UBS Wins Auction for Enron Unit
Grasping for a crucial lifeline, Enron Corp. agreed to sell majority ownership of its core energy trading business to UBS Warburg, a New York investment banking firm, for an undisclosed amount.
Enron, which would keep 49% of the wholesale trading business, said the proposed sale is an important step in rebuilding the Houston company so that it can successfully emerge from bankruptcy. But analysts doubt that the trading operation of everything from electricity to weather futures--a trading business Enron pioneered and pushed to new heights--will ever return to its former glory.
“There were really not any energy companies or traders bidding and if there really was a viable entity that had a lot of value, you would have seen some of them bidding,” said utility analyst Andre Meade of Commerzbank Securities.
“It’s not clear that this will ultimately be successful,” Meade said. “It’s going to take a while to get counter-parties and trading partners comfortable with a reconstituted Enron. A lot of them lost a lot of money and had their businesses disrupted because of Enron.”
Enron crumbled in less than seven weeks from a titan of the energy industry to a resident of U.S. Bankruptcy Court, albeit the largest ever. Revelations of hidden losses and suspect accounting practices sent investors fleeing and brought on a cash crunch that ended in Enron’s Dec. 2 filing for bankruptcy-law protection.
Enron conducted an auction Thursday among at least six bidders in the New York offices of its bankruptcy attorneys, Weil, Gotshal & Manges, but was still working to seal the deal Friday morning and had to request a two-hour delay before it could present the bidder to Judge Arthur J. Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York. Enron said the agreement would be filed Monday, and Gonzalez set a hearing for Thursday.
Gonzalez also ruled late Friday that the Enron bankruptcy case would remain in New York. Several creditors had sought to move the case to Houston.
“The consummation of this deal will literally bring back to life the most valuable component of Enron’s enterprise,” Enron attorney Martin Bienenstock said in court.
Enron said the creditors committee in its bankruptcy case has approved the selection of UBS Warburg, the U.S. arm of Swiss financial services firm UBS, but some creditors sought to block or delay the sale, saying they want more information about how the proceeds of the sale will be used.
Analysts’ estimates of how much the sale would bring have varied widely, from as little as $100 million to as much as $1.5 billion. Either would represent a tiny fraction of the former worth of the trading business, which generated about 90% of Enron’s nearly $101 billion in revenue in 2000.
Enron began as a traditional natural gas pipeline operator but in recent years transformed itself into a little-regulated wheeler-dealer in energy and dozens of other products, shedding physical assets along the way.
Since its filing, Enron has not run EnronOnline, its Web trading operation, and has all but closed the rest of its trading operation, which at its height early last year handled about 25% of the nation’s wholesale trading of energy.
But many trading partners took their business elsewhere, and without its information-controlling position, the value of Enron’s asset-light trading business is uncertain, Meade said.
