Enron Looks for Investors, But Finds Them Skittish
The New York Times, 11/07/01
COMPANIES & FINANCE THE AMERICAS - Companies scale back Enron business
Financial Times, 11/07/01
Enron's Weaknesses Threaten Industry
Los Angeles Times, 11/07/01
S&P Lowers Rating on Yosemite Securities Co.'s Notes to 'BBB'
PR Newswire, 11/07/01
Mutual-Fund Manager Exits Merrill Lynch
The Wall Street Journal, 11/07/01
SKilling, SEC to talk on Enron dealings 
Houston Chronicle, 11/07/01
Warren Buffet's Berkshire Won't Invest in Enron, NYT Reports
Bloomberg, 11/07/01
Caterpillar, GE, DuPont Advance, As Markets Climb `Wall of Worry'
The Wall Street Journal, 11/07/01
WORLD STOCK MARKETS - Wall St trims its losses on word from Fed.
Financial Times, 11/07/01
Enron hid debt in its many units, suit claims: SEC investigates: Investors say it used asset sales to make its books look good
National Post, 11/07/01
Parallel Woes: Is the U.S. Economy At Risk of Emulating Japan's Long Swoon? --- In Both Countries, Rates Are Low, but Debt Is Heavy; America's Freer Markets --- One Burst Bubble vs. Two
The Wall Street Journal, 11/07/01
A War Casualty?; The experts say supplies are safe, but the longer the Afghan fight, the greater the risk
Newsweek, 11/12/01
Enron Cancels Meeting With Dabhol Power Lenders on Court Action
Bloomberg, 11/12/01
INDIA: UPDATE 1-India lenders seek court action over Enron plant.
Reuters English News Service, 11/07/01
Enron India: Dabhol Pwr Lenders' Singapore Mtg Canceled
Dow Jones Energy Service, 11/07/01
India: Tata Power may ask lenders for loan write-off in DPC
Business Line (The Hindu), 11/07/01
Path paved for due diligence by Tata and BSES
Business Standard, 11/07/01
Domestic lenders file lawsuit against Enron's Indian unit
Agence France-Presse, 11/07/01
Former Enron CEO Testifies Before SEC Tuesday - Exec
Dow Jones Energy Service, 11/06/01
USA: WRAPUP-Enron shares sink as company looks for cash.
Reuters English News Service, 11/06/01
USA: Buyout funds flock to Enron? Might be a PIPE dream.
Reuters English News Service, 11/06/01
USA: Enron shows few signs of restoring battered image.
Reuters English News Service, 11/06/01
Playing the Flux With Enron
RealMoney.com, 11/06/01
Look Ahead Instead of Looking for Market Justice
RealMoney.com, 11/06/01


Business/Financial Desk; Section C
Enron Looks for Investors, But Finds Them Skittish
By RICHARD A. OPPEL Jr. and ANDREW ROSS SORKIN

11/07/2001
The New York Times
Page 2, Column 5
c. 2001 New York Times Company

Enron's attempt to quietly line up a big-name investor to demonstrate its financial strength seems to have backfired. 
Overtures to several prominent investors have failed to turn up any takers, sending the stock to a new low yesterday. Uncertainty about the impact of Enron's troubles have also prompted one big energy trader to unwind some positions.
Representatives of Enron, the energy trading company based in Houston, have approached Warren E. Buffett, the chairman of Berkshire Hathaway, but he decided not to pursue a major investment in the company, according to a person close to the talks. Part of Mr. Buffett's reluctance was an unwillingness to sign a confidentiality agreement with the company that would preclude him from trading in Enron's debt, the person said. Officials of Berkshire Hathaway did not return phone calls Tuesday. 
More than a dozen buyout firms, including Clayton, Dubilier & Rice; the Blackstone Group, and Kohlberg Kravis Roberts, have expressed little interest, according to a person close to the talks. The G.E. Capital unit of General Electric has also been approached, this person said, and has not ruled out an investment. Officials from all of the companies declined comment or did not return telephone calls. The overtures were reported Tuesday by The Wall Street Journal. 
Although it used its pipeline assets last week to secure a $1 billion credit line, the company's ability to obtain additional financing is unclear to investors. Shares of Enron fell $1.50 yesterday to $9.67, the lowest since 1992. 
Enron could lose its investment-grade credit rating. If it did, traders might shift their business elsewhere because of additional risk. A ratings cut could also trigger early redemption of debt that Enron has guaranteed, forcing the company to issue tens of millions of new shares to cover the debt. 
Moody's Investors Service and Standard & Poor's rate Enron two notches above ''junk'' status, while Fitch Investors Service lowered it this week to just one notch above junk. Fitch cited ''the difficulties Enron faces in managing its liquidity position in the face of an erosion in investor confidence'' and said that it would consider further downgrades. 
The company's prospects are further clouded by an investigation into Enron's finances by the Securities and Exchange Commission. On Tuesday, officials with the Milken Institute said Jeffrey K. Skilling, Enron's former chief executive officer who resigned in August, had to cancel a seminar appearance because he had to go to Washington. A spokesman for Mr. Skilling said he was not in Washington today, but that he was planning to answer questions from the S.E.C. 
According to a person close to the company, Enron hopes within the next week to outline publicly the various off-balance-sheet debts and related-party transactions that have drawn the attention of the S.E.C. 
Officials with other large energy companies, including Duke Energy, Dynegy Inc. and Reliant Inc., declined comment Tuesday on whether they have had discussions about making an investment in Enron. 
A senior executive at the El Paso Corporation, the Houston natural gas giant with a market capitalization that is now three times that of Enron, said the company might be interested in acquiring assets from Enron but was unlikely to do a large transaction. ''We like companies that have hard assets,'' said the executive, adding that no talks were under way about asset purchases, although the executive said El Paso officials believe Enron will survive this crisis. 
Large energy traders said Tuesday that they are still doing business with Enron, though they continue to watch the situation very closely. Some executives also said some energy producers may be steering business away from Enron and to other traders and marketers. 
An Enron spokesman said that transaction volume remains unchanged in the company's North American natural gas and power business -- which accounts for more than 90 percent of the company's trading. 
Officials at one of the largest independent natural gas producers, the Apache Corporation of Houston, said they have unwound nearly all of their hedges on gas prices in the last few days over concerns about what would happen to the marketplace for energy derivatives if Enron collapsed. Apache, like many gas producers, had entered into financial contracts allowing it to sell natural gas at set prices. With the steep drop in prices this year, Apache has large paper gains on those contracts. 
Apache has been able to unwind all but one hedge, a complicated transaction that involves Enron and other parties, said Ray Plank, Apache's chairman. The primary reason for unwinding the hedges, he said, ''is that the market is having to digest the major impact of Enron's credit problems.'' 
Apache has about a gain of about $70 million from the various transactions, he said. ''We've got a stack of chips in front of us, and we decided we'd take them and get out of the game.''

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

COMPANIES & FINANCE THE AMERICAS - Companies scale back Enron business
By ROBERT CLOW, JULIE EARLE and SHEILA MCNULTY.

11/07/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

ENERGY HOUSTON COMPANY FEELS COMMERCIAL IMPACT OF CONTINUING PUBLIC RELATIONS CRISIS. 
Counterparties are starting to withdraw their business from Enron, in an early sign that the embattled company's trading business could be adversely affected by the company's continuing public relations crisis.
Aquila said it had been reducing its exposure to Enron for some time because of its risk limits. The company's risk-management controls have obliged it to scale down exposure to Enron as dealing with the Houston-based energy trader has come to be considered more of a risk. 
Separately, Apache, an oil company, said it was closing out of some of the hedges it had put on with Enron. 
Raymond Plank, Apache chairman and chief executive, said his company was now pulling back from all hedging, including those with Enron. "If they have 25 per cent of the market, and they continue to have the problems which are evident daily, they could start a tidal wave, which could affect other elements of the futures market," he said. 
Mr Plank added that Apache was also to stop selling Enron crude oil, the only other business it did with the energy company. "We don't want the credit risk," he said. 
An Enron spokesman said Aquila remained one of Enron's most prominent counterparties, though he added that he could not comment about whether Aquila might have reduced its credit exposure to Enron. Apache is a small customer in what, for Enron, is a small business, he added. 
Enron has been under pressure since October 16, when management announced that the company had incurred a $1.01bn charge and $1.2bn reduction of shareholders' equity as a result of some off-balance sheet dealings. The company has also become the subject of a Securities and Exchange Commission investigation as a result of those dealings. 
Since that announcement the company's share price has fallen more than 50 per cent and Enron's long-term debt has been downgraded by all three leading credit rating agencies. 
But despite the PR crisis, Enron has repeatedly stressed that its core trading business has been performing well. 
Enron counterparties' growing wariness comes at a time of continuing nervousness over the company's balance sheet. One of the company's first actions after the initial announcement was to draw down $3.3bn of bank lines to protect itself against fickle commercial-paper lenders spurning it. Then, earlier this week, Enron followed that up by raising $1bn from a secured credit line co-arranged by JP Morgan Chase and Citigroup. 
At the time of the new bank deal, an official close to the bank group described the funds as "comfort" funds which the company could simply "stack up in the lobby", in order to reassure investors. 
Unfortunately, the loan does not seem to have reassured investors as much as was hoped. Enron is now talking to private equity firms, including the Blackstone Group, about supporting it with a $2bn investment. 
Off-balance sheet entities affiliated to Enron owe $8bn-$9bn in debt. Enron itself is carrying $12.8bn in debt. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business; Financial Desk
Enron's Weaknesses Threaten Industry
JAMES FLANIGAN; NANCY RIVERA BROOKS
TIMES STAFF WRITERS

11/07/2001
Los Angeles Times
Home Edition
C-1
Copyright 2001 / The Times Mirror Company

