Stocks Expected to Open Lower, Hurt By Weak Economic News Dow Jones Business News, 10/25/01 Kaplan Fox Seeks To Recover Losses For Investors Who Purchased E Bloomberg, 10/25/01 Enron CNBC: Squawk Box, 10/25/01 Fitch Puts Enron On Rating Watch Negative 2001-10-25 13:49 (New York) Fitch Puts Enron On Rating Watch Negative Fitch-NY-October 25, 2001: Fitch places the following Enron securities on Rating Watch Negative: senior unsecured debt `BBB+'; subordinated debt `BBB'; preferred stock `BBB-`; and commercial paper `F2'. Pipeline subsidiary `A-` rated senior unsecured debt at Northern Natural Gas Co. and Transwestern Pipeline Co., are also placed on Rating Watch Negative. The rating action primarily relates to the negative capital market reaction to recent disclosures by the company. The loss of investor and counterparty confidence, if it continues, would impair Enron's financial flexibility and access to capital markets, therefore, impacting its ability to conduct its business. On Oct. 16, 2001, Enron announced a $1 billion after-tax charge to earnings to be taken in the third quarter of 2001 and a reduction of balance sheet equity by $1.2 billion relating to the unwinding of structured transactions. Since that time, there have been several damaging news reports on the company and its management. More importantly, investors have voiced concerns. Enron's common stock price has plummeted and spreads on its debt have widened. The company has attempted to quell rumors and has publicly stated that it has adequate liquidity to conduct its business. Approximately $1.5 billion of unused liquidity is available under committed bank lines. An additional concern is that certain structured transactions of the company including Marlin Water Trust II and Osprey could unwind. While various sources of repayment exist, such as the sale or liquidation of underlying assets, or an equity offering, primary credit support is derived from the Enron obligation to remarket mandatorily convertible preferred stock if an amount sufficient to repay the notes has not been deposited with the trustee 120 days prior to the maturity date or upon a note trigger event. In the event that the issuance of the preferred stock yields less than the amount required to redeem the senior notes in either case, Enron is required to deliver additional shares. If Enron cannot or does not deliver on its obligation, then the amount of the deficiency becomes a payment obligation of Enron, representing a general unsecured claim. While trigger events include a downgrade of Enron's senior unsecured debt below investment grade by one of the major rating agencies in conjunction with specified declines in Enron's closing stock price over three consecutive trading days, Enron would have a forebearance period of 60 days as long as an attempt was being made to register the shares. The total amount of Marlin and Osprey debt is approximately $3.2 billion. Enron has not verified that the underlying assets have adequate market value to fully pay down the associated debt. While capital market uncertainties have escalated, Fitch has no information to indicate that there are any fundamental problems with Enron's core wholesale, retail, and pipeline businesses. Fitch expects to be in contact with the company on a continuing basis to both monitor ongoing events and address strategic, longer-term issues. STOCKWATCH Enron higher after dismissing CFO Fastow 10/25/2001 AFX News © 2001 by AFP-Extel News Ltd NEW YORK (AFX) - Share of Enron were higher in opening trade, after the company dismissed its chief financial officer, Andrew Fastow, due to his past involvement in running two partnerships, in which Enron had invested, dealers said. At 9.56 am, Enron was up 1.13 usd, or 6.95 pct, at 17.55. The DJIA was down 138.60 points at 9,207.52, the S&P 500 index was down 15.95 pts at 1,069.00 and the Nasdaq composite down 39.02 at 1,692.52. Enron said it named Jeff McMahon CFO to replace Fastow, after announcing Monday that the Securities and Exchange Commission is looking into the Fastow-related transactions. "In my continued discussions with the financial community, it became clear to me that restoring investor confidence would require us to replace Andy as CFO," said chief executive Kenneth Lay in a statement. Enron shares have fallen sharply in recent days on concerns over financial transactions made with the two partnerships, LJM Cayman LP and LJM2 Co-Investment LP, which analysts said could affect future earnings and which have prompted class action suits against the company. McMahon, who had been serving as chairman and CEO of Enron's Industrial Markets group, had quit his job as treasurer last year, after voicing concerns within the company about Fastow's role in running the two partnerships, according to the Wall Street Journal. This morning, Salomon Smith Barney analyst Raymond Niles downgraded Enron to "buy- speculative," from "buy-high risk", to reflect his concerns that "lingering uncertainty over financial practices may begin to impair Enron's commercial operations." "This is the least likely outcome, in our view, but one whose likelihood has increased over the last week as questions continue to be asked," he said. ng/lj For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =DJ Concerned