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Sent: Monday, December 17, 2001 8:58 AM
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Subject: FW: NYTimes.com Article: Enron Seeks Quick Auction of Trading
Unit 




Enron Seeks Quick Auction of Trading Unit

December 17, 2001 

By JONATHAN D. GLATER


 

The Enron Corporation (news/quote) has found at least 14
potential buyers interested in its energy trading business,
enough so that it plans to go ahead with an auction for the
unit in less than a month without lining up a fallback
buyer first. 

In papers filed with a bankruptcy court in New York late
Friday afternoon, lawyers for Enron, which sought Chapter
11 protection earlier this month, asked Judge Arthur J.
Gonzalez to approve an auction of a 51 percent stake in a
joint venture. That venture would own Enron's wholesale
energy business, which includes Enron Online and which
trades commodities ranging from natural gas to steel in
addition to complex financial instruments. 

Lawyers involved in the bankruptcy proceedings said the
company and its lawyers had decided to proceed with an
auction as quickly as possible to prevent further
deterioration of the trading operation's value. The
decision means that Enron, which is based in Houston, has
dropped plans to negotiate a deal with one buyer - J. P.
Morgan Chase (news/quote) and UBS Warburg have both been
mentioned for the role of "stalking horse" - against which
other bidders would compete. 

"There are 14 interested parties," said Martin J.
Bienenstock, whose law firm, Weil Gotshal & Manges, is
representing Enron. "Some of them would like to be stalking
horses, but we don't really need one." 

Mr. Bienenstock did not provide any guidance on what an
investor might be expected to pay. "We're not selling it
for dollars," he said. "We're creating a joint venture.
We're putting in the traders, the systems and the
intellectual property; the other party is putting in
creditworthiness. The issue in the auction is what part of
the joint venture will Enron own and what part the other"
company will own. The 49 percent-51 percent split may not
be the final ownership structure, he added. 

A hearing will be held on Wednesday on an Enron motion that
lays out bidding procedures, and Enron proposed that the
auction be conducted on Jan. 10. 

One lawyer involved in the proceedings said that "more
typically, you would go in there with a negotiated deal"
that the bankruptcy court could use as a benchmark for
evaluating competing bids. But producing a negotiated deal
takes time, this lawyer said, and Enron is trying to
complete this sale "extremely fast." He added, "Whether
that's realistic, I don't know." 

Bankers and lawyers for Enron have said that if the trading
business is to be sold as a going concern, it will have to
be sold quickly. "Each day that the wholesale business is
not acting at full capacity is another day for a competitor
to lure customers" or employees, Enron's lawyers warned in
the filing on Friday. 

It is also important that the trading business find a
creditworthy partner to maintain the confidence of clients.
Otherwise, buyers of energy or other commodities, fearing
that transactions might not be completed because of lack of
financial strength, would not do business with the joint
venture. 

For these reasons, an auction was expected, especially
after Enron told creditors last week that it planned to
create a joint venture with a creditworthy financial
institution to take over the trading business. 

Auctions are used in bankruptcy proceedings to ensure that
the bankrupt company receives the maximum amount from sales
of its assets. The proceeds, which in this case would
probably come in the form of future dividend payments or
profits from the sale of Enron's share of the joint
venture, would then be used to help pay off creditors,
lawyers said. 

http://www.nytimes.com/2001/12/17/business/17ENRO.html?ex=1009608777&ei=1&en=b3d1db086c32264d



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