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Enron estimates $14 billion write-down of assets

Enron Corp on Monday said that up to $24 billion in assets and derivative values could be erased from its books, potentially shaving 38 per cent off the total assets the energy trader listed when it filed its record bankruptcy last year.

The Houston-based firm said the $14 billion in potential asset write-downs may have resulted from "possible accounting errors or irregularities" that overstated their value, pointing a clear finger at former auditor Andersen and prior management.

Enron also warned of a possible reduction of between $8 billion to $10 billion related to the unwinding of some of its myriad derivatives contracts. Several observers have said Enron's derivative book was hiding several nasty surprises that would surface when its underlying contracts were unwound.

The asset write-downs, Enron said, were not presented to the board of directors' audit committee. Some of the loss in value is related to the discount that a bankruptcy filing nearly always places on a debtor's assets.

The potential write-downs were disclosed in a bankruptcy document filed with the US Securities and Exchange Commission, and represented a further setback for disappointed Enron creditors.

Analyst John Olson of Houston investment bank Sanders Morris Harris said the erasure of $14 billion from the roughly $61.5 billion in assets Enron claimed when it filed bankruptcy was "staggering." Enron listed liabilities of $49 billion at the time of its filing, but has since said that its liabilities could reach $100 billion.

"No matter how cynical you would have been about Enron, it's defied all of them in terms of being worse than imagined," Olson said. "They were making it up as they were going along apparently, but $14 billion is real dollars. This thing is just a staggering number to me."

Olson, an early critic of Enron and one of the first to sound the derivatives alarm, said the reduction would erase about half of the $18.7 billion in paper derivative value Enron said it had when it filed its record bankruptcy on Decemebr 2.

"It's like building a bird's nest. You take away a twig and the bird's nest goes kaput," Olson said. "Enron had a lot of paper value. When the stress test came along, a lot of the paper blew away."

As for the asset write-downs, Enron said it believed many would have occurred as a result of the Chapter 11 filing since most of the assets are not going to be part of the reconstituted Enron.

Enron also added it does not plan to conduct a review of accounting adjustments and has not prepared a balance sheet for fiscal 2001, saying its resources are too limited to make such a review feasible.

It also said that, as expected, the most recent quarterly filing on November 19, 2001, must not be relied on. Since Andersen was Enron's auditor, the last quarterly filing has remained unaudited as the two parties have become mired in litigation.

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