Energy Cos Make Few Changes In Enron Dealings 2001-10-25 14:13 (New York) By Mark Golden, Kristen McNamara, Jon Kamp and John Edmiston Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Energy trading companies have concerns about the credit quality of troubled Enron Corp. (ENE), but they have made almost no changes in policies concerning the top trader of North American power and gas, the companies said Thursday. The concerns have arisen because Enron, which accounts for about a quarter of the trade in the country's power and gas markets, has seen its share price fall by a third this week due to uncertainties about its extremely complex financial structure. Moody's has put Enron's credit on watch for possible downgrade, and some of the company's debt is trading like junk bonds in the secondary market this week. "We have made no changes to our credit policy concerning Enron," said John Sousa, chief spokesmann for Dynegy Inc. (DYN). "It's business as usual." Williams Cos. (WMB) spokesman Jim Gipson said that his company, too, has made no changes and has no concerns about Enron's credit. Another Top 10 power and gas trading company, Aquila (ILA), has also left Enron credit unchanged. Other companies expressed concern, though they've taken little if any action. "Like everyone else in the marketplace, we're proceeding with caution," said Lora Kinner, director of credit for Tractebel Energy Marketing, the North American subsidiary of the Belgian company Tractebel S.A. Kinner said the company is just looking for more information and doesn't expect to make any drastic changes. Calif Guarantees Allow Williams To Book Power Revenues By Andrew Dowell Of DOW JONES NEWSWIRES 10/25/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Clarifications by California as to what electricity transactions the state will back enabled Williams Cos. (WMB) to book $180 million in power sales from the previous period as third-quarter revenues, the company said Thursday. The revenues came from power Williams sold through the California Independent System Operator, which runs the state's wholesale power market and clears and settles transactions. The state of California has paid more than $11 billion for power bought directly from suppliers, but has yet to pay for any ISO power since it took over the job of buying power for the state's ailing utilities in mid-January. Two weeks ago, however, the state made clear for the first time which ISO transactions it would back. "It's that fact that has allowed us for the first time to recognize dollars from sales to the California ISO," Williams Chief Operating Officer Steven Malcolm said on a conference call Wednesday. Williams reported third-quarter net income of $221.3 million on revenues of $2.81 billion, up from $121.1 million on revenues of $2.33 billion in the same period the year before. Williams is now in talks with California to secure payment for its ISO sales. The process is complicated by the state's role as guarantor of transactions undertaken on behalf of the utilities, which aren't creditworthy enough to buy power for themselves. The ISO didn't envision third-party guarantors when it set up its settlement process, and state accounting rules require more detailed bills than those sent out by the ISO each month, state power officials have said. The state says it has set aside $1.2 billion to cover ISO transactions. As reported, suppliers including Williams had charged the state with deliberately muddling the repayment issue to keep power flowing for free. Willing To Renegotiate Separately, Williams' officers also said the company was willing to discuss reworking its long-term contracts with California, provided the result benefited both parties. California Gov. Gray Davis is under heavy fire for having locked the state into contracts running as long as 20 years at prices negotiated at the peak of a market that has since collapsed. Both sides could potentially benefit from changes to the length of the term of the contracts or the specifics of power-supply obligations - perhaps freeing up supply that Williams thinks it could get more money for on the spot market, Malcolm said. "We're always willing to sit down with a customer," Malcolm said. Williams hasn't been approached by the state to renegotiate the contracts, Malcolm said. Any attempt by California to force through one-sided changes is unlikely and could backfire for the state by disrupting plans for new power plants, he said. "To the extent contracts are changed, financing is going to go away," he said. Downplaying Enron Opportunities Williams downplayed its ability to capitalize on the recent troubles of market-leader Enron Corp. (ENE), saying it focuses on large, long-term structured deals, not the high-volume, physical-market transactions that Enron dominates, Malcolm said. Also, TradeSpark - the Internet-based energy exchange in which Williams is a partner - is limited for now in its ability to expand and take volume from Enron's proprietary system EnronOnline because of the horrific losses operator Cantor Fitzgerald (X.CFZ) suffered in the attacks on the World Trade Center. "That's interrupted the rapid growth we were seeing," Williams Chief Executive Keith Bailey said on the call. 