Enron files Ch.11 reorganization plan ( 2003-07-12 15:23) (Agencies)
Enron Corp., whose record-shattering bankruptcy turned it into the ultimate
symbol of corporate excesses, on Friday filed a reorganization plan that will
probably pay creditors less than one-fifth of the $67 billion they are owed.
The plan comes 19 months after Enron's spectacular failure, which led to one
of the costliest Chapter 11 bankruptcies in history with professional fees
nearing $500 million.
If U.S. Bankruptcy Judge Arthur Gonzalez in New York approves the
reorganization plan, Enron would no longer exist as a single entity.
Rather, its interest in three pipelines and 19 international assets would be
spun off into two separate companies whose shares would be distributed to
creditors. Its other assets, including Oregon utility Portland General Electric,
would be sold.
Interim Chief Executive and Chief Restructuring Officer Stephen Cooper
acknowledged in a conference call that Enron's plan was essentially a
liquidation, but not in the traditional sense that nothing will remain.
"What will emerge out of the bankruptcy are three or more hard asset
platforms that will continue to employ 12,000 people and will have very solid
revenues," he said.
The preliminary estimated recovery rate for creditors is 14.4 cents to 18.3
cents on the dollar, far lower than the corporate average. For example, many
creditors of telecommunications company WorldCom Inc., which took the bankruptcy
crown from Enron, are expected to fare about twice as well with a recovery rate
of about 36 cents.
'ASSET-LIGHT' PHILOSOPHY
The plan also needs the approval of 50 percent of the creditors and holders
of two-thirds of the dollar amount, which is likely, given that the plan had the
tentative approval of the creditor's committee.
That Enron creditors would get so little is hardly a surprise. Revelations of
a wildly inflated balance sheet sent the company spiraling into what was then
the world's largest bankruptcy.
Former chief executive Jeff Skilling also carried out to an extreme an
"asset-light" philosophy that looked upon hard assets as burdens, and Enron shed
them whenever it could.
About 30 percent of the money for creditors will come from the proposed
pipeline company, CrossCountry Energy, and the planned international gas and
power company to be built from Enron's mostly South American assets, Cooper
said.
The remaining 70 percent will be cash. Those funds will come from about $5
billion in proceeds from Enron's commodity contracts; the expected sale of
Portland General Electric, which could fetch $2 billion; and other lesser asset
sales.
Cooper said there is much work yet to be done to bring the outstanding claims
in line with the $67 billion the company's books show as owed. A final recovery
estimate is not likely until August, he said.
The estimated recoveries range from 100 percent for certain claims to nothing
for common stockholders. There are more than 350 classes of creditors.
Enron has not included in its calculations potential proceeds from litigation
against its banks and financial advisers. So far, that has only reached the
mediation stage with no claims filed yet, Cooper said.
Those claims would assert the financial institutions helped put Enron into
the ground by enabling the company to engage in too many ultimately detrimental
financial transactions.
Enron hopes to have the plan confirmed by year's end.
