Rediff Logo
Money
Line
Channels: Astrology | Broadband | Contests | E-cards | Money | Movies | Romance | Search | Women
Partner Channels: Auctions | Health | Home & Decor | IT Education | Jobs | Matrimonial | Travel
Line
Home > Money > Reuters > Report
January 9, 2002
1210 IST
Feedback  
  Money Matters

 -  'Investment
 -  Business Headlines
 -  Corporate Headlines
 -  Business Special
 -  Columns
 -  IPO Center
 -  Message Boards
 -  Mutual Funds
 -  Personal Finance
 -  Stocks
 -  Tutorials
 -  Search rediff

    
      



 Earn From
 Insurance


 Click Here to get
 minimum
 guaranteed 6%*
 returns on your
 premiums


  Call India
   Holiday Special
   Direct Service

 • Save upto 60% over
    AT&T, MCI
 • Rates 29.9¢/min
   Select Cities



   Prepaid Cards

 • Mumbai 19.9¢/min
 • Chennai 26¢/min
 • Other Cities



 India Abroad
Weekly Newspaper

  In-depth news

  Community Focus

  16 Page Magazine
For 4 free issues
Click here!

 
Reuters
 Search the Internet
         Tips
 Sites: Finance, Investment
E-Mail this report to a friend
Print this page Best Printed on  HP Laserjets

Enron gets bids for trading operations

Two banks have submitted bids for a controlling stake in Enron Corp's dormant energy trading business, moves that may allow the once-dominant business to revive in coming weeks, people familiar with the company's plans said on Tuesday.

Enron, which declared bankruptcy on December 2, received bids from Citicorp Inc and UBS Warburg for a majority stake in the Houston-based energy trading operations.

But a third financial institution that previously expressed interest, J P Morgan Chase & Co declined to submit a bid by last night, the deadline for bids for the Enron assets, these people said.

Citicorp, UBS Warburg and J P Morgan declined to comment on any interest in Enron assets.

Analysts said it's difficult to value the once-powerful trading operation that has virtually shut down, hobbled by worries over Enron's murky finances. The assets being auctioned make up the bulk of Enron's wholesale services business, which generated $94.9 billion in 2000, with $2.2 billion in revenue.

John Olson, an analyst with Houston-based Sanders Morris Harris, estimated the trading business stake could go for $1 billion to $1.5 billion, since ''this thing is going to have to crawl before it can walk.''

However, Robert Chambers, analyst with Lehman brothers, said he anticipated bids of no more than $100 million, since he said Enron is basically auctioning off only ''people, computers and software, but not the book,'' referring to contracts that Enron had forged before its bankruptcy.

''Chances of getting a $2 billion auction bid are impossible, given that they are not selling the book,'' said chambers.

He acknowledged being 'bearish' on Enron, but said there is still Enron, particularly its distressed bonds, which he values at 35 cents on the dollar, even though they are trading at 24 cents.

Another analyst, who asked to remain unnamed, said the operation could command a value of 10 times earnings, or about $10 billion, and any valuation depends on ''a big caveat of whether this trading operation will come back.''

In addition to the banks, British oil giant BP Plc also said it may be interested in the Enron operations, once the world's biggest trader of contracts for natural gas and other energy commodities.

BP said it had submitted a bid of $25 million for a small portion of Enron's assets, including some back office functions and information technology assets. A spokesperson for the London-based company it said it may be interested in other assets but declined to elaborate.

Enron has all but shut down its Houston-based trading operations while it seeks a financial backer that could guarantee contracts for the myriad commodities that it has traded. Enron trading operations generated the bulk of its $101 billion in revenue in 2000.

The company is slated to decide on Thursday whether to accept a bid. Enron lawyers previously stated that the company is not looking for cash bids, but rather an ownership stake of up to 51 per cent. The stake would give the bidder cash flow from the operations, but it would agree to guarantee contracts.

Any bid for the trading operations must be approved by Judge Arthur Gonzalez of the southern district of New York bankruptcy court, which is overseeing Enron's Chapter 11 bankruptcy case.

Enron is offloading the trading operations to generate cash to pay off as much as $40 billion in debt.

Enron collapsed after disclosures of hidden debt in off-balance sheet transactions destroyed investor confidence in the Houston-based company.

Enron's advisors have made it a priority to revive the trading operations, which have all but stalled in the wake of the bankruptcy filing.

ALSO READ:
The Enron Saga

Back to top
(c) Copyright 2000 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Tell us what you think of this report

ADVERTISEMENT