Executives in the energy industry voiced concern Tuesday at the continuing decline in the value and credit rating of Enron Corp. and questioned how long Chief Executive Kenneth Lay will keep his job. 
Enron's stock slumped to its lowest point in 91/2 years on reports that the Houston-based energy giant is stumping for a cash infusion of $2 billion or more.
The fear among executives across many energy sectors is that Enron's ability to maintain markets in contracts for electricity and natural gas would collapse under the weight of its falling credit standing and the growing reluctance of other energy companies to do business with it. 
Enron is the world's largest trader of energy contracts, taking in more than $140 billion in revenue in the first nine months of this year from buying and selling electric power and natural gas contracts worth more than $500 billion in aggregate. 
Industry sources estimate that Enron is involved in one-third of all energy contracts. If such a market maker could not function because of lack of financing, the ripple effects could be a disaster for energy industries, experts said. 
"What we're seeing is a threat to far more than a single company or even a single industry," one energy investor said. 
Leading energy executives have been approached by institutional investors to consider forming a new management team, sources said Tuesday. Such a team would step in at Enron to work out its difficulties, which stem from transactions and obligations the company evidently made with at least 33 off-balance-sheet partnerships from which Enron managers profited. 
Lawyers suing the company say Enron used the affiliated partnerships to hide liabilities from shareholders. Investors also have accused company executives of conflicts of interest because they acted on investments for both the company and the partnerships. 
The thinking in energy circles in Houston and elsewhere, sources said, is that Enron Chairman and CEO Lay would have to resign to allow the company to attract fresh financing. Enron was reported Tuesday in the Wall Street Journal to be seeking $2 billion in financing. 
Sources in Houston reported that the company was discussing emergency financing with Blackstone Group, a New York-based investment firm. Widespread reports had major oil companies, particularly Royal Dutch/Shell Group, considering a buyout of Enron. 
Jeffrey Skilling, who resigned suddenly in August as Enron's CEO, was reported to be under subpoena to testify in Washington. Enron is under investigation by the Securities and Exchange Commission for possibly failing to properly disclose off-balance-sheet partnerships to shareholders. 
Meanwhile, the company's stock declined $1.50 a share to $9.67 on the New York Stock Exchange, the stock's lowest closing price since 1992. Less than a year ago, Enron stock sold for $84.88 a share. 
Enron's credit rating has been downgraded by Fitch Inc., Standard & Poor's and Moody's Investors Service, with Fitch on Monday taking the company's credit to BBB-, one level above noninvestment grade. 
Fitch analyst Ralph Pellecchia said his agency would drop Enron to junk status if the company made no progress in reducing its debt, if its trading business were to show signs of significant deterioration or if expenses and charges from noncore businesses it is selling should exceed current estimates. 
A rating below investment grade would present further obstacles to Enron's ability to continue making markets in electricity and natural gas supplies. A fall below investment grade also would trigger early repayment of $3.3 billion in bonds that otherwise would not be due until 2002 and 2003. 
"There are a lot of things they can do that people might perceive as being positive," Pellecchia said. "They are trying to show that they have the cash available and the capacity of managing their businesses over time, of getting out of bad businesses and running their business more openly and transparently. Obviously, this is a process." 
Enron's troubles have cascaded of late. The company reported a $618-million loss in the third quarter and a $1.2-billon reduction in shareholder equity--after two years in which its annual revenue more than trebled. 
The company led a trend in energy trading, creating an Internet-based network, EnronOnline, that allowed millions of suppliers and purchasers of electricity, natural gas, oil and coal to trade with one another. Enron made markets in all those commodities, putting up its own capital to buy and sell them. 
It is that key role as a clearinghouse that has put Enron in greatest peril because it needs a continuing flow of cash to act as "the buyer for every seller and the seller to every buyer," said Philip K. Verleger Jr., a Newport Beach energy economist. 
"Enron is now trying to reach out to other people to get them to fund this EnronOnline ... but a lot of companies have been moving business out of Enron," he said. 
Ironically, California is in the position to help push Enron deeper into trouble, Verleger said. 
That is because Enron is owed millions of dollars by California for electricity sold to the state and its utilities during the power crisis, and Enron, in its role as market maker, probably has a hand in many of the controversial long-term power contracts signed this year by the state. Gov. Gray Davis, other politicians and state regulators have repeatedly accused Enron of overcharging for electricity. 
"If Gray Davis were to pull the plug on the state's electricity deals with Enron or other firms, he quite possibly could put Enron into bankruptcy," Verleger said. "How quickly things change." 
If Enron were to collapse, he said, much of the company's trading business could simply migrate to smaller competitors, as happened when junk-bond powerhouse Drexel Burnham Lambert Inc. folded in 1990. But such a collapse could seriously damage the trading of electricity, he said, because Enron pioneered that market and its complex financial instruments. 
* 
Bloomberg News was used in compiling this report.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


S&P Lowers Rating on Yosemite Securities Co.'s Notes to 'BBB'

11/07/2001
PR Newswire
(Copyright (c) 2001, PR Newswire)

LONDON, Nov. 7 /PRNewswire/ -- Standard & Poor's today lowered its rating on the GBP200 million 8.75% series 2000-A linked Enron obligations issued by Yosemite Securities Co. Ltd. to 'BBB' from 'BBB+'. 
The rating action is a consequence of the downgrade of Enron Corp.'s senior unsecured debt rating, which acts as support to Yosemite Securities Co. Ltd., to 'BBB' from 'BBB+' on Nov. 1, 2001.



/CONTACT: Perry Inglis of Standard & Poor's, London, +44-20-7826-3857/ 07:32 EST 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


Fund Track
Mutual-Fund Manager Exits Merrill Lynch
By Tom Lauricella
Staff Reporter of The Wall Street Journal

11/07/2001
The Wall Street Journal
C18
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -- James D. McCall, a star mutual-fund manager when he was hired two years ago by Merrill Lynch & Co. but whose investment performance took a breathtaking fall as tech stocks crumbled, left the company. 
The two Merrill funds run by Mr. McCall, who specializes in aggressive, fast-trading stock picking, are among the worst-performing stock funds of any kind over the last year, costing investors hundreds of millions of dollars since his big bets on technology turned sour during the past year.
The $329 million Merrill Lynch Focus Twenty Fund lost shareholders 81% of their investment during the past 12 months. Mr. McCall's other portfolio, the $66 million Premier Growth Fund, is down 68%. When the two portfolios were rolled out during the spring of 2000, investors entrusted $1.2 billion to the funds. 
A Merrill spokesman said Mr. McCall, 48 years old, wasn't available to comment and that the firm wouldn't comment on the reason for his departure. 
Mr. McCall's resignation is the first high-profile departure from the Merrill Lynch Investment Managers since Jeffrey Peek, the group's president, resigned in late September after being passed over for the post of president at the brokerage firm. That post instead went to E. Stanley O'Neal. 
Mr. Peek recruited Mr. McCall slightly more than two years ago from Pilgrim Baxter & Associates, a Wayne, Pa., money manager, with the aim of broadening Merrill's then-struggling fund lineup away from its focus on the bargain-oriented value stocks, which at the time were out of favor. Mr. McCall's specialty is aggressively trading the stocks of fast-growing companies in a style known as momentum investing. His portfolios often were concentrated among small numbers of stocks, adding to their volatile nature. 
While at Pilgrim Baxter, Mr. McCall's funds were among the top-performing portfolios of their kind. In 1998, for example, the PBHG Large Cap 20 Fund gained 68% in a year when the Standard & Poor's 500-stock index rose 28.5%. 
However, even before Mr. McCall joined Merrill, there was controversy. Mr. Peek's efforts to lure him away from Pilgrim Baxter turned into a legal battle between Merrill and Pilgrim Baxter, which eventually was settled under terms that weren't publicly disclosed. But what proved to be a bigger problem was that at just about the moment that Merrill launched Mr. McCall's funds to great fanfare, his style of investing went cold. 
"Talk about an ill-fated venture," says Russel Kinnel, director of fund analysis at Morningstar Inc. "They couldn't have timed it worse." 
Even compared with other growth funds, Mr. McCall's funds posted exceptionally large losses. While the Focus Twenty Fund has lost 72% since the start of the year, the average large-cap growth fund is down 27.5%, according to Morningstar. 
Mr. McCall's portfolios were heavily invested in technology, telecommunications and biotechnology stocks. Mr. McCall also had a big wager on Enron Corp., the energy company whose stock has plunged 88% during the year. According to the most recent information available, Enron was the ninth-largest position in the Focus Twenty Fund. 
"His numbers are shockingly bad even by the standard of other growth momentum funds," Mr. Kinnel says. "If you look at what is in the funds . . . if it went down, he owned it." 
Taking Mr. McCall's place on both funds will be another PBHG veteran, Michael Hahn. Mr. Hahn currently manages Merrill's $11 million Mid Cap Growth Fund, which also has had a rough year, losing 57%. The Merrill spokesman said Mr. McCall "is making himself available to assist in the transition" of the funds management to Mr. Hahn. 
Morningstar's Mr. Kinnel said despite the fund's poor performance, "the fact that they are putting Mike Hahn on the funds indicates that Merrill isn't throwing in the towel on the momentum strategy." 
By late yesterday, Mr. McCall's name and photograph had been replaced by Mr. Hahn's on the Merrill Web site.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Nov. 7, 2001
Houston Chronicle
Skilling, SEC to talk on Enron dealings 
By LAURA GOLDBERG 
Copyright 2001 Houston Chronicle 
Jeff Skilling, the former chief executive officer of Enron Corp., has been contacted by the Securities and Exchange Commission. 
The SEC is investigating business dealings between Enron and investment partnerships run by the company's recently removed chief financial officer, Andrew Fastow. 
Skilling plans to answer questions from the SEC, Denis Calabrese, a spokesman for Skilling, said Tuesday. 
Wall Street has raised a number of questions about Enron's financial reporting and stability since the company released third-quarter earnings Oct. 16. 
In the earnings report, Enron disclosed it had taken a $35 million loss related to ending its relationships with investment partnerships formerly run by Fastow, who was then chief financial officer. It also reduced shareholders' equity by $1.2 billion. 
Fastow resigned his role with the partnerships, called LJM Cayman and LJM2 Co-Investment, in June after criticism from some on Wall Street. Enron replaced him Oct. 24. Skilling unexpectedly resigned in August as CEO, citing personal reasons. 
Enron has previously said its auditors and attorneys reviewed the Fastow-LJM arrangements and that its board was fully informed of and approved the arrangements. 
However, a special board committee is now reviewing transactions involving LJM and possibly other entities. 
Shares in Enron fell $1.50 Tuesday to $9.67. 