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 EnronOnline, has seen its share price fall by a third this week due to uncertainties about its extremely complex financial structure. Those concerns have raised questions about the business model of EnronOnline, a platform on which Enron is the counterparty in all trades. Those concerns could eventually boost volume on neutral exchanges like TradeSpark. "We continue to believe in the neutral platform that TradeSpark offers," Malcolm said. TradeSpark LP was formed by eSpeed Inc. (ESPD), Cantor Fitzgerald (X.CFZ), Shell (RD) unit Coral Energy, Dominion (D), Koch Energy Trading Inc., TXU Corp.'s (TXU) TXU Energy unit and Williams Cos.' Williams Energy Marketing & Trading Co. -By Andrew Dowell, Dow Jones Newswires; 201-938-4430; andrew.dowell@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Stocks Expected to Open Lower, Hurt By Weak Economic News 10/25/2001 Dow Jones Business News (Copyright © 2001, Dow Jones & Company, Inc.) A Wall Street Journal Online News Roundup Stocks are expected to open with losses Thursday, weighed down by disappointing U.S. economic news and the European Central Bank's decision to leave interest rates unchanged. About an hour before the New York Stock Exchange opened, futures on the Standard & Poor's 500-stock index were sharply lower, suggesting that the Dow Jones Industrial Average will post a 94-point loss at the opening bell. In one of a trio of negative economic reports, the Commerce Department said orders for durable goods, or products expected to last more than three years, tumbled 8.5% in September. That was a much steeper drop than the 0.9% decline forecast by economists surveyed by Thomson Global Markets. Meanwhile, the Labor Department reported that the number of Americans filing new claims for state unemployment insurance rose to 504,000 for the week ended Oct. 20. That was more than the 500,000 jobless claims expected by economists. The Labor Department also said that the employment-cost index rose 1% in the third quarter, slightly more than expected. The indicator measures changes in compensation costs, including wages and salaries, as well as costs for employee benefits. Later, at 10 a.m. EDT, the National Association of Realtors is expected to say that 5.26 million existing homes were sold last month, down from the 5.5 million sold in August. Prior to release of the economic news, S&P futures had pointed to a weaker opening on Wall Street, after the ECB left rates alone despite growing political pressure for another rate cut to help the stumbling European economy. In addition to pouring over Thursday's economic reports, investors will spend much of the session sorting through a mountain of earnings reports, said Peter Cardillo, director of research at Westfalia Investments. Among companies that announced quarterly earnings so far, Dow Chemical said third-quarter net income plunged 84%, hurt by weak demand, substantial price declines and a slew of charges mostly related to acquisition expenses and restructuring at Dow Corning. Among other stocks to watch, Enron on Wednesday replaced its finance chief, Andrew Fastow, capping a tumultuous day in which the Houston powerhouse saw its stock price continue to fall sharply. States suing Microsoft are hiring one of the nation's top trial lawyers, signaling they may seek a harsher antitrust remedy than the White House. Meanwhile, the software giant's Windows XP formally makes its debut Thursday. In key overseas markets, stocks were mixed. London's Financial Times-Stock Exchange 100-Share Index was down 1.2% in intraday trading, while Frankfurt's DAX was 0.9% lower. Earlier in the day, Japan's Nikkei 225 average closed with a gain of 0.7%, and Hong Kong's Hang Seng Index rose 0.2%. In Wednesday's session, Wall Street continued to shrug off disappointing earnings news, and focused instead on hopes that low interest rates and the government's economic-stimulus program will produce a recovery. Technology issues saw much of the buying, with the Nasdaq Composite Index rising 27.10 points, or 1.6%, to 1731.54. The Dow industrials inched 5.54 points, or 0.1%, higher to close at 9345.62, despite substantial losses in two of its components, Eastman Kodak and AT&T, which issued weak outlooks. In major U.S. market action Wednesday: Major stock indexes advanced. But on the Big Board, where 1.34 billion shares traded, 1,374 stocks rose and 1,743 fell. On the Nasdaq, 1.89 billion shares changed hands. Bonds gained. The 10-year Treasury note rose 13/32, or $4.0625 for each $1,000 invested. The yield, which moves inversely to price, fell to 4.588%. The 30-year bond was up 23/32 to yield 5.330%. Early Thursday, the 10-year note was up 10/32 to yield 4.553% while the long bond was 17/32 higher, yielding 5.303%. The dollar was mixed. Late in New York, it traded at 122.87 yen, up from 122.68, while the euro rose against the dollar to 89.35 U.S. cents from 89.07. Early Thursday in New York, the dollar bought 123.17 yen and traded at 88.27 cents to the euro. 