04:33 20Nov2001 RSF-Platt's: Enron sees cash drain, warns on survival

New York (Platts)--20Nov2001/533 am EST/1033 GMT Enron filed Q3 financials late Monday, revealing a huge cash drain, despite last week's $1.5-bil asset-backed infusion from merger partner Dynegy. Enron said its cash Friday had fallen to $1.2-bil, even with the Dynegy payment three days earlier, $550-mil drawn on a new bank line last week and $3-bil drawn on existing lines earlier this month to pay off $1.9-bil of commercial paper. Enron blamed operating costs, trade settlements and collateral deposits paid to trading partners. Enron said it expects $800-mil soon from asset sales and got another $440-mil bank line Monday. But it warned it might not be enough to keep its investment-grade credit rating or restructure debt coming due. That could have a "material adverse impact on Enron's ability to continue as a going concern," it warned.
 
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 Tuesday, 20 November 2001 04:33:58
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19:23 19Nov2001 RSF-Enron sounds debt alarm, reduces reported earnings

    By C. Bryson Hull
    HOUSTON, Nov 19 (Reuters) - Humbled energy giant Enron Corp. <ENE.N> on Monday warned that it could be forced to pay a $690 million debt by next week and reduced its already-abysmal third-quarter earnings.
    The Houston company sounded the debt and credit alarms once again in a filing made on Monday with U.S. Securities and Exchange Commission.
    Among the new information included is the disclosure that Enron is up against a short deadline to meet a $690 million debt obligation triggered by a credit downgrade last week.   That marked the start of a nine-day period that expires on Nov. 26, during which Enron must lay down collateral against the debt owed to a third party in one of its myriad partnerships.
    If not, the partner has the right to liquidate all of the assets of the partnership, which includes a Brazilian natural gas company that Enron was counting on selling to raise $250 million in cash.
    The company is working to make alternative payment arrangements, since it can ill-afford to pay the debt now. Enron has already already maxed out its $3 billion credit line, secured roughly $2 billion in loans and is looking for more cash to stay afloat.
    Enron also reduced previously reported 2001 third-quarter earnings by 3 cents per share and increased previously reported earnings for the first 9 months of the year by a penny per share. The move reflects adjustments made after the quarter's end, Enron said.
    On Oct. 16, Enron reported a loss of $638 million or 84 cents per share for the third quarter of 2001. On Nov 8, Enron said it had restated earnings for 1997-2000 and that net income for the four-year period was more than a half a billion lower than originally reported.
    It also warned that a further drop in its credit rating could force it to pay $3.9 billion to other partnerships, the bulk of it to Osprey Trust and Marlin Water Trust.
    Such an outcome would keep Enron from paying its revolving credit accounts and "would likely have a material adverse impact on Enron's ability to continue as a going concern," the company wrote.
    Enron had released those figures earlier, but had yet to state in such stark terms the dire risk the debts pose to its viability.
    CREDIT COULD BE A KILLER
    Moody's Investors Service and Standard & Poor's this month cut their respective senior unsecured debt ratings for Enron to "Baa3" and "BBB-minus," just one notch above "junk" status. Each warned it may cut its respective ratings again. Moody's also cut Enron's short-term debt rating, which affects  commercial paper, to "Not Prime," a junk rating.
    In nearly all of its partnership deals, Enron guaranteed the financing it received with a promise to issue Enron shares to its partners if its credit fell below investment grade and its stock price was under certain levels. At the close of trading Monday on the New York Stock Exchange, Enron shares were at $9.06 - well below the trigger prices.
    All of the partnerships, which Enron used to finance projects in a way that kept them off the balance sheet, have become the once-proud company's bane. The SEC is investigating potential conflict-of-interest issues involving two such partnerships on which ousted Chief Financial Officer Andrew Fastow served as general partner.
    Enron had to extract itself from those partnerships, which led to a $1.2 billion reduction in Enron shareholder equity.
    The revelation of the equity reduction started one of the more stunning and rapid corporate collapses in recent memory, leaving Enron to be bought on Nov. 9 by smaller cross-town rival Dynegy Inc. <DYN.N> for the fire-sale price of $9 billion in stock.
    In an unusual note, Enron said that its financial statements in the filing were not audited by an independent accountant, per SEC regulations, because of "the need of Arthur Andersen LLP, Enron's independent auditors, to complete their review procedures."
    Arthur Andersen had no comment, but Enron said the ongoing investigation by a special committee appointed by Enron's board of directors to look into its partnership dealings precludes the audit's completion.
    (Additional reporting by Andrew Kelly in Houston and Jonathan Stempel in New York)
    ((Houston bureau, 713 210 8522, bryson.hull@enron.com))
    
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 Monday, 19 November 2001 19:23:57
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