Warren Buffet's Berkshire Won't Invest in Enron, NYT Reports
2001-11-07 04:17 (New York)


     Houston, Nov. 7 (Bloomberg) -- Berkshire Hathaway Inc.'s
Chairman Warren Buffett won't invest in Enron Corp., the largest
energy trader, the New York Times reported, citing an unidentified
person close to the talks.

     Buffett, who decided against investing because he was
unwilling to sign a confidentiality agreement that would preclude
him from trading in Enron's debt, is one of a number of people and
firms approached by the energy company, the paper said.

     Clayton, Dubilier & Rice, the Blackstone Group and Kohlberg
Kravis Roberts & Co. have all shown little interest, a person
familiar with the talks said, according to the NYT. General
Electric Co.'s GE Capital unit hasn't ruled out an investment, the
paper cited the source a saying.

     The Securities and Exchange Commission is investigating
Enron partnerships run by its former chief financial officer,
Andrew Fastow. The entities bought and sold Enron shares and
assets, with the trades costing Enron $35 million and $1.2 billion
in lost shareholder equity. Enron, which is seeking $2 billion in
private money, ousted Fastow last month, the Journal reported.



Abreast of the Market
Caterpillar, GE, DuPont Advance, As Markets Climb `Wall of Worry'
By Robert O'Brien
Dow Jones Newswires

11/07/2001
The Wall Street Journal
C2
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -- A broad range of stocks posted gains in another session marked by a rousing finish, as investors refused to let hesitation about fundamental shortcomings dent hopes for an eventual recovery by the U.S. economy. 
Shares of Bank of New York added $1.41, or 4%, to $36.65, while Bank of America gained 1.08, or 1.8%, to 62.11, and J.P. Morgan Chase advanced 1.18, or 3.2%, to 37.54, part of a final-hour improvement in financial stocks.
A host of cyclical stocks exposed to economic conditions, which, at least presently, look pretty dismal, rallied. Caterpillar rose 1.69, or 3.7%, to 47.79. General Electric gained 1.03, or 2.7%, to 39.80. DuPont increased 1.01, or 2.4%, to 43.03. 
Consumer lenders also made progress, with credit-card lender Capital One Financial gaining 2.38, or 5.3%, to 47.13, MBNA rising 1.29, or 4.5%, to 30.15, and Household International advancing 2.78, or 5.2%, to 56.53. 
The gains came amid some hopes that the Federal Reserve's decision to reduce interest rates again would stimulate borrowing and spending on the part of consumers and corporations. 
Yesterday's rally proved to be another demonstration of the market's ability to climb the proverbial wall of worry, often at the expense of investors who have bet the market would fall, only to scramble to cover their short positions when the decline doesn't materialize. 
"We certainly saw a lot of short-covering in the final hour of the session," said Michael Driscoll, director of listed trading at Credit Suisse First Boston. "This is a market that has held together remarkably well, and maybe there's some hope out there that this [rate cut] reads well in the papers tomorrow morning." 
"But there is a lot of concern on the part of traders and investors about when and if rate cuts are going to start to stimulate things," Mr. Driscoll added. 
But at least the early returns -- and, appropriately enough, on election day in many places -- were favorable. The Dow Jones Industrial Average advanced 150.09, or 1.59%, to 9591.12. The Nasdaq Composite Index increased 41.43, or 2.31%, to 1835.08. 
The Dow industrial average's push received a big lift from gains in Hewlett-Packard and in International Business Machines. Hewlett-Packard rose 2.92, or 17%, to 19.81, after a key shareholder, the family of co-founder William Hewlett, spoke out in opposition of H-P's plans to acquire Compaq Computer. International Business Machines, whose dominance in some markets appeared to be the target of a combined H-P and Compaq, increased 4.22, or 3.8%, to 114.19. Compaq Computer fell 49 cents, or 5.5%, to 8.50. 
Another technology bellwether in the industrial average, Microsoft, rose 1.51, or 2.4%, to 64.78 on the Nasdaq Stock Market. Nine of the 18 states that were party to the Justice Department's landmark antitrust suit against the software company agreed to settle the Microsoft case. 
Walt Disney, another industrial average component, fell 41 cents, or 2.1%, to 18.75. Analysts, concerned about attendance at the company's theme parks, and about advertising sales at its television networks, expressed worries about the entertainment giant's fourth quarter. Goldman Sachs cut its rating on the stock to market perform. 
Shares of Cisco Systems (Nasdaq) gained 57 cents, or 3.2%, to 18.47, as investors responded to the networking-products giant's quarterly profits, released late Monday. Lehman Brothers raised its rating on Cisco in the wake of the profit statement. 
Qwest Communications International dropped 71 cents, or 5.7%, to 11.79. The Denver telecommunications carrier told vendors and contractors to halt work on its fiber-optic network as it cuts costs amid an economic downturn; that broached concerns that the company won't realize its ambitions of turning cash-flow positive in the second quarter of 2002. 
Cephalon (Nasdaq) added 1.04, or 1.6%, to 65.55. The West Chester, Pa., biopharmaceuticals concern posted what analysts described as strong third-quarter results, and the company raised its 2001 earnings forecast. CIBC World Markets, calling the results a blowout quarter, reiterated its strong buy rating on the stock. 
Enron fell to a 52-week low on heavy volume; with 45 million shares changing hands, the stock declined 1.50, or 13%, to 9.67. The Wall Street Journal reported yesterday that the energy giant is seeking another capital infusion of at least $2 billion. 
Shares of Jabil Circuit rose 1.58, or 6.4%, to 26.43, after Thomas Weisel Partners identified the St. Petersburg, Fla., contract electronics manufacturer as a prospective beneficiary of improvements in Cisco's sales; Jabil provides outsourcing services to Cisco. 
SAP's American depositary shares added 1.60, or 5.8%, to 29.11. The German enterprise-software maker introduced an enhanced integration-software product. Credit Suisse First Boston said it didn't think the introduction of the product would have any short- or medium-term impact on SAP's earnings prospects, but that it did signal the importance of the integration-software market. 
Shares of some integration-software developers, such as Tibco Software (Nasdaq), which fell eight cents, or 0.8%, to 9.41, lost ground on the prospects of increased competition in its market. 
RSA Security (Nasdaq) gained 23 cents, or 1.7%, to 13.73. Salomon Smith Barney described the Bedford, Mass., provider of network-security products and data-encryption software as one likely beneficiary of the federal government's security spending package. 
Time Warner Telecom (Nasdaq) advanced 1.57, or 15%, to 12.12. The Littleton, Colo., telecommunications-services provider reported third-quarter results that showed a sharp jump in revenue, though its losses increased over a year earlier, due in part to costs related to an acquisition.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



WORLD STOCK MARKETS - Wall St trims its losses on word from Fed.
By MARY CHUNG.

11/07/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

US stocks trimmed their their losses, immediately following the Federal Reserve's decision to lower short-term interest rates by 50 basis points yesterday. 
Wall Street had widely expected the central bank to cut rates for the 10th time this year to help stimulate the US economy. But the decision by the Fed policymakers to cut by more aggressive 50bp lowering the federal funds rate to 2 per cent following a recent rash of grim economic data bolstered the market. In late trading, the Dow Jones Industrial Average was off 9.82 at 9,431.21 and the S&P 500 index 2.25 at 1,100.59. The Nasdaq Composite gained 1.41 at 1,795.06.
Cisco Systems offered some cheer and earlier bolstered the technology sector after the networking company reported sales and earning above Wall Street forecasts and said the downturn in the sector may have bottomed. Several analysts, encouraged by Cisco's earnings performance, raised their rating on the company. Shares rose 2.4 per cent at $18.33 while rival Juniper Networks slipped 2.6 per cent at $22. 
Microsoft edged slightly higher, up 0.1 per cent at $63.34, as six of the 18 states suing the software company said they opposed the Justice Department-backed settlement but would consider continued talks with the company. 
Shares in leading technology stocks were mixed as Oracle and Ciena dipped while Intel and Sun Microsystems gained. 
Metropolitan Life dipped 0.4 per cent at $27.80 after the largest US public life insurer reported lower third-quarter earnings. 
Walt Disney was the biggest loser on the Dow, down 4 per cent at $18.39 after Goldman Sachs downgraded the stock, citing an anticipated decline in Disney's fiscal September 2002 earnings and the lack of a sustainable near-term catalyst. 
Goldman also said: "Despite the box office success of Monsters, 2002 earnings are under particular pressure at Disney World and the broadcasting division." 
Pixar Animation, the company that co-produced the hit movie, continued its decline, down 1.6 per cent at $34.40 following a downgrade by Prudential Securities earlier this week. 
The energy sector saw the heaviest losses with ExxonMobil down 2 per cent at $38.61 and Enron, the embattled energy trading company, off another 11 per cent at $9.93. 
Toronto was little changed in early trading as investors awaited news of the US Federal Reserve's interest rate intentions. At midsession the S&P 300 composite index was virtually all square at 7,076.80. 
Nortel Networks added 35 cents at C$10.34. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



Financial Post: World
Enron hid debt in its many units, suit claims: SEC investigates: Investors say it used asset sales to make its books look good
Russell Hubbard
Bloomberg

11/07/2001
National Post
National
FP13
(c) National Post 2001. All Rights Reserved.

