Shareholder Calls for Ouster of El Paso Board

El Paso Corp. saw its woes mount Tuesday when a shareholder called for the ouster of its board of directors, a move that could slow down the struggling utility’s plans to get its house in order.

“Along with the company’s thousands of employees and stockholders who rely on El Paso, I can no longer watch passively as the value of the company continues to decline,” Selim Zilkha, wrote in a letter to the board.

Zilkha owns about 8.9 million El Paso shares, or about a 1.5% stake in the company.

El Paso reacted quickly, urging shareholders to reject Zilkha’s proposal. El Paso said it has been trying to work with Zilkha and get him on board with the company’s plans to move forward.

Although El Paso described Zilkha’s action as “highly disruptive,” industry observers said Zilkha’s move puts extra pressure on the company to quickly come up with a restructuring plan.

The company, which two years ago was considered a major consolidating force in the U.S. utility sector, has seen its share price drop nearly 90% in the last year. Its debt recently was downgraded five notches deeper into “junk” territory by Moody’s Investors Service.

El Paso’s chief executive, William Wise, has resigned but is continuing in that post until a replacement is found.

Last week, the company announced a broad plan to come out of its financial mess that included asset sales of $2.9 billion but it failed to convince bond and stock investors.

John Olson, analyst with Sanders Morris Harris, said El Paso needs to reduce its capital expenditure by at least a billion dollars from a planned $2.6 billion to gain some credibility with investors and credit rating firms.

“The company has a liquidity problem,” Olson said.

El Paso shares closed down 14 cents at $4.05 on the New York Stock Exchange.