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Enron Mail |
I was in Spain with the Credit Department to receive a list of assets and
supporting documentation from GMP that they were to prepare to convince Enron the company had a chance to make it through its present difficulties. The overall situation is that this business has ground to a halt. They are a distribution company without any supplies or suppliers willing to supply them on open credit and no bank lines. Thus they are making no sales and have no cash coming into the business. They are owed 12 mil dollars presently from their customers for previous deliveries. They are unlikely to recover this outstanding receivable without a resumption of deliveries. The above reflects the situation that we were working with GMP to improve with the thought that their outstanding debt was appx 30 million dollars. The situation this week we found out was considerably worse. They disclosed that they had not paid the Spanish tax authorities since September the vat taxes they collect on the government behalf. 25 mil usd is the amount of overdue taxes and that number will continue to increase depending on the rate of interest they are charged and the penalties imposed upon them for their default. Given the debt is to the tax authorities this poses further difficulties. The tax authorities have preferential rights over all other creditors There is no time bar that limits the time period that the courts can look back to quantify when a company became effectively bankrupt can be absolved as not legitimate. The payments we received since September (50 million) could therefore be viewed by the courts as money that should have been paid by GMP to other creditors. Looking through the records some of this payments were for cargoes being delivered in that time (appx 18 mil) but the majority (32 mil) was the paying down of previous debt. Our existing debt situation is as follows: 5 mil unsecured debt on oil sold to GMP 13 mil unsecured debt on mark to market exposure. Four vessels were delivered over November and December by Enron to Ectric Spain that priced to GMP over the month of delivery. GMP was to prepay this oil to Enron as they lifted the product. We entered this arrangement to try and keep them operating and also allow them to meet their strategic stock requirements. Our risks under a claw back by the courts for preferential payment while GMP insolvent: 20 million in strategic stocks (this oil was initially sold by Enron to GMP and then the title was passed by GMP to Ectric Spain when GMP was in default on the payment). Concern here being that if the courts declared GMP bankrupt at the time that the title was transferred that transaction could be declared null and void. Enron would have to liquidate the physical oil and the proceeds divided amongst all the creditors. ?? million on money received by Enron in preference to the other creditors. The main concern here is the 25 million owed to the tax authorities. The debt of the other suppliers and banks is as follows: veba 15 mil. total 3 mil. vitol 1 mil. deutche bank 10 mil. we don't feel that there is a significant case of preferential treatment to us vs these other suppliers. Actions we are taking going forward. 1) Speaking with Veba about insisting on a professional liquidation practitioner being hired as a precondition for any further support. 2) We are in the process of selling all the oil that we hold in Spain. We want to eliminate the possibility of the courts putting a freeze on the oil we have in Spain in the event of bankruptcy. We will continue to pressure this company to refinance their company. In March 2000 we conducted a detailed review of their books and they were worth 5 mil usd. We don't believe that the business has lost money anywhere near the level of present indebtedness and actually would have expected 2000 to have been a profitable business environment for them. Thus, it is our conclusion that they have been taking money out of the company. I will update you further on what if any assets they do bring forward to improve this outlook. David/Robert please add in where you feel I've left out anything important. Thanks, Chris.
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