HOUSTON - Enron Corp., the largest energy trader, quickly found a buyer when it decided to sell 14 power plants in 1999: a joint venture Enron had created, called Whitewing. 
The venture, run by former Enron chief financial officer Andrew Fastow, received US$807-million in financing from bonds issued by another partnership, also created by Enron and headed by Mr. Fastow, this one called Osprey.
The two partnerships are among 33 affiliates formed by Enron in the 1990s as the company shifted to energy trading from owning plants and pipelines. Investors allege in lawsuits that Enron used partnerships to move debt off its books, concealing the company's true financial state. The debts of partnerships such as Whitewing and Osprey remain Enron's responsibility, the suits contend. 
"Many of the details of these transactions were hidden from the public," reads a class-action lawsuit filed in federal court in Texas, one of 14 actions filed against Enron in the past two weeks. The company "used these asset sales to falsely improve Enron's balance sheet, thereby maintaining Enron shares at artificially inflated prices," the suit alleges. 
Shares of Houston-based Enron have plunged 86% in the past year. They fell US$1.50 yesterday to US$9.67 after bond-rating agency Fitch Inc. said it may cut the company's credit rating to junk status. 
Enron said three weeks ago that it was taking third-quarter losses of US$1.01-billion from failed investments, including two partnerships run by Mr. Fastow. The company also bought back 62 million shares from a partnership, reducing Enron shareholder equity by US$1.2-billion. 
The Securities and Exchange Commission last week started a formal investigation into Enron's transactions with its affiliates. 
Enron spokeswoman Karen Denne declined to comment on the suits, saying the company doesn't discuss matters under litigation. 
Ms. Denne also declined to respond to specific questions about Enron's relationships with the partnerships, including Whitewing and Osprey. 
Shareholders say Enron's financial statements are vaguely worded and incomplete. In reading Enron's filings, shareholders say, it is almost impossible to find a clear reference to any transactions between Enron and its affiliates. 
Enron was once the fastest-growing company in the energy business, its sales rising from US$9-billion in 1994 to US$101-billion last year and US$147.8-billion so far this year. 
The Houston-based company took on debt to finance its growth. In the mid-1990s, Enron's long-term debt almost tripled, reaching US$7.36-billion in 1998. The company had been acquiring plants worldwide, including the US$3.2-billion purchase of Portland General Corp. in 1997; the US$1.27-billion acquisition of an electric plant in Brazil in 1998; and the US$2.51-billion purchase of a water company in the United Kingdom in 1998. 
In the late 1990s, Enron executives changed course. The company said it would sell pipelines and power plants to make money almost entirely from trading energy, rather than producing it. The plan succeeded. Last year, 97% of Enron's revenue came from trading and advising industrial customers on energy use.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Parallel Woes: Is the U.S. Economy At Risk of Emulating Japan's Long Swoon? --- In Both Countries, Rates Are Low, but Debt Is Heavy; America's Freer Markets --- One Burst Bubble vs. Two
By Jacob M. Schlesinger and Peter Landers
Staff Reporters of The Wall Street Journal

11/07/2001
The Wall Street Journal
A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)

The Federal Reserve's decision to cut its benchmark interest rate to 2%, its 10th rate cut this year, moves the U.S. central bank closer to the day when it runs out of rate-cutting ammunition. And that raises an unsettling question: Could the U.S. be going down the same dismal economic path trod by Japan a decade ago? 
With each passing week, the similarities increase. In the 1980s, Japan was considered the model capitalist economy; in the 1990s, the U.S. held that distinction. In both cases, the good times ended with the bursting of a stock-market bubble, pricked, at least in part, by a nervous central bank. In both cases, predictions of a quick turnaround proved to be wrong.
The excessive American investment in fiber-optic high-speed phone lines echoes Japan's decade-earlier investment binge in memory-chip factories. The plight of one well-respected American company, Enron Corp. -- which has lost two-thirds of its market value in just three weeks -- is reminiscent of the previously invisible weakness Japan's slump exposed at many of that country's banks. Even the recent squabbling in the U.S. Congress that threatens to derail a package of economic-stimulus measures sounds eerily similar to the bureaucratic and political wrangling that stymied bold fixes in Japan. 
And now, U.S. monetary policy, considered to be the most powerful tool for countering the nation's downturns, is looking increasingly like Japan's, as interest rates fall toward zero. 
Japan has endured a decade of stagnation. Could that happen here? 
Most analysts continue to answer with a resounding no. They point out that Japan burst not just a stock-market bubble, but also a real-estate bubble, which in turn laid low its banking system. The U.S. bubble appears to have been limited to stocks, and the American banking system remains strong. 
U.S. policy makers also insist that they are wiser than their Japanese counterparts, in part because they have learned from Japan's mistakes. And, they add, the U.S. economic and political system is more flexible than Japan's and better able to make the necessary repairs. 
"It's easy to raise the suspicion that the Japanese and American economies have some similarities," U.S. Treasury Secretary Paul O'Neill said in a recent interview. "I don't think it's apt to make a comparison." Among other things, he says: "They're not an open economy. One of the things that has really been beneficial to our economy is this openness and the challenge that we have permitted to come in here, from foreign suppliers from all over the world. . . ." 
Moreover, the U.S. central bank hasn't yet exhausted its rate-cutting options. In announcing its half-point rate cut yesterday, the Fed's policy committee made clear that it remained poised to keep cutting rates down into the 1% range if deemed necessary. "For the foreseeable future," it declared, "the risks are weighted mainly toward conditions that may generate economic weakness." 
U.S. markets have rallied in recent weeks on the assumption that the Fed still will be able to turn things around by next year. Indeed, after trading a bit lower yesterday in the hours before the Fed's 2:15 p.m. EST rate announcement, the Dow Jones Industrial Average soared 150.09 points, or 1.59%, to finish at 9591.12, just 14 points below its close the day before the Sept. 11 terrorist attacks on the U.S. 
Fed Chairman Alan Greenspan continues to cling to his faith in the U.S. economy's future. "The long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate," the Fed said in its statement yesterday. 
Yet the Japanese were no less confident about their economy a decade ago, even as it slipped into prolonged crisis. "Our foundations are solid," declared Bank of Japan Governor Yasushi Mieno, as he started cutting interest rates in 1991. 
Japan's Nikkei Stock Average peaked near 40000 in December 1989. But in 1991, when three leading economic institutes issued long-term forecasts for Japan through the next decade and beyond, each saw long-term economic growth continuing at between 3% and 5% a year. Instead, the country grew at an annual average of 1.1% between 1992 and 2000. 
In April 1992, as the Nikkei appeared to be hitting bottom at 17000, a consensus of a dozen top forecasters still foresaw Japanese economic growth for the following year at between 2% and 3%. It ended up growing 0.4%. Today, the Nikkei hovers around 10000, and the Japanese economy is back in its fourth recession of the past decade. 
One reason for the unexpected length and depth of Japan's decline is that its 1980s bubble created a myriad of destructive excesses, many of which became evident only after the bubble popped. For example, it wasn't until 1991 that real-estate prices started falling -- and many analysts thought that decline would be temporary. It wasn't until the mid-1990s that economists saw how severely the fall in real-estate prices had hurt Japan's big banks. 
Those bad investments continue to haunt Japanese banks. The banks didn't lend so much directly to real-estate speculators; instead, much of the money went through intermediaries such as non-bank finance companies and construction companies. Today, many of those contractors are near insolvency, and the banks may have to take huge write-offs. "We recognized that it would take a long time to be fixed, but even so, we thought that would mean two or three years," Yoshimasa Nishimura, a former head of the Japanese Finance Ministry's banking bureau, says of the bubble. 
And it took manufacturers many years to recognize that the capacity they had built up during the bubble was never going to be used. Auto makers manufactured 13.5 million vehicles, including trucks and buses, in Japan in 1990. The number fell off gradually after that and now stands at about 10 million per year. For years, companies kept excess capacity and workers, betting that the falloff was temporary. 
When Japan's economy first slowed, there was widespread confidence that its government could easily manage the downturn. In the 1980s, the country's fabled bureaucrats had a sterling reputation for economic management, much as Mr. Greenspan did in the U.S. during the 1990s. With short-term interest rates at 6% and a budget surplus of 8.8 trillion yen ($72.3 billion) -- or 2% of gross domestic product -- the Japanese central bank and parliament had plenty of room to cut rates, cut taxes, and boost public spending. 
The Bank of Japan did ultimately cut rates by almost all six percentage points. Politicians used the full surplus and even let the government run a primary budget deficit -- or deficit excluding bond issuance and repayment -- of 11 trillion yen, or 2% of GDP. But they acted too slowly and in the end failed to jump-start the economy. 
American policy makers give themselves higher marks for speed of response. The Fed has cut interest rates by 4.5 percentage points in just 10 months. It took the Bank of Japan more than 4 1/2 years to do the same. 
Moreover, the U.S. Congress has turned unprecedented budget surpluses into almost certain deficits with equal dispatch, passing a massive $1 trillion, 10-year tax cut earlier this year and rapidly approving $40 billion in stimulus measures and a $15 billion airline bailout in the wake of the Sept. 11 terrorist attacks. Members of Congress now are caught up in a stalemate over a plan for $75 billion to $100 billion in additional stimulus actions, but that, too, has a good chance of enactment before year's end. The Japanese Diet, on the other hand, dallied for a year and a half before passing its first stimulus package. 
Even more important than the speed of America's policy makers, though, may be the flexibility of the American economy itself. Analysts say the U.S. economy has a more self-cleansing form of capitalism that discourages the many excesses that built up in Japan during the 1980s. 
A decade ago, the Japanese boasted of having found the secret formula for smoothing out free-market business cycles. Companies had friendly shareholders as well as bankers who provided "patient capital" that allowed for long-term technological investments in spite of weak quarterly earnings. Lifetime employment guarantees gave workers a sense of income security, encouraging them to keep spending during downturns. 
In retrospect, those same traits seem like weaknesses -- factors that shielded Japanese companies from the free-market pressures that would have made them more efficient. The U.S. system, by contrast, is considered better equipped to shift resources from unproductive to productive uses. 
Even today, after the decade-long slump, the Japanese company Matsushita Electric Industrial Co. refuses to lay off any of its 130,000 employees in Japan, despite losses that are expected to exceed $2 billion this year. That's a far cry from U.S. companies, such as International Business Machines Corp. and AT&T Corp., which laid off workers even during the boom years, freeing up technology talent to go to newer, fast-growing rivals such as Dell Computer Corp. or Cisco Systems Inc. 
In part, it is U.S. policy makers' willingness to inflict short-term pain that allows for that flexibility. American officials argue that Japan would have come out of its crisis more quickly if it had handled its banking crisis the way the U.S. handled the American savings and loan crisis in the 1980s. Back then, U.S. government-ordered thrift shutdowns and foreclosures caused shareholders to lose their investments and borrowers to lose their properties. In Japan, failed banks were propped up, and their problems allowed to fester. 
Still, American-style free markets are hardly immune from excesses, and more and more become apparent the longer the economy idles. Telecom companies spent tens of billions of dollars to lay tens of millions of miles of fiber-optic cables, an estimated 2.6% of which is now being used. 
Blue-chip American Express Co. ended up writing off more than $1 billion in junk bond investments that were considered relatively low risks until the economy went sour. "Subprime" lender Providian Financial Corp. sent its earnings and stock price soaring in the late 1990s by tapping the once largely ignored pool of consumers with checkered borrowing records. Providian insisted that it used sophisticated models to limit its risks. Nonetheless, it ended up announcing a surprising 71% drop in third-quarter earnings last month, and its stock fell by more than half. 
More surprises are almost certainly in store. Many analysts argue that the U.S. stock market -- even at more than 25% below its peak -- remains a bubble waiting to deflate further. The Standard & Poor's 500-stock index still is trading at a price-to-earnings ratio of between 21 and 28 times earnings, depending on the measurement, and would need to fall at least 30% to reach its historic average P/E ratio of 15, according to the Leuthold Group, a Minneapolis-based investment research firm. 
To some analysts, the large amount of consumer debt outstanding in the U.S. is the ticking time bomb that could rival the bad loans dragging down Japanese banks. American households borrowed freely and dipped deeply into savings during the 1990s. In good times, with wages and stock portfolios rising, the situation seemed manageable. But now, as income-growth slows and mutual funds shrink, the burden could spin out of control. The Fed estimates that the household debt-service burden -- the ratio of debt payments to after-tax income -- rose above 14% earlier this year for the first time since 1987. At about the same time, the number of Americans filing for personal bankruptcy hit a record 390,064. 
One reason for the surge in American borrowing has been a sharp increase in the number of new home mortgages and a wave of mortgage refinancing to take advantage of falling interest rates and rising home values. Both home sales and consumer spending, backed by rising housing values, have been rare bright spots over the past year in an otherwise dismal economy. 
But there are dangers as well. One concern: that the sharp rise in home prices over the past four years -- nearly 20% nationally, when adjusted for inflation, and more than 60% in hot markets such as Silicon Valley, according to the Office of Federal Housing Enterprise Oversight in Washington -- could turn into a miniature version of Japan's real-estate bubble. 
Another worry: that America's housing market isn't driven entirely by free-market forces. Rather, this theory goes, it is propped up by Japan-like government subsidies and easy loan terms made possible by widespread assumptions that the government would pick up the tab for any defaults. 
The nation's mortgage market is dominated by Fannie Mae and Freddie Mac, government-chartered companies that are shareholder-owned but still enjoy various implicit and explicit subsidies, such as tax breaks and an emergency line of credit from the U.S. Treasury. The two Washington-area companies don't actually issue mortgages themselves. Instead, they buy mortgages from lenders and repackage them into tradable securities. In doing so, they play a major role in influencing the size and shape of the market by setting underwriting standards for the loans they purchase. 
Some conservatives -- including the Fed's Mr. Greenspan -- have expressed concern that Fannie and Freddie, by using government subsidies to expand the housing market, create distortions, drawing capital away from more productive uses. The Congressional Budget Office estimates that the two companies last year enjoyed subsidies totaling $10.6 billion -- a number they say is exaggerated. Other critics say that the companies encourage more, and riskier, lending than a completely free market would allow -- a pattern that may sustain housing demand in the near term but raises the risk of a bigger bust down the road. Japan's woes have been exacerbated by formal and informal government backing for lenders. That includes a Government Housing Loan Corp. that gets a $3 billion annual subsidy and a separate state-run loan guarantee program that keeps many technically bankrupt small businesses afloat. 
Fannie Mae Chairman Frank Raines rejects the notion of any similarity between his company and Japanese-style subsidies. "Their mortgage corporation has no private-market discipline -- there is no private management, no private equity capital, no private debt capital." Fannie, he says, has all three, as well as tight regulatory standards requiring the company to keep enough capital on hand to withstand a catastrophe. The company's private shareholders, he adds, have every incentive to prevent overly risky lending, since they would lose their investments even if the government were to intervene to back the loans. 
Elsewhere on the business front, the vaunted flexibility of the American economy -- while perhaps raising efficiency in the long run -- could also serve to intensify a downturn. American corporations' readiness to resort to layoffs at the first sign of weakness risks battering consumer confidence. In the past three months alone, the unemployment rate has soared by nearly a full percentage point -- to 5.4% in October from 4.5% in August, and the U.S. jobless rate once again exceeds Japan's, which after a decade of stagnation still is 5.3%. 
Even workers supposedly protected by union contracts have a fragile safety net. In the wake of the terrorist attacks, major airlines, such as AMR Corp's American Airlines and Delta Air Lines invoked force majeure clauses in their labor contracts, allowing them to skirt many negotiated protections and dump workers without advance notice. Partly as a result, the Conference Board's index of consumer confidence plunged to 85.5 in October from 114 in August, one of the swiftest declines on record. 
While Japan's unique circumstances may account for some of its problems, they also may demonstrate a broader and more disturbing point: that policy may at times be relatively powerless to contain the destructive forces of a bursting bubble. 
As companies are saddled with excess capacity, they have little incentive to borrow to expand, no matter how low interest rates fall. Even after the sharp drop in capital spending over the past year, the percentage of industrial capacity in use in the U.S. in September was just 75.5% -- the lowest level since 1983 and hardly an inducement for companies to build new factories. 
Layoff-spooked consumers also may be unwilling to spend tax rebates enacted to encourage shopping. A recent University of Michigan survey concluded that just over one in five households have spent the rebate checks mailed out this summer, with the rest tucking the money into savings or using it to pay debt. 
At the extreme, the supply overhang from a collapsing bubble can touch off a dangerous cycle of deflation, or falling prices. In a deflationary environment, consumers curb spending, waiting for goods to become still cheaper in the future. Borrowers get crushed by debt burdens as their loans become more expensive in relative terms. Companies, forced to keep cutting prices, cut back on workers and purchases of supplies, spreading pain throughout the economy. 
In Japan, deflation got under way in earnest in 1998 after the collapse of a major bank and securities company. In both 1998 and 1999 wholesale prices fell 1.5%, and after a flat year in 2000, they are falling again in 2001. The U.S. isn't there yet. But commodity prices have fallen sharply since 1998, while U.S. consumer prices, by some measures, appear to be slipping. The Commerce Department reported last week that its favored measure of inflation -- the price index for gross domestic purchases, or prices paid by U.S. residents -- fell by 0.3% in the third quarter, a sharp reversal from the 1.3% increase in the second quarter and the first quarterly decline in nearly 40 years. (Analysts say the number was artificially depressed by one-time factors relating to Sept. 11 -- insurance benefit payouts that, for measurement purposes, lower insurance prices.) 
In a deflationary world, the central bank's powers to respond are diminished because monetary policy works most effectively if interest rates can fall below the rate of inflation. But rates can't do that if inflation falls below zero.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



