Enron Gets OK for Bankruptcy Emergence

By KRISTEN HAYS AP Business Writer

HOUSTON (AP) - Enron Corp.'s plan to emerge from one of the most expensive and complicated bankruptcies in history - and to sell off most of its remaining pieces - received court approval Thursday. The Enron name will disappear and most creditors will receive about 20 cents on the dollar.

If pending sales of domestic pipelines and a Pacific Northwest utility close as expected later this year, all that will be left of the scandal-ridden company that once claimed $100 billion in revenues and pioneered trading operations that expanded well beyond energy will be a smattering of pipeline and power assets in 14 countries.

"This is what's left of what had been a $65 billion asset company," said John Olson, a Sanders Morris Harris analyst who has followed Enron since its inception in 1985.

U.S. Bankruptcy Judge Arthur Gonzalez in New York signed off on Enron's plan to exit Chapter 11 bankruptcy protection Thursday with no notable adjustments.

Houston-based Enron filed for bankruptcy protection in December 2001 amid revelations of hidden debt and inflated profits accomplished through a tangle of accounting trickery. Thousands of workers lost their jobs and investors lost billions as the company's stock, once a high-flyer, become worthless.

The reorganization plan aims to pay most of the more than 20,000 creditors about $12 billion of the approximately $63 billion they are owed with cash raised, mostly from a series of asset sales, and with stock in one of three new companies created from Enron's remains under the reorganization plan.

A date for the plan to become effective - meaning Enron can begin distributing cash and stock - has not been set.

Shareholders will get nothing. And employees who lost their savings wrapped up in Enron stock are relying on lawsuits to get some payback.

Unlike airlines or other large companies that go into and then emerge from bankruptcy largely intact, albeit often smaller and having shed some debt, the ventures that once defined Enron as a leader in energy and other markets are long gone.

Swiss investment bank UBS snapped up the once-envied trading operations less than two months after Enron went bankrupt for no money up front and a promise to give Enron one-third of its profits. Those profits never came as the energy trading industry struggled in the aftermath of Enron's implosion. By late 2002, UBS shut down the Houston operation and transferred only 90 of the more than 600 traders and other workers to its trading hub in Connecticut.

The broadband operation that never made a profit or lived up to grand video-on-demand promises went bankrupt with its parent. The retail energy unit that promised to deliver energy to large customers, including Pacific Bell Park in San Francisco, crumbled as well.

"Beyond the hard assets in their pipelines and particularly their utility, Enron was largely a gigantic collection of paper assets whose value, in hard times, turned out to evaporate," Olson said.

The assets that didn't evaporate are: CrossCountry Energy Corp., which holds Enron's whole or part interest in three domestic natural gas pipelines; Portland General Electric, a utility; and Prisma Energy International Inc., the collection of international assets, most of which are in Latin America.

If sales of CrossCountry and Portland General close later this year, Enron will distribute a total of about $12 billion to creditors - 92 percent in cash and 8 percent in Prisma stock. If one or both of the sales fall through, creditors will receive less cash and more stock in the multiple companies.

CrossCountry has so far attracted two buyers.

The first bidder, Texas billionaire and Coastal Corp. founder Oscar Wyatt Jr., in May offered $2.2 billion. Then last month a joint venture of Southern Union Co. and GE Commercial Finance Energy Financial Services offered $2.3 billion. Both offers include $430 million in assumed debt. Gonzalez will consider those and any other bids at a Sept. 1 auction, and is slated to approve the winning bid Sept. 9.

CrossCountry's holdings are the 2,600-mile Transwestern pipeline, which transports gas from West Texas, Oklahoma, eastern New Mexico, the San Juan Basin in northwestern New Mexico and southern Colorado to California, Arizona and Texas markets; half-ownership with El Paso Corp. of Citrus Corp., a holding company that owns the 5,000-mile Florida Gas Transmission pipeline from southeast Texas to Florida; and a less than 2 percent interest in Northern Border Partners, which transports natural gas from Canada to the Midwest.

Last year Enron announced plans to sell Portland General to an investment group backed by Texas Pacific Group for $1.25 billion in cash and $1.1 billion in assumed debt.

"Undoubtedly, this was an extremely complex bankruptcy. Today's court approval acknowledges not only the tremendous amount of work that has been accomplished during the last two and a half years, but also the overwhelming support of our economic constituents," said Stephen F. Cooper, Enron's acting CEO and chief restructuring officer, said in a news release.

Dozens of people, including Enron founder and former chairman Kenneth Lay, former CEO Jeffrey Skilling and former finance chief Andrew Fastow, have been charged with crimes in the Justice Department's ongoing probe of what caused the collapse.

Fastow is among 10 former executives who have pleaded guilty, while Lay and Skilling are among 20 who have pleaded innocent and are facing trial.

The massive bankruptcy generated more than $665 million in fees for lawyers, accountants, consultants and examiners, according to the Texas Attorney General's office.