Investor alarm over bank exposure to Enron as filing reveals £22bn of debt

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The Independent Online

Enron collapsed with debts of $32bn (£22bn), much of it in the form of unsecured credit from banks including Barclays, according to the US energy trading giant's formal bankruptcy filing.

Details of the Chapter 11 filing emerged as Enron sacked 4,000 of the 7,500-strong workforce at its Houston headquarters in Texas and Dynegy, its one-time saviour, counter-sued Enron to gain control of the company's Northern Natural Gas Pipeline Company.

The filing in the bankruptcy court of the southern district of New York shows that Barclays is the largest unsecured creditor of Enron North America Corporation with an exposure of $126m. But Barclays is dwarfed by the likes of Bank of New York, Chase Manhattan and Citibank, which collectively advanced unsecured credit of $7.5bn.

The filing shows that Enron collapsed with total debts of $31.3bn and assets of $49.3bn. The list of creditors runs to 54 densely typed pages featuring 2,800 companies and individuals ranging from giant banks and oil companies to bookshops, stevedores, supermarkets, bakers, aquarium suppliers and even the Portland Art Museum.

The extent of the banking sector's exposure helped send the FTSE 100 index lower. It closed down 39.0 points to 5,164.6 with Barclays' shares falling by almost 3 per cent. Barclays announced bad debt provisions of £600m for the second half but did not break down Enron's contribution. Although Barclays' unsecured liability of $126m is comfortably provided for by the bank, analysts warned that it could have secured loans valued at hundreds of millions of pounds whose recoverability would not be established until next year.

Royal Bank of Scotland, another major syndicated loan leader, also maintained silence over its exposure and saw its shares slide 2.1 per cent to 1,591p. Insiders said RBS had fully quantified both its secured and unsecured exposure and saw no reason to bring forward a trading update scheduled for late December. HBOS, Royal & SunAlliance and a host of asset managers also retreated. Fitch, the ratings agency, warned unsecured creditors were "unlikely" to see significant levels of recovery". It cut Enron's credit rating to D ­ its lowest grade.

According to the filing, the heaviest level of debt and the largest volume of unsecured creditors are in the main holding company Enron Corporation, which has debts of $13.15bn and assets of $24.8bn. Next comes Enron North America, withdebts of $8.84bn and assets of $13.7bn. BP is a creditor of several of the 14 separate Enron companies which have filed for protection from their creditors.

On Sunday Enron sued Dynegy for $10bn, claiming its rival had deliberately pulled out of a $23bn rescue of the company in order to drive a competitor out of business and get its hands on the Northern Natural pipeline. Dynegy had advanced Enron $1.5bn in return for all the preference shares in the pipeline company. Last night, Dynegy served its own legal claim demanding Enron return the $1.5bn or hand over control of the pipeline.

Meanwhile, a privately owned power plant company based in Illinois said it is looking to acquire "at least a majority" of Enron's shares. Standard Power & Light, which has 11 employees and annual sales of $1.5m, said it already had commitments in place to fund at least part of a bid.

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