Business; Capital Gains
A War Casualty?; The experts say supplies are safe, but the longer the Afghan fight, the greater the risk
By Jane Bryant Quinn Reported by Temma Ehrenfeld

11/12/2001
Newsweek
41
Copyright (C) 2001 Newsweek Inc. All Rights Reserved.

Finding someone who worries about America's oil supplies today is as hard as finding Osama bin Laden. We keep pumping gasoline into our SUVs as if oil and war, like oil and water, never mix. Yet we're fighting in a part of the world where a misstep or assassination could shock the oil market and suddenly jack prices up. I don't even want to think about how much economic damage that could do. 
So far, investors have barely batted an eye. Average prices for energy stocks plunged earlier this year--forecasting less demand as business slowed. Now, however, there's hope for a recovery by mid-2002. Starting in late September, average prices turned and rose.
Consumers, too, have put away their worry beads. Just last May, drivers screamed when gasoline reached an average of $1.72 a gallon at the pump. Now it's $1.25 and could drop by an additional 
10 cents, says Fred Rozell, retail-pricing director at the Oil Price Information Service in Lakewood, N.J. 
You see the same story in natural gas. Prices to residential consumers dropped about 23 percent over the first nine months of 2001, according to the Bureau of Labor Statistics. Since October 2000, the cost of home-heating oil has gone down 17 percent. 
I don't mean to imply that the oil markets brushed bin Laden off. Crude prices spiked in London right after the terror attacks. Businesses dependent on oil built higher inventories. But the hijacked planes crashed into a world economy that was already weak. Oil demand slumped. OPEC prices plunged by almost one third, to less than $19 a barrel. 
Together, the OPEC countries pump 40 percent of the world's oil. Last week they let it be known that they would cut production--hoping to push up the price to $22 a barrel or higher. (Oil producers still have bad dreams about 1998, when prices fell to $10 and their economies slipped.) 
Whether higher prices can be enforced, however, remains to be seen. Non-OPEC countries, such as Mexico and Russia, might pump more oil to fill the gap. Or the global recession might turn out to be worse than business now expects. 
This war's economic risks seem to me to be extraordinarily high. Take Saudi Arabia alone. The entire world needs Saudi oil. That's the only country able to mobilize huge amounts of extra capacity, quickly, in case--say--Iraq cuts off supplies and oil prices spike. 
Looking just at America, imports account for about half the oil we consume. Two thirds of that goes for transportation--cars, trucks, buses, trains, planes. Forget SUVs; we're talking about basic business infrastructure. It doesn't run on green energy. 
Our Devil's deal with the Saudis is: you pump oil, we defend your corrupt regime against threats (and zip our mouths, even when you let your schools and mosques preach jihad against Americans in the Middle East). 
We keep some 5,000 U.S. military people on Saudi soil. What we don't know is how far their power can actually reach. Bin Laden is making their presence a tinderbox issue for the radicals. Just four weeks ago two people (one American) died in a bombing in the Al Khobar neighborhood, where 19 U.S. airmen were bombed in 1996. 
Francis Perrin, editorial manager of the Paris-based journal Arab Oil & Gas, thinks the Saudi ruling family can hang on for a few more years, at least. If not, even hostile regimes pump oil--witness Iran. 
Any oil produced, anywhere, goes into the general global pool, says Michael Toman, a senior fellow at Resources for the Future in Washington, D.C. One angry producer can't stop shipments just to the United States. 
But one angry, big producer willing to pump less oil could hurt all users equally. And a new Saudi regime could pump less, if it has fewer princes to support. Prices might have to top $35 a barrel before Americans start to conserve, says Charlie Ober, head of T. Rowe Price's New Era Fund. 
So much for my fears. The stock market doesn't seem to share them. "Energy stocks start to perform when the economy reaches bottom," says J. C. Waller, a portfolio manager for the ICON Energy Fund. The gains since September suggest that investors see better business six to nine months out. A stronger economy by late 2002 would raise oil demand, raise prices and encourage drilling. That's why drilling and drilling-equipment stocks have been so strong. 
As usual, buyers of individual stocks are walking into a minefield. OK--the oil-drilling group has been one of the top 10 performers over the past three months. But among them, you got everything from Nabors Industries (up 63 percent since late September) to Parker Drilling (down 55 percent since May). 
And take Enron, the hottie energy trader that soared to $89 last year. The Securities and Exchange Commission is digging into its accounting. In just three weeks it slid 69 percent, to as low as $11.30. 
Energy investors tend to rotate from sector to sector, making it tough for amateurs to keep up. That's where mutual funds come in. 
But each "energy" fund takes a different tack. ICON, for example, built its own computer model to root out what it hopes are undervalued stocks. (Its mathematics, however, don't include political risk.) 
Fidelity Select Energy Service buys large drillers and servicers. That made it one of the worst funds this year because those stocks took such a beating during the first nine months, says Dan McNeela at Morningstar. As drillers gain, Fidelity will turn around. 
For more diversification, look at Vanguard's Energy Fund. It invests in all sectors of oil and gas, so it's much less volatile than its competitors. "We don't think people should have an energy port-folio all the time," says manager Ernst von Metzsch. But given the price drops in 2001, he calls this the right time. 
Still, you have to ask, "what if?" Low stock prices (and energy prices) look interesting. But invest gradually over several months. Recovery could be slow. It's not clear how risky this war will be. 
Reported by Temma Ehrenfeld 


Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


Enron Cancels Meeting With Dabhol Power Lenders on Court Action
2001-11-07 06:26 (New York)

Enron Cancels Meeting With Dabhol Power Lenders on Court Action

     Mumbai, Nov. 7 (Bloomberg) -- Dabhol Power Co., Enron Corp.'s
Indian unit, said it canceled a two-day meeting with Indian
lenders after local banks filed a suit to stop it from canceling
its power contract with Maharashtra state.

     Officials from Dabhol Power, Industrial Development Bank of
India and other local banks that helped fund the $3 billion power
project were scheduled to meet in Singapore tomorrow to resolve
the ten-month-old payments dispute.

     Indian lenders yesterday filed a suit in the High Court of
Mumbai to stop Dabhol Power from canceling its power contract with
Maharashtra State Electricity Board. A six-month notice period for
Dabhol to cancel the contract with the board expires Nov. 19.
Enron issued the notice on May 19 to end the contract because of
unpaid bills.

     ``The precipitous action taken by IFI's (Indian lenders), and
in which no advance notice was given to any parties including
foreign lenders, has resulted in cancellation of the scheduled
discussions'' on Nov. 8 and 9, Dabhol said in a statement.

     Dabhol said it was ``surprised'' local banks filed a suit
just ahead of the Singapore meeting ``specifically requested'' by
the lenders. Government officials are meeting with Enron in
Washington later this week during Indian Prime Minister Atal
Behari Vajpayee's visit to the U.S.

     Indian lenders have lent Dabhol $1.4 billion for the power
project and are most at risk if Enron pulls out. They're concerned
the electricity board will be forced to buy the power plant if
Enron carries out its threat, making it difficult for local
lenders to get back their loans.

     Enron owns 65 percent of Dabhol, India's biggest foreign
investment. The board owes it $64 million for bills that are ten
months overdue. The board stopped buying power from Dabhol in May,
saying it was too expensive.

     The court action by lenders ``is a precipitous step clearly
designed to frustrate (Dabhol) and its stakeholders' ability to
pursue legal remedies under the power purchase agreement,'' the
Economic Times quoted from a statement issued by Dabhol.

--Ravil Shirodkar in the Mumbai newsroom (91 22) 233 9024 


INDIA: UPDATE 1-India lenders seek court action over Enron plant.

11/07/2001
Reuters English News Service
(C) Reuters Limited 2001.

(Adds cancellation of Singapore meeting and company's reaction in paras 3-7) 
BOMBAY, Nov 7 (Reuters) - Indian lenders to Enron Corp's Dabhol Power Co (DPC) have filed a legal petition to try to prevent DPC from pulling out of the beleaguered power project, a senior banker said on Wednesday.
"We have moved the Bombay High Court to get an interim stay on a final termination notice and to stop Dabhol from transferring its assets," the banker, who declined to be identified, told Reuters. 
The move provoked an angry reaction from Dabhol. 
The company immediately cancelled a scheduled meeting with domestic lenders in Singapore on November 8 and 9 to discuss the issue. 
"DPC is disappointed with the legal action taken by the Indian lenders, which is an attempt to deny DPC's foreign sponsors and lenders of their previously agreed to legal claims," it said in a statement. 
The cancellation of the meeting is also a blow to efforts to solve the dispute, which has damaged India's efforts to attract more foreign investment in the power sector. 
Enron officials and the lenders were to discuss, among other things, proposals from two domestic companies, Tata Power and BSES Ltd, to buy out the U.S. company's stake in the project. 
A final termination notice would cancel a power purchase agreement with the power plant's exclusive customer - Maharashtra State Electricity Board (MSEB) - and transfer ownership of the power plant to MSEB. 
DPC has not yet issued a final termination notice but it has taken a step towards that by issuing a notice of transfer of assets to MSEB, which allows for the assets of the power plant to be valued. 
Both notices are provided for under MSEB's power purchase agreement (PPA) with Dabhol. 
DPC and the authority have been feuding for a year over unpaid bills and tariffs. The 2,184-megawatt power plant was shut down in June because of the dispute. 
Indian banks and other institutions have provided loans and guarantees of around $1.4 billion for the plant, India's largest single foreign direct investment at $2.9 billion. 
The lenders' consortium, led by Industrial Development Bank of India, filed the petition on Tuesday, the banker said. 
DPC is 65-percent owned by Enron Corp., one of the world's biggest energy companies which is battling to calm investor worries about business deals being probed by the U.S. Securities and Exchange Commission. 
General Electric Co and Bechtel Corp each hold 10 percent in DPC. 
Enron Corp's shares fell 13.4 percent to $9.67 on Wall Street on Tuesday in a further fallout of investor worries about the company. Its stock has fallen 88 percent this year. 
Under the terms of another notice served by DPC on MSEB in May, the two sides are locked in a negotiating period up to November 19 to try to resolve their dispute. Enron has said it intends to sell its DPC stake to either the Indian government or domestic lenders. 
Both domestic and foreign lenders have stopped disbursements to DPC, which Dabhol says has reduced its ability to look after the plant. 
"We want to ensure that talks between prospective buyers and Enron take place amicably. We believe if a final termination notice is served, it will precipitate the situation. We don't want this," the banker said. 
(With additional reporting by Sriram Ramakrishnan).

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Enron India: Dabhol Pwr Lenders' Singapore Mtg Canceled

11/07/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

SINGAPORE -(Dow Jones)- A meeting scheduled in Singapore later this week between the domestic lenders to India's Dabhol Power Co. and DPC executives has been canceled, said Jimmy Mogal, a DPC spokesman in India, Wednesday. 
DPC is the Indian unit of U.S. energy company Enron Corp. (ENE).
The lenders and the DPC executives were due to discuss ways to bailout the beleaguered Dabhol power project at the Singapore meeting. Enron has a controlling 65% equity stake in the 2,184-megawatt Dabhol power project, located in the western Indian state of Maharashtra. 
Mogal said the meeting was canceled after the Indian lenders to the US$2.9 billion project filed a lawsuit Tuesday in the Mumbai High Court to protect their investments. 
Enron wants to sell its equity in Dabhol due to payment defaults by Maharashtra State Electricity Board and the Indian federal government's failure to honor payment guarantees. 

"Dabhol Power Company is disappointed with the legal action taken by the Indian lenders, which is an attempt to deny DPC's foreign sponsors and foreign lenders of their previously agreed-to legal claims," Mogal said in a statement. 
Mogal described the lenders' lawsuit as a "precipitous action" and said no advance notice was given to any of the concerned parties, including foreign governmental lenders. 
The lawsuit has now forced "the cancellation of the scheduled discussions on Nov. 8 and 9 in Singapore between DPC and the Indian lenders on an amicable resolution of the Dabhol issue," Mogal said. 

DPC's domestic lenders include ICICI Ltd. (P.ICC), Industrial Development Bank of India (P.IDB), IFCI Ltd. (P.ICI) and State Bank of India (P.SBI). 
According to a report Wednesday in the Business Standard, a hearing for the lawsuit has been scheduled for Wednesday. 
Domestic lenders have the highest exposure to the Dabhol project and are anxious not to see it collapse. The project represents the biggest foreign investment deal in India to date. 
Domestic lenders have provided $1.4 billion of the project's total projected cost of $2.9 billion. IDBI's exposure is in the excess of 20 billion rupees ($1=INR47.98), and the bank runs the risk of going deep into the red if this project goes bust. 
Domestic lenders want the federal government to clear MSEB's default of $48 million and to find additional buyers, such as a state-owned power utility like National Thermal Power Corp. Ltd. (P.NTP), for DPC's electricity from the second phase of the Dabhol project. 
"Despite recent events, DPC remains confident of its legal position, as prescribed under the various contract documents, and expects this dispute will ultimately be resolved to the satisfaction of DPC and its stakeholders," Mogal said. 
Other shareholders in the Dabhol project include the Maharashtra State Electricity Board with a 15% stake, and General Electric Co. (GE) and Bechtel (X.BTL) with 10% each. 
Enron is at the center of a power supply dispute between the state government and DPC over what the government claims are "unaffordable" power tariffs. 
DPC has come under fire because of the relatively high cost of its power. Critics object to DPC charging INR7.1 a kilowatt-hour for its power, compared with INR1.5 per kWh charged by other suppliers. 
The problems with DPC have only added to Enron's much-publicized financial troubles. 
Investor confidence in the Houston-based energy company dropped after Enron posted a third quarter loss of $618 million and disclosed a $1.2 billion decrease in investor equity related to partnership transactions undertaken with the company's former chief financial officer, Andrew Fastow. 

