HOUSTON – Former energy trading giant Enron Corp. continued to play a waiting game Friday, refraining from public comment even as the market readied for what could be the largest corporate bankruptcy filing in history.
Enron's 20,000-plus employees worldwide, including more than 6,000 in Houston, were also awaiting word on whether they would still have jobs next week; Enron laid off 1,100 in Britain on Friday.
Some in Houston had already cleaned out their desks, anticipating layoffs after getting paid on Friday. They also reflected on a whirlwind downfall that gripped the once-heralded company two days after its would-be savior, Dynegy Inc., walked away from a $8.4 billion bailout.
"We kind of went out with a bang," Enron employee Nathan Will said. "It wasn't like we sat around for six months bleeding. It's a Wild West scenario that masks a lot of disappointment."
The bleeding continued Friday on the New York Stock Exchange, where shares trickled down another 10 cents, or 28 percent, to 26 cents in heavy trading. Last December, shares were trading near $85 per share.
Enron declined to return repeated calls Friday.
"Everyone is sitting around and waiting to see what (Enron chairman and chief executive) Ken Lay is going to do," said Prudential Securities analyst Carol Coale. "As far as we're concerned they don't have a lot of alternatives. They have good assets with the pipelines, but as we've said in print, those assets are pledged against banks."
According to BankruptcyData.com, Texaco Inc. filed the largest bankruptcy in history in 1987 when it had $35.9 billion in assets. Adjusted for inflation, that amount would be about $56.4 billion today, the Boston-based company said.
As of Sept. 30, Enron had $62.8 billion in assets, though that figure may be substantially less, given developments over past several weeks.
Robert Christmas, a bankruptcy expert with Nixon Peabody LLC in New York, said Texaco sought bankruptcy protection to escape an $11 billion court judgment. He said Enron needs Chapter 11 bankruptcy protection to keep creditors seeking up to $27 billion in debt at bay while the company tries to remain in business, albeit smaller and humbled.
But Enron also needs cash and credit to maintain its trading operation -- both of which are scarce.
"What do you do if no one trusts your credit?" Christmas said. "No terrorist blew up Enron. It was management."
Several energy companies have stopped making trades with Enron, while getting ready to take a charge against profits for potential exposure for contracts that aren't completed. Typical was a statement from Naperville, Ill.-based Nicor, which said its financial exposure to Enron was less than $5 million.
Enron's loss of credibility in the market stemmed from revelations that its chief financial officer for running partnerships that allowed the company to keep half a billion dollars in debt off its books. In early November, Enron restated its earnings back to 1997, eliminating more than $580 million in reported income in that time span.
Houston-based Dynegy swooped in to rescue its neighbor with an $8.4 billion buyout, but even top officials at the smaller rival were surprised when Enron later disclosed it had a $690 million debt within a week.
Amid negotiations to reduce the purchase price, the Dynegy-Enron deal fell apart after Enron's credit was reduced to junk status.
Congressional leaders are calling for hearings into the Enron fallout, the Securities and Exchange Commission is investigating, and both investors and employees have filed several lawsuits.
The picture is starkly different from a year ago, when former Enron chief executive Jeff Skilling touted the company as the wave of the energy future.
Enron had developed trading mechanisms used to control price fluctuations in natural gas and applied them to electricity, bandwidth, metals and other commodities. Executives said major oil companies were dinosaurs because they handled production and marketing, while Enron left production to others and made most of its profits buying and selling.
Skilling quit Enron in August this year. Some physical assets, such as power operations in India and Brazil, lose money while others are heavily leveraged. Analysts doubted the company could scare up enough credibility to entice traders back.
"All the facts aren't out yet," said Robert Webb, finance professor and senior associate dean at the McIntire School of Commerce at the University of Virginia. "It's possible that later analysis will show that somehow there were bad trades that previously were reported as profitable. But right now, the collapse seems to be more the management."
In other developments:
--Dynegy reiterated that it plans to acquire Enron's Northern Natural Gas pipeline -- which has 16,500 miles of pipelines from Texas to the Great Lakes -- in exchange for the $1.5 billion part-Dynegy owner ChevronTexaco pumped into the ailing trader.
Rob Doty, Dynegy's chief financial officer, said Friday that because Dynegy is a preferred shareholder, Northern Natural Gas cannot seek bankruptcy protection without Dynegy's approval, however.
--Rating service Fitch Inc. reiterated Friday that it had placed Dynegy Inc. on a negative rating watch following the dissolution of its deal to buy Enron. In particular, it cited the likelihood of legal challenges to Dynegy's plan to take over the Northern Natural Gas as well as over the failed buyout "potentially creating unquantifiable financial liabilities."
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