Updated from 10:36 a.m. EDT

Williams ( WMB) narrowly escaped a brush with bankruptcy, but the rescue may have come at a steep price.

Analysts on Thursday found themselves puzzling over the costs associated with Williams' newly regained liquidity.

"One could say you're selling off good assets and encumbering good assets ... to support an engine that isn't running," Goldman Sachs analyst David Fleischer said during a conference call Thursday. "What will this future Williams look like?"

Tulsa-based Williams made an 11th-hour deal that will flush it with $3.4 billion of desperately needed cash and credit. The company reached agreements for two secured loans totaling $2 billion and finalized $1.4 billion worth of asset sales.

Following news of the deals, Williams' stock surged 29% to finish Thursday at $3.80. The spike, triggered by a wave of investor relief, came despite a lack of clarity about the nature of the transactions.

Dodging

Dodging pressure from analysts, Williams refused to disclose specific details about its new credit arrangements, including interest rates for both facilities and the collateral posted for $1.1 billion in financing provided by Citigroup.

"We aren't giving out information on the details of the transactions we entered into," said Williams Chief Executive Steve Malcolm. "That will be available when the 10Q comes out."

Williams did reveal the collateral pledged for its second financing vehicle, a $900 million senior secured credit agreement with Lehman brothers and a unit of Warren Buffett-led Berkshire Hathaway. To secure the financing, Williams posted virtually all of the assets it obtained last year's acquisition of Barrett Resources -- an exploration and production company that carried a $2.8 billion price tag.

Carol Coale, an analyst at Prudential Securities, pointed out that Williams originally purchased Barrett Resources to provide asset support to its now-flailing merchant energy operations. With that asset now encumbered, she questioned whether Williams had jeopardized its chances for a creditworthy trading partner.

Like many of its struggling peers, Williams is seeking a partner or buyer for the trading business that fueled its once-explosive growth. The entire sector has fallen deeply out of favor since last year's shocking bankruptcy of former industry leader Enron.

So far, the energy merchants have failed to forge deals, although Williams said Thursday it remains upbeat about the possibility.

"Over the last few days, there have been 30 to 40 participants who've come through our data room," Malcolm said. "We have received bids -- and we are very pleased with the bids that have come in."

Victory

Critics have written off the value of Williams' trading operation as minimal, at best. They concede that Williams scored a victory by staving off bankruptcy, but only after selling and pledging truly valuable assets in the process.

"The company has severely reduced its flexibility," said one. "It's in a very, very tight spot."

Peter Cohan, a Massachusetts author and investment strategist, agreed.

"Facing extinction, Williams may have sold its soul to the devil," said Cohan, a longtime Williams critic with no stake in the company. "And the devil here lies in the so-far unknown details of the various asset sales and financing deals."

Many view Buffett as the real winner in the package. This marks Williams' second major deal with Buffett, whose MidAmerican Energy snatched up Williams' Kern River pipeline -- considered a prize asset -- for $450 million earlier this year. The Buffett-led company this week also rescued cash-starved Dynegy ( DYN), paying a distressed price for the Northern Natural Gas pipeline Dynegy bought from Enron less than a year ago.

Following Williams' announcements Thursday, Fitch became the first credit rating agency to offer a nod of approval. The agency shifted the company's credit watch status from negative to evolving after a week of pushing Williams deep into junk territory over liquidity concerns.

Turnaround

Williams' ability to dodge a harrowing trip to bankruptcy court -- a likely scenario just last week -- came as little surprise to some.

Harry Chernoff, an economist focused on the utility industry, said he took a position in Williams' stock after the company resolved a number of pressing issues last week. On Friday, after its stock sank below $1, Williams announced a deal to sell its stake in bankrupt Williams Communications, a likely long-term power contract with the state of California and an end to threats by federal regulators to revoke the company's rate-setting authority in deregulated power markets.

"Previously, I had thought Williams was in big trouble," Chernoff said. "But when the company resolved those matters, I figured it could get the credit it needed."

Earlier this week, Chernoff said those predicting bankruptcy simply misunderstood the nature of Williams' problems. Unlike some of its peers, he said, Williams has a wealth of assets that bankers would view as attractive collateral for loans.

"Williams is illiquid, not insolvent," he said at the time. "I can't see any reason at all why the banks would want to force a default on the credit lines."

Chernoff conceded that Williams will emerge as a more heavily leveraged company that isn't wildly profitable. He also predicted that Williams' balance sheet will suffer a serious blow over the company's new power deal with California. That renegotiated deal, he said, is probably worth a lot less than the original one currently on Williams' books.

"California knew it had Williams over a barrel -- that a deal could help the company survive," he said. "Williams will probably have to take a $1 billion hit for this."

Williams contradicted this assumption, maintaining Thursday that its settlement with California shouldn't hurt the value of its trading portfolio. Critics scoffed at that notion, however.

Whatever happens, Tulsa money manager Fredric E. Russell said he's relieved that Williams' close call with bankruptcy is over. Russell's firm owns nearly 200,000 shares of Williams' stock.

"Aside from a date with Raquel Welch, this is about the best news I could hope for," Russell said.

Russell, for one, said he hopes that Williams has learned a lesson from its recent flirtation with disaster. After this, he said, Williams should know better than to cling to a once-sexy energy trading business that has been poisoned since the demise of Enron.

"There's nothing wrong with being dull, staid and unglamorous when you can make a lot of money with your pipelines," he said.

"Williams needs to focus on what it does best. And management needs to realize just how lucky they are."

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