IDBI Chief General Manager V.K. Saxena defended the lenders' legal move. 
"The Indian lenders went to the court to protect their interests. What's wrong with that? Enron cannot just leave us high and dry," Saxena told Dow Jones Newswires. 
Indian lenders have written to the DPC requesting new talks. "The lenders want the power project to run. We find ourselves in a piquant situation," Saxena said. 

-By Sri Jegarajah and Himendra Kumar, Dow Jones Newswires; 65-415-4066; sri.jegarajah@dowjones.com

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

India: Tata Power may ask lenders for loan write-off in DPC

11/07/2001
Business Line (The Hindu)
Fin. Times Info Ltd-Asia Africa Intel Wire. Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd

MUMBAI, Nov. 6 LENDERS to Enron's Dabhol Power Company (DPC) may have to write off "part of" their loans for potential buyers to remain interested in acquiring the project. 
Officials at Tata Power told Business Line that the company may ask lenders at a multilateral meeting to be held in Singapore to write off "part of" the $1.9-billion in loans to the 2,184-MW project.
Tata Power had given an expression of interest to financial institutions last month. Mumbai-based power utility, BSES Ltd, is the only other company which has publicly expressed interest in buying the project, albeit, at a substantial discount. 
According to the sources, while the Tatas have asked for writing off loans in addition to the earlier demand for increasing the moratorium on loan repayments and slashing of interest rates. Rupee loans constitute over 65 per cent of the debt. Domestic FIs would be most affected if the loans were to be written off. 
Senior Tata Power officials, including Mr Adi Engineer, Managing Director and Mr Phiroze Vandrevala, Deputy Managing Director, are leaving for Singapore on Wednesday to attend the negotiations. Senior bureaucrats from the Union Ministries of Finance and Power are also expected to attend, apart from State and MSEB officials. 
According to sources, Tata Power will ask for a complete debt and equity restructuring for it to buy a stake in DPC. This also includes asking Enron Corporation to take a 50 per cent hit on its equity in DPC. 
Enron had earlier quoted a price of $1.2 billion for its stake. "The Tatas are looking at a figure of $600 million," sources said. 
Another matter of contention in the price quoted by Enron includes the $0.22-billion which account for "retained earnings" which have been added to the cost. According to the Tatas, they are willing to pay only $0.8 billion of these "retained earnings" which include Enron's much-talked about 'education charges'. 
The company will push for separate negotiations for the LNG terminal and the power plant. Enron had earlier said that it would not consider selling the project piecemeal and that the company picking up a stake in the project would have to buy the power plant along with LNG terminal. 
The company plans to negotiate the debt and equity factors to bring down power tariffs to an "ideal price" of Rs 2.70 per unit to Rs 2.90 per unit, sources said. 
Archana Chaudhary

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Path paved for due diligence by Tata and BSES
S Ravindran Mumbai

11/07/2001
Business Standard
4
Copyright (c) Business Standard

Enron is poised to enter into confidentiality agreements with the two contenders Tata Power and BSES prior to entering into serious negotiations. Tata Power and BSES are the only two companies to have publicly evinced interest in buying Enron's stake in Dabhol Power Company (DPC). 
Confirming the move a senior Tata Power executive said, "The terms and conditions of the confidentiality agreement are under discussion. This will pave the way for future negotiations."
BSES chairman and managing director R V Shahi, however, said that he was "not aware of any such move." The DPC spokesman could not be reached for comment. The stage seems to be set for hardcore negotiations to buy its equity in the beleaguered DPC. Enron, which holds 65 per cent in DPC, has announced its intention to exit the project following payments dispute with the Maharashtra State Electricity Board (MSEB). 
Its two other US based partners General Electric and Bechtel hold 10 per cent each and they too have decided to exit the project. The balance stake is held by MSEB through a special purpose vehicle. Enron, GE and Bechtel have valued their combined 85 per cent stake at about $1.2 billion. It is learnt that BSES is insisting on a steep discount but Enron has so fare refused to budge. The Mumbai-based power company is also negotiating for a reduction in the capital cost of the project by spinning off the 5 million tonne LNG facility into a separate company. It's contention is that it can source gas by entering into supply agreements with other players who are setting up LNG terminals on the west coast of India.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Domestic lenders file lawsuit against Enron's Indian unit

11/07/2001
Agence France-Presse
(Copyright 2001)

BOMBAY, Nov 7 (AFP) - Indian banks and financial institutions which have lent money to US-based Enron Corp's controversial domestic subsidiary have filed a lawsuit to ensure they get the funds back, an Enron official said Wednesday. 
The suit has been filed by State Bank of India, ICICI Ltd., Industrial Development Bank of India and IFCI Ltd., which have given Enron's three billion-dollar power project in western Maharashtra 60 billion rupees (1.25 billion dollars) in loans.
The suit comes a day after Dabhol Power served an "asset transfer notice" to the Maharashtra State Electricity Board (MSEB) for the valuation of the company's assets in order to sell these off. 
Enron Corp, along with MSEB and the state government of Maharashtra, had jointly set up the project, which plunged into controversy after MSEB failed to pay Dabhol Power for power purchased from the company. 
The Enron official said the bankers wanted immediate resumption of work at the plant which will ensure cash flow and help the owners pay their dues to the lenders. 
Dabhol Power Company said on Tuesday it plans to issue the final termination notice to MSEB after November 19 in order to formally close the plant. 
Enron holds a 65-percent stake in Dabhol Power Company, while MSEB is the other stakeholder. 
jds/bm/dv

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Former Enron CEO Testifies Before SEC Tuesday - Exec
By Jason Leopold
Of DOW JONES NEWSWIRES

11/06/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- Jeff Skilling, the former chief executive of embattled energy company Enron Corp. (ENE), canceled an appearance in Los Angeles Tuesday because he was testifying before the U.S. Securities and Exchange Commission in Washington D.C., according to Ross DeVol, executive of the office of the chairman of the Milken Institute, which was sponsoring a conference where Skilling was scheduled to speak. 
DeVol said he spoke to Skilling on the telephone Monday, and Skilling said he was canceling his appearance in Los Angeles because he was subpoenaed by the SEC last week to testify Tuesday.
"I spoke with Jeff briefly, and he said he had to testify before the SEC in Washington, but he didn't say specifically what for," DeVol said. 
Skilling was unavailable for comment. Enron spokesman Mark Palmer said he was under the impression Skilling was in Houston Tuesday and not testifying before the SEC, but that he received the information "third hand." 
An SEC spokesman said the agency could not confirm or deny Skilling's appearance before the commission. As a matter of policy, the SEC does not comment on investigations. 
Enron shares have declined more than 70% since mid-October, when the company disclosed a $1.2 billion reduction in shareholder equity that resulted from the unwinding of a partnership headed by its former chief financial officer, Andrew Fastow. 
The SEC launched an inquiry two weeks ago into the partnership, according to Enron, and last week, Enron said the inquiry had become a formal investigation. 
An Enron spokesman said the SEC investigation is focusing on "third party and related party transactions." 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

USA: WRAPUP-Enron shares sink as company looks for cash.
By Jeff Franks

11/06/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, Nov 6 (Reuters) - Enron Corp. shares sank below the $10.00 mark for the first time in nearly a decade on Tuesday as the energy trading giant sought cash to calm investor worries about business deals being probed by federal regulators. 
Shares in the Houston-based firm closed down $1.50, or 13.4 percent, to $9.67, a level not seen since May 1992, as Enron stock continued a downward spiral that has lopped off 88 percent of its value this year.
It was the most actively traded issue on the New York Stock Exchange, with 29.6 million shares changing hands, and the fourth-biggest percentage loser. 
Analysts attributed the drop to ongoing investor anxiety about the company's deteriorating credit ratings, which have been cut to near-junk levels and raised questions about Enron's ability to continue to finance its business. 
The company, which is the nation's No. 1 trader of natural gas and electricity, was once a Wall Street star, but has fallen under fire for failing to explain off-the-balance sheet transactions that led to a $1 billion charge and a $1.2 billion write-down of shareholder equity on Oct. 16. Its stock has lost $18.5 billion in market value since that date. 
The deals, conducted with partnerships run by then-Chief Financial Officer Andrew Fastow, are under investigation by the U.S. Securities and Exchange Commission for possible conflicts-of-interest. 
Fastow took a leave of absence on Oct. 24 in the latest of a growing line of high-profile departures topped by the August resignation of chief executive Jeff Skilling. He left after just six months on the job, saying he wanted a lifestyle change. 
To bolster fading investor confidence, Enron has been gathering cash and credit and trying to sell off assets to pay down debt. 
The Wall Street Journal reported on Tuesday that Enron had talked with private equity firms and rivals in the power-trading business about providing a capital infusion of at least $2 billion in exchange for an equity stake and other terms. 
The infusion was needed, it said, because access to financing is drying up and asset sales are going slower than expected. 
The report said Enron had approached such buyout firms as Blackstone Group and Clayton, Dubilier & Rice to gauge their interest and had gotten calls from a number of power traders, none of whom the paper could identify. 
Enron, Blackstone, and Clayton Dubilier all declined comment. People familiar with the situation said Clayton Dubilier wasn't interested, but Blackstone is willing to discuss an Enron proposal. 
A TOUGH READ 
They said investors may be wary because Enron's books are difficult to understand and therefore the depth of its problems unknown, but not lost on them is that last year the company had $100 billion in revenues and $1.4 billion in net earnings. 
"It's definitely an opportunity," said one advisor to private equity funds. "It's a distressed situation and it has stable cash flow." 
Image experts said Enron could make itself more attractive by responding fully to investor demands for more information, rather than clamming up as it has in recent days while it tries to get its house in order. 
"Their perception is that there's obfuscation going on, in terms of senior people making pronouncements without fully understanding the nature of what they're talking about and that in turn gives the impression that they're hiding something," said John Lister of Lister Butler Consulting, a brand identity consulting firm. 
He said the company should quit listening to lawyers and come clean. 
"What tends to happen in these situations is lawyers get inserted into the situation. The first thing a lawyer tells you is to shut up. And unfortunately that is the antithesis of what good brand stewardship requires," he said.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

