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Enron aiming to file for bankruptcy next week

Humbled US energy giant Enron Corp prepared on Friday for the biggest bankruptcy protection in history amid warnings that its multi-billion dollar liabilities may take years to unravel.

Insiders in Texas said Enron aimed to file for Chapter 11 bankruptcy proceedings in the United States early next week to seek temporary protection from creditors owed as much as $17 billion.

"It's hugely complicated and it's going to take many years to unravel," said Jon York of London lawyers Richards Butler, working on the case for a number of Enron's creditors.

In Europe 5,400 staff were waiting for news of job losses from PricewaterhouseCoopers, called in as administrator on Thursday, the day after Enron credit was reduced to junk status.

Distressed banks and trading partners were counting the cost of an ignominious failure by the once-mighty trading house that billed itself "The World's Leading Company."

US banks JP Morgan Chase, Canada's Imperial Bank of Commerce, Australia's NAB, Dutch ABN AMRO, French Credit Lyonnais and Britain's Abbey National are among Enron's biggest creditors.

US energy traders like Duke Energy, Williams and Dynegy Inc also are exposed although many energy groups in Europe and the US said they were able in recent weeks to close their positions in an orderly fashion.

Worldwide some 25 companies so far have revealed they are owed more than $6 billion of secured and unsecured loans. That includes $3 billion of secured loans to a syndicate that was financing Enron's Indian Dabhol power project.

Global Economy not at risk

But there appeared little risk Enron's demise would have a material impact on the struggling world economy, with optimism growing for a recovery next year.

The company's own accounts show that it has some $62 billion of assets on its books-- its bankruptcy would be the largest in history, dwarfing the $35.9 billion in assets Texaco had when it went under in April 1987.

Shares, bonds and the dollar all rose on Friday as increased hopes that the global economy will pick up soon counterbalanced worries about the implications of Enron's fall.

"The sanguine nature of markets' reaction to Enron shows how much investors' psychology has recovered. If this had happened two months ago it could have been very different," said John Hatherly, head of global analysis at M&G.

"News of the financial crisis at Enron knocked markets hard yesterday because of the group's global links. Since then the market has been more selective about who it believes is exposed," said pan-European strategist Tamzin Hobday of WestLB Panmure.

Banker Bear Stearns said the crisis had deepened the spread of corporate debt versus government guaranteed bond issues.

In Japan, the yen came under some pressure from worries that struggling Japanese banks and funds are exposed to Enron debt. Enron has five outstanding yen bond issues, totalling 105 billion yen ($848 million)-- all fed to Japanese investors.

Enron shares on Thursday closed down 41 per cent at 36 cents on the New York Stock Exchange, having peaked at $90.56 in August 2000.

In Washington, congressional panels launched probes into the finances of the Houston-based firm that employees 21,000 worldwide.

Republican House Energy and Commerce Committee Chairman Billy Tauzin launched an inquiry and instructed his staff to begin preparing for hearings on Enron's financial collapse early next year.

Assets eyed

Enron started to unravel in October after slicing the equity held by its shareholders when holes were discovered in company accounts. It was obliged to restate earnings going back more than four years and creditors lost confidence.

A rescue bid by Dynegy Inc was withdrawn after further deterioration in Enron's finances were revealed, allowing the Texan company to invoke a material adverse change clause.

Enron's Internet energy and metals trading platform EnronOnline was trading on Friday to allow counterparties to unwind positions and manage credit.

Enron Europe was expected to announce job losses and stopped delivery of wholesale electricity in continental Europe, a trade source said.

"Everyone is expecting they will announce selective redundancies but certain people will have to stay to help out the administrators," he said. Many of the job losses will come at European headquarters in London.

European power cuts are not expected because Enron's customers were mainly other traders or large industrial consumers left scouring Europe's newly liberalised power market for their electricity.

Enron pioneered power trading in Europe, dealing with about 300 partners from multinationals to local utilities in the region's fledgling gas and electricity markets.

Enron's UK Teesside power station and those in Poland, Italy and Turkey remained outside administration.

Meanwhile, competitors already were starting to circle the doomed giant.

"The reason Enron is in trouble is not a fundamental problem with its marketing and trading operation, it was a credit crunch," said Lawson Steele, global utilities coordinator for UBS Warburg.

Administrator PwC said there was "very serious" interest in its European metals business while its power stations and supply businesses also were seen finding buyers.

"Enron direct would probably be snapped up," said David Kurtz an analyst at Datamonitor, of the group's 150,000 UK customers.

Dynegy said on Friday it had exercised an option under its failed bid for Enron to claim the company's US northern natural gas pipeline.

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