Enron files for bankruptcy
By Noelle Knox
USA Today
NEW YORK — Enron yesterday became one of the largest companies in U.S. history to file for bankruptcy protection. The world's largest energy trader also filed a $10 billion lawsuit against former suitor Dynegy for backing out of a merger agreement.
Enron's trading business began disintegrating in October as customers severed ties with the cash-strapped company. Investors bailed out as Enron's financial problems unfolded.
The stock closed Friday at 26 cents. Less than a year ago, Enron had a stock price of $84.88.
Enron will continue to operate but is laying off a "substantial" number of its 21,000 workers. Hardest hit will be the 7,500 in Houston, where Enron is based.
While Enron holds its creditors at bay, executives are scrambling to find interim financing and a financial institution to take a major stake in its trading operations.
Enron filed an electronic application yesterday with the U.S. bankruptcy court for the southern district of New York. Enron put 14 of its affiliates in bankruptcy with total assets of $25 billion and debts of $13 billion.
Because several pipelines and its international operations were not included, Enron's would be the second-largest bankruptcy filing. In 1987, Texaco sought refuge from creditors with $36 billion in assets.
The filing was widely expected after Dynegy rescinded its offer to buy Enron for $9 billion.
Dynegy blamed Enron for not revealing all its financial troubles. But in the lawsuit, Enron accused Dynegy of intentionally taking "advantage of Enron's precarious condition to further its own business goals." By terminating the merger, the lawsuit said, "Dynegy sought to put an end to Enron as a competitive force."
Dynegy spokesman John Sousa told The Associated Press his company didn't have "an opportunity to review the litigation. However, we continue to be confident in our position."
While Enron's fate plays out in the courts, its problems continue to rattle energy markets.
On Friday, the company laid off 1,100 workers in Great Britain. It has defaulted on energy contracts in England and Wales. Canadian authorities expect it to abandon construction of a generating plant in Ontario. In all, more than two dozen electricity and natural gas companies say Enron owes them a total of $700 million.
Enron's troubles started in October when it reported a third-quarter loss and some surprising charges, including the write-down of investments in partnerships controlled by its former chief financial officer.
Although the relationships had been disclosed in corporate documents and reviewed by Enron's lawyers, accountants and directors, investors started asking more questions.
Wall Street's concern turned to fear when Enron restated its financial results for the past five years, eliminating more than $580 million in reported income.
