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Fitch cuts Enron's debt rating to D

Credit rating agency Fitch said on Monday it had cut Enron's senior unsecured and subordinated credit rating to D, its lowest credit rating, and said that this indicated a recovery level for debt holders of below 50 per cent.

"Over the last few days, Enron faced insurmountable financial challenges coming from an overwhelming debt burden, increasing liquidity demands from off-balance sheet vehicles, and collateral calls from counterparties in its trading operations," Fitch said.

It said should Enron emerge from bankruptcy, it would be a materially smaller and different company, adding that it considered a liquidation of Enron's bankruptcy estate, rather than reorganisation, a distinct possibility.

The credit rating agency said it expected recovery rates on senior unsecured claims to be in the 20 per cent to 40 per cent range, with subordinated and preferred stock recovery rates significantly less.

Enron -- formerly the top U.S. energy trader -- filed the biggest ever Chapter 11 bankruptcy on Sunday. The commercial paper rating of C had been previously withdrawn. The CC rating of pipeline subsidiaries Northern Natural Gas Co. and Transwestern Pipeline Co. are maintained as they were not included in the bankruptcy petition, and they remain on Rating Watch Negative.

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