Enron May Repay Half of Amount It Promised

Enron Corp., which filed the second-biggest bankruptcy in U.S. history, may pay less than half of what the company promised under a plan to exit bankruptcy when it makes its first distribution to creditors.

Most creditors will get about 20 cents on the dollar under terms of the plan. The company may pay less than that amount when it makes its first distribution to creditors, as it negotiates resolution of billions of dollars in disputed claims, Robert Bingham, Enron’s associate director of restructuring, said Thursday. Bingham was testifying during the first day of a hearing to consider the plan in U.S. Bankruptcy Court in New York.

“Is it correct that no more than 50% can be distributed to creditors?” asked Hollace T. Cohen, a lawyer for one of Enron’s creditors. “That may be,” Bingham said.

Enron, the world’s largest energy trader before an accounting fraud caused its collapse in 2001, is asking the court to confirm a plan that would allow it to exit bankruptcy this year.

Enron proposes to give creditors, such as Citigroup Inc. and J.P. Morgan Chase & Co., more than $7.4 billion in cash. They also would get stock in remaining businesses, valued at $3.7 billion, and whatever proceeds the company receives from lawsuits filed against former banks, law firms and other business partners.

The distribution amounts are based on the approximately $60 billion in undisputed claims against the company, Cohen said. In total, about $130 billion in claims, $70 billion of which Enron disputes in whole or in part, have been filed against the firm.

Enron will reserve cash to pay the disputed amounts once they are resolved through negotiations, Bingham said. Until they are resolved, its creditors may receive just a portion of their expected distribution, Bingham said.

Cohen and other lawyers representing objecting creditors questioned Bingham on whether creditors would be better off if Enron just liquidated its assets.

Bingham repeatedly testified that it was the company’s judgment that its creditors would be best served under the proposed plan.