Enron Proposes to Spin Off New Firm

Enron Corp. on Friday proposed a strategy for bundling the bulk of its energy generating, exploration and pipeline businesses into a new company that would be split from and run independently of the husk now in Chapter 11 proceedings.

Enron’s interim chief executive, corporate turnaround specialist Stephen F. Cooper, presented the plan to Enron’s official committee of unsecured creditors in a meeting in New York. Cooper said getting the operating units out from under Enron’s complicated bankruptcy case would be the best way to maximize their value.

Once the new company, for now to be called OpCo Energy Co., is formed, it would be auctioned off. The proceeds--some combination of cash, bonds or stock--would later be divided among the creditors in a process to be overseen by U.S. Bankruptcy Court in Manhattan.

Enron hopes to complete the transaction by year’s end. OpCo, which would have operations in the U.S. and Central and South America, would generate annual EBITDA, or earnings before interest, taxes, depreciation and amortization, of $1.3 billion.

The goal of the plan is first to “preserve the pizza,” then later decide how to slice it up among the creditors, Cooper said in a telephone news conference after the creditors meeting.

It was one of several metaphors he used to describe the complex proposal. A moment later, he said he wanted to “deliver a Clydesdale” to creditors rather than have the assets shrink to the size of a Shetland pony or a Chihuahua.

The entire proposal requires the approval of creditors and the Bankruptcy Court.

OpCo stands for “Options Company,” to convey the idea that creditors would have an array of options under the plan, Cooper said. He quickly acknowledged that it is “a weird name” and said a new one would be chosen later.

Luc Despins, chief lawyer for the creditors committee, did not return telephone calls seeking comment on the proposal.

Cooper said he did not foresee mass layoffs among the approximately 20,000 employees who work for the companies that would be bundled into OpCo, adding that in most cases, the workers would go along with the companies whether they were merged with other firms or operated as stand-alone entities.

As for the 2,000-plus employees in Enron’s trading unit, Enron North America, it has been clear since the company filed its Chapter 11 petition Dec. 2 that they would eventually lose their jobs as the company wound down its business, Cooper said.