Enron Files Plan to Come Out of Bankruptcy

Creditors would get pennies on the dollar, and the company would split into separate firms.
Publish date:


has filed a plan to emerge from bankruptcy that includes a compensation offer for its creditors and a proposal that would split the former energy merchant into independent companies.

The plan, filed with the U.S. Bankruptcy Court for the Southern District of New York, includes estimated amounts that would be recovered by more than 350 classes of creditors. The recovery percentage estimates range from 100% for certain claims to nothing for holders of common stock.

However, the plan does "preserve the rights of Enron shareholders to a contingent recovery in the extremely unlikely event that Enron's total assets exceed total allowed claims," the company said.

On the basis of preliminary estimates, Enron's unsecured creditors would receive between 5% and 75% of their claim, depending on which particular debtor the claim is against. Creditors are owed around $67 billion. Most would receive between 14.4 cents and 18.3 cents on the dollar.

"This is a good day in what has been a very complicated process," Stephen F. Cooper, Enron's acting CEO and chief restructuring officer in a statement posted on the company's Web site. "We have, with the support of our creditors' committee and the Enron North America examiner, filed a plan that maximizes recovery for our stakeholders, creates platforms to distribute value, and preserves jobs through the creation of our new business entities.

"Having reached agreement with a broad base of our economic stakeholders, we can expedite this process and hopefully avoid lengthy bankruptcy maneuvering and the associated legal expenses," the statement continued.

Three debtors represent more than three-fourths of Enron's unsecured claims -- Enron Corp., Enron North America and Enron Power Marketing. The plan, which covers Enron's 174 debtor entities, must be approved by 50% of the creditors and two-thirds of the dollar amount of claims for each creditor class.

Enron expects the bankruptcy court to hold a hearing in the fall. If the plan is confirmed by the end of the year, partial distributions could begin on a periodic basis, as soon as the payments are practical.

Last month, Enron said it would form CrossCountry Energy, a holding company for the company's interests in Transwestern Pipeline, Citrus Corp. and Northern Plains Natural Gas.

Additionally, Enron has announced the creation of a new international energy company, which will be called Prisma Energy International and be made up of the majority of Enron's international energy infrastructure businesses. Both companies would be independent businesses with independent boards of directors.

Enron is still in the process of determining whether to sell Portland General Electric or distribute stock of the company to its creditors.