A total of 1,100 staff at the London headquarters of Enron were fired last night without redundancy pay by administrators called into the collapsed US energy trading giant earlier this week.
PricewaterhouseCoopers said it would retain 250 of the 1,350 staff in London to help with the administration of Enron Europe. But the rest were told to consult a government website to find out what their statutory redundancy entitlement would be. Many employees will receive only the minimum £250 payment.
The job losses came as Abbey National warned that it would take a £95m write-off to cover its exposure to Enron. Other European and US banks also spelled out their exposure to Enron, which will become the biggest corporate failure in history when it files next week for Chapter 11 bankruptcy protection from creditors.
The global banking sector is estimated to have some $15bn (£10bn) of Enron debt on its collective balance sheet, as opposed to through specialist subsidiary vehicles.
Abbey National shares fell 5.5 per cent to 978p following news of the write-off, reinforcing investor doubts over credit quality in the bank's wholesale unit. "We are a bank, we are in the business of risk and reward. Sometimes it comes to this," said Mark Pain, the former finance director who was drafted in as the new head of Abbey's wholesale division last month. "The exposures to Enron at the time they were acquired were predominantly rated investment grade."
Abbey also warned second-half profits could fall year on year due to the impact from the US slowdown. In July the mortgage bank posted a shock rise in bad debt provisions owing to a deterioration in its US loan book.
Shares in Royal Bank of Scotland, which heads the eighth-largest Enron debt syndicate, fell 1.8 per cent to 1,625p amid continuing uncertainty about whether it had sold on its exposure. A spokesman refused to indicate RBS's exposure on the grounds of customer confidentiality, but noted: "Enron is a very large company with a wide range of business interests and assets."
Shares in Barclays, the UK bank that headed the largest Enron debt syndicate, closed up 5p at 2,150p amid a strengthening conviction that it had sold its own exposure, probably to French and German banks. Market sources said the impact on Barclays was "non material".
Elsewhere, the French bank Crédit Lyonnais disclosed it had $250m (£176m) of Enron bonds on its books. National Australia Bank, the owner of Yorkshire Bank and Clydesdale Bank, and three of its domestic rivals revealed exposure totalling $350m. The US insurance company Chubb estimated it had a $220m exposure to Enron through surety bonds, which are used to guarantee financial contracts. Analysts expect Enron's collapse will cost the insurance industry more than $3bn.
The worldwide shipping industry has an estimated exposure of $100m and yesterday there were fears that some companies could be pushed to the brink of bankruptcy. Enron accounted for about 50 per cent of the entire freight derivatives market. "Many shipping companies will go bust because we cannot fufil our obligations," Enron's shipping director, Pierre Aury, said.Reuse content