-----Original Message-----
From: 	McClain, Jennifer  
Sent:	Tuesday, November 20, 2001 1:46 PM
To:	McCarroll, Zachary
Subject:	FW: Bloomberg (just in case you haven't read this one)



 -----Original Message-----
From: 	Ganjoo, Shalesh  
Sent:	Tuesday, November 20, 2001 12:22 PM
To:	McClain, Jennifer; Masani, Zal; Freeman, Ben
Subject:	Bloomberg (just in case you haven't read this one)

11/20 11:46
Enron Falls Amid Concern Debt Threatens Dynegy Bid (Update2)
By Stacie Babula 
Houston, Nov. 20 (Bloomberg) -- Enron Corp. shares and bonds dropped after the energy trader disclosed debts of $9.15 billion due by 2003, suggesting a takeover by Dynegy Inc. may not happen soon enough to save the company from bankruptcy. 
Shares of Enron fell $1.17, or 13 percent, to $7.89 in late morning trading. Enron's 6.4 percent notes due in July 2006 were bid at 77 cents on $1 of face value and offered at 81 cents, down more than 3 percent from yesterday, traders said. 
Enron, whose shares plunged 90 percent this year as accounting errors led to earnings restatements, a federal investigation and a management shakeup, said it has less than $2 billion in cash or credit lines. Dynegy plans to complete its buyout by October, and Enron may have to ask its lenders to restructure payment schedules to survive. 
``This filing shows that Enron is in a precarious financial situation,'' said Commerzbank Securities analyst Andre Meade, who rates Enron shares `hold' and doesn't own them. ``They have to stay afloat for the Dynegy deal to go through, and that now looks difficult.'' 
Dynegy agreed Nov. 9 to buy Enron in a transaction now valued at $25 billion in stock and assumed debt. The difference between Dynegy's offer for Enron and the price of Enron shares widened to more than 45 percent from 29 percent yesterday, Bloomberg data show. 
``It's become more clear that the chances of this deal going through aren't 90 percent, but much closer to fifty-fifty,'' said Edward Paik, who helps manage the Liberty Utilities Fund, with 1.6 million Enron shares. ``There's just so much information that is unknowable'' about Enron's financial position, he said. 
SEC Filing 
Last week, Enron Chief Operating Officer Greg Whalley said the company has $8 billion invested in ``non-core'' businesses, including broadband and the Dabhol power plant in India. Whalley said Enron will sell those business to pay down debt. Enron expects to get ``billions'' from the sales, Whalley said, without being more specific. 
Enron wouldn't comment on whether it could sell assets fast enough to keep current on its debts. Asset sales valued at about $800 million are expected close by the end of this year, the company said yesterday in its third-quarter filing with the Securities & Exchange Commission. 
Most of the $9.15 billion in debt is due before the end of the third quarter, when the Dynegy buyout is scheduled to close, according to the SEC filing. 
Dynegy and ChevronTexaco Corp., which owns 26 percent of Dynegy, may have to help Enron win refinancing agreements with its lenders, said Kathleen Vuchetich, who helps manage the $1.4 billion Strong American Utilities Fund, which is 5 percent Dynegy shares. 
``I never dreamt (the $9.15 billion in debt due) would be that large, coming due all at once,'' Vuchetich said. ``It calls into question their decision to schedule it that way in the first place.'' 
Enron yesterday reduced third-quarter results by 3 cents a share, bringing the period's loss to 87 cents, or $664 million, according to the SEC filing. On Nov. 8, Enron lowered earnings back to 1997 by $586 million to reflect losses by affiliated partnerships that were wrongly kept off the books. That included a third-quarter reduction of $17 million. 
A drop in Enron's senior unsecured debt rating to ``BBB-'' by Standard & Poor's on Nov. 12 may force Enron to pay off a $690 million note by Nov. 27 if it doesn't find collateral to guarantee the debt taken on by an affiliated partnership, the company said in the filing. 
Without repayment or collateral, investors in a partnership that owns Brazilian natural-gas assets can begin to liquidate the partnership's assets, Enron said. The company said it's working with lenders to come up with an acceptable agreement on the debt. 
Enron used affiliated partnerships to raise money quickly and take debt off its books. Its shares plunged this year as investors questioned whether the partnerships also were being used to hide losses from failed investments. 
Chief Executive Officer Kenneth Lay said last month that buying back 62 million shares from two such partnerships cost Enron shareholders $1.2 billion in lost equity. 
Fourth Quarter 
Making good on debt owed by its Whitewing affiliated partnership may cut Enron's fourth-quarter earnings, Enron said. Enron is obligated to back Whitewing by issuing junior convertible preferred stock. Because Enron's stock has plunged, it may have to write down its assets by $700 million, the filing said. 
ChevronTexaco, the second-largest U.S. oil company, is providing $2.5 billion in cash as part of the Enron buyout. It provided the first $1.5 billion a week ago. 
Shares of ChevronTexaco, based in San Francisco, rose $2.51 to $84.42 in midmorning trading. Dynegy fell 50 cents to $43.05. Dynegy and Enron are both based in Houston. 
Enron's Lay admitted last week that failed investments and a loss of investor confidence forced the sale to Dynegy. Before the buyout was announced, Enron stock had fallen 90 percent this year.