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Enron to embark on multibillion-dollar asset sale

Enron Corp, seeking to win creditors over to its Chapter 11 reorganisation plan, said it may cede control of its key energy trading unit to a financial backer and plans to raise up to $6 billion by selling other assets.

Appearing before hundreds of creditors at a New York hotel, Enron chief financial officer Jeff McMahon said the company plans to sell its troubled Azurix Corp water unit; its wind energy businesses; and other, mainly emerging markets, businesses. He estimated those asset sales could generate $4 billion to $6 billion.

McMahon also said Enron is in advanced talks to sell a controlling stake in Enron's core energy trading unit to a financial backer, which would be expected to rebuild the Houston-based business.

While the company is in negotiations with three prospective financial backers, it is considering holding an auction to bring in other bidders to boost the price the unit may command, said McMahon. People familiar with the talks said the financial backers include J P Morgan Chase & Co, Citicorp, two of Enron's biggest creditors, and UBS Warburg.

NO CONFIDENCE

In its first public meeting since its December 2 bankruptcy filing in New York, Enron officials suggested that its calamitous fall was simply the result of a lack of investor and creditor confidence.

That lack of confidence continued to be displayed in the stock market Wednesday. Enron shares, despite bouncing off an intraday low of 52 cents, were still down 3 cents at 69 cents a share on the New York Stock Exchange. The shares have traded in a 52-week range of $84.88 and 25 cents.

The gloom spread to other players in Enron's sector. Calpine Corp was about unchanged at $15.50 a share, after falling as low as $11 earlier in the day. Calpine shares have also been battered by the backlash from a Dec. 9 article in the New York Times asking the question whether "Is It (Calpine) an Enron Twin or Just a Look-Alike?"

In late Wednesday trading, Enron competitors Reliant Resources Inc, Mirant Corp, and NRG Energy Inc were all lower.

For the most part, Enron executives didn't dwell on the disclosures of extensive off-balance sheet transactions, restated earnings and federal investigations that caused investors to abandon a stock that fell from $90 stock late last year to a penny stock today.

"This is not the type of situation that some newspapers would suggest," said Martin Bienenstock, a Weil Gotshal & Manges attorney who represents Enron. "Ninety-nine per cent of the losses of confidence were due to discomfort over balance sheets and not wrongdoing."

HEARINGS COMMENCE

Enron, which has had its share of bad days in the past few months, was further criticized Wednesday morning by its long-time auditor for not providing full disclosure of its financial situation.

Accounting firm Andersen warned Enron that certain off-balance-sheet transactions may have been illegal, but was kept in the dark about other crucial data, which led to the power trader's collapse, according to Chief Executive Joseph Berardino.

Speaking before the House Financial Services Committee, Berardino said: "It is not clear why the relevant information was not provided to us. We are still looking into that. We notified Enron's audit committee of possible illegal acts within the company."

Enron chief executive Kenneth Lay, who declined an invitation to appear Wednesday before the House committee, said little at the morning meeting with creditors except to say that he instructed his advisers to seek completion of the bankruptcy within one year.

Enron also said it now has about $15 billion in bank debt, of which only about $2 billion is secured. The company has bond debt of $15 billion; $13 billion in trade debt, of which $8 billion is for derivatives and $5 billion is to banks and for bonds; and surety debt related to contract delivery of $2.5 billion, said Bienenstock.

McMahon said to date, some 5,000 employees have lost their jobs, a move expected to save the company some $600 million a year. He said Enron has allocated some $105 million in "employee retention" programs, particularly for the trading unit in Houston.

"It's all about people," said McMahon. "We need to keep these people around so we can sell the business."

Enron officials also said the sale of its Portland General utility in "on track" for a sale expected to be completed in late 2002.

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