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. Kaplan Fox Seeks To Recover Losses For Investors Who Purchased E 2001-10-25 12:07 (New York) Kaplan Fox Seeks To Recover Losses For Investors Who Purchased Enron Corp. Common Stock NEW YORK, NY -- (INTERNET WIRE) -- 10/25/01 -- Kaplan Fox (kaplanfox.com) has filed a class action against Enron Corp. and certain of the Company's officers and directors in the United States District Court for the Southern District of Texas. The suit is brought on behalf of all persons or entities who purchased the common stock of Enron Corporation ("Enron") (NYSE: ENE) between January 18, 2000 and October 17, 2001, inclusive (the "Class Period"). The complaint charges Enron Corp. and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, defendants engaged in asset and securities sales to closely related affiliates and interested parties, which disguised Enron's true financial position. Many of the details of these transactions were hidden from the public. Defendants used these asset sales to falsely improve Enron's balance sheet, thereby maintaining Enron shares at an artificially inflated price. Certain Enron executives, who held positions in the affiliates that presented clear conflicts of interest, reaped millions of dollars in personal gains from these transactions. The complaint further alleges that during the Class Period, Defendants made misleading statements regarding the potential value of Enron's Broadband business, in order to artificially boost Enron's share price. With knowledge that Enron's Broadband business would never post a profit and was seriously overvalued, Defendants continued to make misleading statements about the Broadband business in order to maintain the share price at its artificially inflated levels. Defendants used the artificially inflated value of Enron's Broadband business to hedge against, in order to gain millions of dollars in financing. Defendants failed to disclose the risk of these financing arrangements. Defendants hid the true nature of Enron's earnings, its hedging, its businesses, and the correct state of Enron's finances from its investors and the market, further artificially inflating Enron's share price. While the stock was artificially inflated for the above reasons, Enron executives engaged in extensive insider trading, gaining personal proceeds of approximately $482 million during the Class Period, before the public became aware of the above practices. Plaintiff seeks to recover damages on behalf of the Class and is represented by Kaplan Fox & Kilsheimer LLP. Our firm, with offices in New York, San Francisco, Chicago and New Jersey has many years of experience in prosecuting investor class actions and actions involving financial fraud. For more information about Kaplan Fox & Kilsheimer LLP, you may visit our website at www.kaplanfox.com If you are a member of the Class, you may move the court no later than December 21, 2001 to serve as a lead plaintiff for the Class. In order to serve as a lead plaintiff, you must meet certain legal requirements. If you have any questions about this Notice, the action, your rights, or your interests, please e-mail us at mail@kaplanfox.com or contact: Kaplan Fox & Kilsheimer LLP - 805 Third Avenue, 22nd Floor - New York, NY 10022 Kaplan Fox & Kilsheimer LLP - 100 Pine Street, 26th Floor - San Francisco, CA 94111 Contact: Frederic S. Fox, Esq., Kaplan Fox & Kilsheimer LLP Phone: 800-290-1952 Fax: 212-687-7714 Email: mail@kaplanfox.com Date October 25, 2001 Time 07:00 AM - 08:00 AM Station CNBC Location Network Program The Squawk Box Mark Haines, co-anchor: Joe Kernen, what's going on? Joe Kernen, co-anchor: We've got to shift gears into this Enron situation which has just been--you've been talking about it quite a bit, David--how could you not talk about it? Seventy-six million shares yesterday, down fifty percent in the last two weeks. This is a company with--what?--a hundred million in revenues. James Cramer, guest market commentator: Maybe. Kernen: Yeah, right. Anyone who does any trading in energy apparently, you know, uses Enron Online, so anything that destabilizes Enron to a great extent could destabilize the whole energy trading arena and... Cramer: Go ahead, say it! Say what you're thinking! No one has said it yet. We know the truth. We believe that Enron caused a national short squeeze. They knew every single number in this gas situation. They wrecked the California utility system and profited from it. That's my bet. My bet that this--they had--look, they were the market maker. Imagine if Instinet knew what you were going to be buying and took it ahead of you. I think they cornered the market for electricity for about four months, made a huge fortune and now the company is unraveling and when someone--when the Justice Department gets in there we're going to discover this. Kernen: Let's see what happened... Haines: Now, wait a second... David Faber, co-anchor: Whoa, whoa, whoa! The Justice Department, Jim? Now, is that new? Is that something-- Cramer: No, that would be, if I were a prosecutor, something... Faber: OK, so they are not being investigated? Cramer: Well, no, I'm actually being a little forward thinking. Kernen: The SEC wants documents about the limited partnership transactions of Mr.