USA: Buyout funds flock to Enron? Might be a PIPE dream.
By Dane Hamilton

11/06/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Nov 6 (Reuters) - It's going to take a lot of sweet-talking to get private equity firms to pour cash into troubled energy trading giant Enron Corp. , buyout executives and industry watchers said on Tuesday. 
Houston-based Enron, whose shares have been hammered on concerns over credit problems and accounting practices, is reportedly seeking $2 billion from investors to bolster its balance sheet. On Tuesday, its shares fell $1.50, or 13.4 percent, to $9.67, on the New York Stock Exchange, the lowest in nearly a decade.
Leveraged buyout (LBO) firms, which specialize in buying large stakes in companies and help manage them for eventual sale, are typically reticent in buying stock in public companies. And worries over Enron's accounting transparency could force investors to spend months on due diligence, delaying any short-term infusion, experts said. 
"Enron is a tough one," said David Stein, partner in the Fund Evaluation Group, which advises private equity investors. "They do so much esoteric stuff that it would take a long time to figure out." 
Enron said last week it had obtained $1 billion in secured credit lines from J.P. Morgan Chase & Co. and Salomon Smith Barney. However, the Wall Street Journal reported the company is seeking some $2 billion in cash from major buyout firms such as Blackstone Group and Clayton Dubilier & Rice in return for an equity stake in Enron. 
Enron, Blackstone, and Clayton Dubilier all declined comment. However, people familiar with the situation said Clayton Dubilier wasn't interested and Blackstone is willing to discuss an Enron proposal. 
Private equity executives echoed the view that the lack of transparency in Enron's accounting would pose a serious hazard in effectively valuing the company as a precursor to an investment. 
"It would take a long time to figure out," said one executive with a major U.S. buyout firm. Even potential buyers of Enron assets say they have been baffled by Enron's financial reporting. 
"Our lawyers looked at some of Enron's stuff in the past and walked away shaking their heads," said an executive with a competing firm who asked to remain anonymous. 
However, buyout executives didn't reject such an investment outright. Despite problems that have driven Enron's shares down from $75 on Jan. 3, the company still generated $100 billion in revenue last year and $1.4 billion in net earnings, mostly from huge trading operations in electricity and natural gas. 
"It's definitely an opportunity," said one advisor to private equity funds. "It's a distressed situation and it has stable cash flow." But, this advisor added, "if the accounting is questionable, you have some serious issues there. You are basing your investing on the numbers the company has provided." 
If Blackstone did invest in Enron, it would be a step away from its traditional strategy of buying controlling stakes in private companies for eventual sale. 
"Our limited partners (investors) don't like this kind of investing, in general, so you have to have a compelling reason," said Steven Schwarzman, Blackstone's chief executive and co-founder, at a recent conference in New York. 
Most private equity funds say their pension fund investors prefer they don't invest in public stocks, since those investors could just as easily buy the stocks themselves without paying fees to the buyout firm. 
However, some buyout firms, like Warburg Pincus LLC, have lately made a push into public stock investing, known as private investments into public equities (PIPEs), finding that the market meltdown in the last year has made valuations overly attractive. 
Blackstone's Schwarzman said PIPE investing is like being "savaged, if the underlying security goes down."

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

USA: Enron shows few signs of restoring battered image.
By Carolyn Koo

11/06/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Nov 6 (Reuters) - Enron Corp. says it is working hard to restore shattered investor confidence, but shareholders and consultants see precious little of the disclosure they consider the company needs to rebuild its reputation. 
The energy trading giant's credibility with investors has been badly tarnished and its stock price has sunk to lows last seen in 1992, as investors clamor for more information about off-balance sheet transactions. The dealings led to a $1.2 billion write-down of shareholder equity that Enron disclosed three weeks ago.
Though Enron promised a week after the unexpected write-down was announced to be more transparent, there is still little sign of greater disclosure. Sightings of Chief Executive Kenneth Lay have been few and far between. 
He dropped a scheduled appearance at a U.S.-British business meeting in Houston last week, and repeated requests for interviews with him have been rebuffed. 
Meanwhile, Wall Street is voting with its feet and Enron's stock continues to sink. The stock fell 13.43 percent on Tuesday alone and it is now down 88 percent this year. In the past three weeks, $18.5 billion has been wiped off the company's market value. 
"The perception is that there's obfuscation going on, in terms of senior people making pronouncements without fully understanding the nature of what they're talking about and that in turn gives the impression that they're hiding something," said John Lister of Lister Butler Consulting, a brand identity consulting firm. 
Since investors began dumping Enron securities three weeks ago, the company has made few visible moves to answer some of the calls for accountability. 
It held a conference call two weeks ago and set up a committee last week to examine its finances and communicate with the U.S. Securities and Exchange Commission, which has launched a probe into Enron's murky transactions. 
Enron has maintained it is being forthright with investors, despite a barrage of criticism. 
"We recognize that our credibility has been damaged and we are working on investor concerns," a company spokeswoman said. 
'TRUST CAME UNDONE' 
Enron, which is garnering bad press on an almost-daily basis, does not seem to realize just how badly its once-shining reputation has eroded, consultants said. If it does, it is failing to act accordingly, they said. 
"Wall Street gave them a high degree of credibility. They enjoyed that trust for a long time, but that trust came undone," said John McCormack, head of consulting firm Stern Stewart and Co.'s energy practice. 
"Confidence takes a long time, years if not decades. But it can be destroyed very quickly," he said. 
Even the special committee has not gone far enough, some investors said. The AFL-CIO umbrella labor union body, whose affiliates hold an estimated 3.1 million shares of Enron, wrote to Lay and William Powers, the committee's chairman, making further demands. 
Those demands included the examination of all transactions with entities in which Enron employees or directors have an interest, adopting procedures for reviewing insider participation in investments, beginning a review of executive compensation and adopting a stricter definition of director independence. 
Beth Young, a consultant to the AFL-CIO, said most special committees set up to examine a company's actions try to show they have wide jurisdiction, a lot of power and that company executives can't stand in their way. 
But she said Enron has defined the committee's mission too narrowly, and she worried it would not examine other third-party transactions the company has that could be potential conflicts of interest. 
Lister advocates as much transparency as possible. 
"The only way they can do that under the circumstances is to have a senior officer with a well-crafted story and they must give the impression that they are telling the truth," he said. 
"What tends to happen in these situation is lawyers get inserted into the situation. The first thing a lawyer tells you is to shut up. And unfortunately that is the antithesis of what good brand stewardship requires," Lister added.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Playing the Flux With Enron
By James J. Cramer <mailto:jjcletters@thestreet.com>

RealMoney.com
11/06/2001 01:52 PM EST
URL: <http://www.thestreet.com/p/rmoney/jamesjcramer/10003568.html>
Enron's (ENE:NYSE - news - commentary) really starting to shock me now. As bad as I think it is, and I think it is plenty bad, I think Enron's got some value. I wonder if you can't take a flier for two bucks and change and buy both the Nov. 10 puts and calls. 
Here's my reasoning: This stock is in flux. Nobody knows what's going to happen. I think the company is worth a huge amount on a takeout. But if the wheels are really falling off, it is not going to stop here. 
This two-buck-and-change play allows you a call and a put on the next 10 days' worth of action, 10 decisive days that I think will definitely determine the fate of this darned thing. 
You want to have a look at both. This strategy gives it to you. 


Look Ahead Instead of Looking for Market Justice
By James J. Cramer <mailto:jjcletters@thestreet.com>

RealMoney.com
11/06/2001 08:30 AM EST
URL: <http://www.thestreet.com/p/rmoney/jamesjcramer/10003542.html>

If you want justice, Cisco (CSCO:Nasdaq - news - commentary) should go to zero. Nortel (NT:NYSE - news - commentary) should go to minus $5. Lucent (LU:NYSE - news - commentary) should go to minus $20. 
If you want fairness, PMC-Sierra (PMCS:Nasdaq - news - commentary) and Applied Micro Circuits (AMCC:Nasdaq - news - commentary) should disappear. 
If you want honor, the folks at Janus and Invesco and FirstHand should fall on their swords after issuing proclamations saying they made big mistakes and rode things all the way down and now understand that asking for forgiveness is simply out of the question. If you want right, the managers and analysts who buried you should have to go to law school and become associates. 
But if you want what's going to happen, you better forget about all of what has happened and focus on the future, because the future is somehow brighter than the past. 
Look, I don't want to press my luck here. We nailed Cisco. We have been bullish about pretty much everything except oil and gas and travel and leisure since Sept. 11 and now we should be getting bullish about the latter. 
Understand, though, even the worst downturns in this country -- forget Japan -- do end and there are people who make out whole even though they shouldn't. 
So many of us have been conditioned by a movie form of justice. We expect Gene Hackman to come in here and dispense justice against bad fund managers. We think Clint Eastwood finds the bad guys at Enron (ENE:NYSE - news - commentary) and makes them paint their pipelines red before he shoots them. We think that Tom Hanks will, in some sort of folksy way, make the dopes who lost you fortunes pay, somehow. 
It just doesn't happen that way. 
Understand that we have been through a brutal, horrid bear market that has ruined millions of people's nest eggs. We have had an unimaginable destruction of capital in the last 20 months. 
But it is coming to an end. Don't fight that. Mourn the bear if you thought it was dispensing justice. I know better. If you survived this far, if you have gotten this far, you are going to make it. You are going to be intact for the better times, which have started in the stock market and will soon start in the economy. 
You think I am telling fairy tales? You are wrong. I am just reciting history. In my world, I make bets that we have seen everything before. We have seen this before. Things are going to get better, whether we like it or not. 
I, personally, like it. 
Random musings: I will be out of pocket for much of the morning as today is parents' visitation day at my daughter's elementary school. I'll be darned, after all of the events I've missed 'cause of that $%&!# hedge fund job, if I am going to miss this opportunity now.