Enron Files Reorganization Plan

Enron Corp. on Friday filed a reorganization plan that probably would pay creditors less than one-fifth of the $67 billion they are owed.

The plan comes 19 months after Enron’s failure, which led to one of the costliest Chapter 11 bankruptcies in history, with professional fees nearing $500 million.

The preliminary estimated recovery rate for creditors is 14.4 cents to 18.3 cents on the dollar, far lower than the corporate average. For example, many creditors of telecommunications company WorldCom Inc. are expected to fare about twice as well with a recovery rate of about 36 cents.

That Enron creditors would get so little is hardly a surprise because it was revelations of a wildly inflated balance sheet that sent the company into what was then the world’s largest bankruptcy.

Former Chief Executive Jeffrey K. Skilling also is said to have carried out to an extreme an “asset-light” philosophy that looked upon hard assets as burdens, directing Enron to shed them whenever it could.

U.S. Bankruptcy Judge Arthur Gonzalez in New York must approve the reorganization plan, which includes several previously announced components such as the spinoffs of Enron’s pipeline and 19 international assets into separate companies whose shares will be distributed to creditors.

The plan also needs the approval of creditors, which is likely, given that the plan had the tentative approval of the creditors committee.

The money for creditors will come from the proposed pipeline company, CrossCountry Energy, and the planned international gas and power company to be built from Enron’s mostly South American assets.

Funds also will come from about $5 billion in proceeds from Enron’s commodity contracts; the expected sale of several major assets such as Oregon utility Portland General Electric, which could fetch $2 billion; and other lesser assets.