-- Faber: Which is very different from what Jim is talking about. Cramer: No, I'm saying that this is what, if I were an enterprising prosecutor, I would say, Did we have a nationwide short squeeze in electricity caused by one company that had access to all the screens and knew exactly what was happening with the electricity market which then wrecked the California utility system, cost the consumer billions of dollars, and is now being hushed up? Kernen: Well, let's talk about the actual news. Here's yesterday's trading-- Haines: Wait a minute. Kernen: Well, I just want to say that the guy is gone now. That's the new news here. Did you read--did you know that Fastow, after four-- Faber: Late yesterday. Kernen: Yeah, after four o'clock, Fastow is gone. What's interesting-- Faber: He's the CFO-- Kernen: But he's a new CFO. Faber: --who benefitted personally from some of these off balance sheet partnerships. Cramer: Mark, you know, I'm not on thin ice here, I'm not on thin ice. Haines: I just want to make sure we understand that this is your theory. Cramer: This is my theory. Haines: OK. Cramer: It is just a theory. It is my opinion. But I think we've got to find out more about that short squeeze that occurred. Haines: OK. Cramer: We need to find out whether it was orchestrated. Kernen: The new CFO might help regain some credibility for the company because he was the old treasurer who left that position a year or so ago because of some disagreements with how Mr. Fastow was doing business apparently. So now he's back as CFO and we'll whether that calms the market down. Faber: Well, what they need to do-- Joe, they need to come clean. I mean, that is what all the investors in Enron and those who've left the company as investors over this last week have wanted. Let's see everything; be as transparent as you possibly can be; tell us exactly what we need to know. And as much as they need to come clean with their investors, they need to come clean with their trading counterparties because that is really what people are concerned about. Kernen: Why is the credit worthiness issue such a big deal? Anyone who does trading with them, if their credit worthiness were to go--if their credit rating were to go down, how would that affect energy trading? Faber: Well, you want to know that they're going to be there on the other side and make good on the trades. Kernen: I guess you would, wouldn't you? Faber: Right. Not that they aren't, but why would you--if you can trade with seven other guys--seven other companies, maybe you cut back a little bit on your exposure there. Kernen: Now, why would-- Faber: And that would hurt their core business. Kernen: Why are people expecting some type of action from the credit agencies, not because of the stock price, right? Because of something that could unravel-- Faber: Because of something related to these liabilities they may have-- Kernen: That they don't know about at this point. Faber: --that they may have with regard to funding some of these off balance sheet partnerships that they backstopped in terms of borrowing that went on at the project level at the off balance sheet partnership. Will it be a liability? They don't know. But that's one of the reasons-- Kernen: We're talking hundreds of millions or billions? Faber: They don't know. Kernen: But there were billions of dollars in limited partners? Faber: Yes. About three billion in financing, I think is what some analysts estimated. Kernen: This is a pretty big number. Faber: Yeah, they can get to most of that with the assets that they have in the partnerships themselves. Kernen: I use a six month chart to show what's happened over the last two weeks. You got to look at here. But if we went back a year, you'd see eighty as far as the high for Enron. Now we're at sixteen. Faber: Everybody else took a hit yesterday. Dynegy got hurt. Kernen: Well, I got Dynegy next. Don't-- Here we go. Faber: I'm sorry. I'm getting a little excited. Kernen: You are. Faber: Enthusiastic about your charts. Kernen: There's a weekly chart of Dynegy, and you know what's coming next, don't you? Now I'm worried about the utility average. I've worried about the transportation average a lot in my career. Mark, now the utilities have replaced my worries. I'm angst-ridden. Did you see this chart? We're breaking below the-- Cramer: That's a positive, not a negative, Joe. Kernen: What's wrong with Cramer today? What happened? Cramer: I'm all fired up! Faber: He really is. My, God, he's got the DOJ getting all crazy, the FBI, the CIA. You going down to En--you going down to Houston yourself? Cramer: I may just have to. I may have to clean up that whole city. Kernen: Jim, why would the--that's the--now getting down to the lows, I mean, the other averages have come back quite a bit from the post-attack lows, the utilities are retesting those. That's not something to worry about? Cramer: No, because I think there's a lot of money going into more cyclical issues. I think the economy is showing signs of getting better. The consumer is certainly much stronger than we thought. The base book didn't say the corporate was strong, but the consumer is strong. Much stronger than before. Kernen: All right. In the past people have worried about the utility averages being a leading indicator, though. I don't--we're talking about four hundred to two-ninety at this point. That's a long way. Cramer: This average has got a lot of problems to it, but I still think that-- Kernen: It's no longer the-- Cramer: --you sell this as safety. We don't want safety as much as we want a little bit more reciprocality. # # #
|