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Enron creditors gearing up for haggling at auction

Creditors of Enron Corp have shifted into high gear in anticipation of an expected intense day of haggling Thursday when the bankrupt energy company auctions off its trading operations.

So far, two financial bidders, Citicorp Inc and UBS Warburg, have submitted bids for the Houston-based company's biggest business, sources said. But both Enron and creditors are hoping other companies may jump into the fray for all or parts of Enron's electricity and gas trading operations.

To take part, a bidder needs only to submit a sealed bid and a certified check for $25 million, to be returned if the bid is not chosen. British oil giant BP Plc, for instance, said it is interested in a small part, but not all, of Enron's trading operations, but left the door open to enlarge its bid later.

The auction is set to take place at the New York office of Enron's attorneys, Weil Gotshal & Manges. Enron lawyers will evaluate bids with a 15-member unsecured creditors committee and could present its recommendations to US Bankruptcy Court Judge Arthur Gonzales on Friday.

Enron, once the world's biggest energy trading company, is seeking a well-heeled backer to take a controlling stake in the Enron trading operations and guarantee contracts.

The company, which filed for Chapter 11 bankruptcy protection December 2, is aiming to revive the moribund trading operations to generate cash to pay off creditors. It is hoping eventually to emerge from the debt shield under Chapter 11, a prospect that can take months or years.

Thursday's auction is likely to be a drawn-out affair, where negotiators will likely pressure bidders to sweeten offers by playing them off against each other.

"This is not like Sothebys," said one member of Enron's unsecured creditors committee, a panel chosen by a US Bankruptcy Court trustee to represent the interests of banks, bondholders and other stakeholders in Enron. "It could go on all day and conceivably into the night."

This committee member, who asked for anonymity, said Enron lawyers and the committee could agree on a bidder or ask for more time. Or they could decide Enron is better off keeping the business.

A key point of discussions this week was the distribution of the proceeds of cash flow from a revival of Enron's trading operation, which generated the bulk of Enron's $95 billion in 2000 revenue in wholesale services, by far its largest division, people familiar with the discussions said.

But these people denied news reports that characterized the discussions as a dispute with Enron and said any issues are likely to be resolved in a way that will not hold up the auction.

"This is a very extreme and inaccurate statement of fact to suggest there is a dispute," said one creditor representative. "We are undertaking due diligence to support the right action. That is what we are supposed to be doing as a creditors committee."

Another committee member said creditors have asked for more information on the nature and extent of the bids on the table. But this member said there is a general agreement to resolve the issues as soon as possible.

"I don't think we have enough information now as to whether we should endorse this sale," said this member.

But he said there is agreement to expedite the sale in the hopes of reviving Enron's most valuable operation.

"The longer you wait, the staler the trading operation becomes," he said.

This member said there have been objections filed in the US bankruptcy court to the sale of the trading operations. But those objections were filed before any bids came in. He said it seemed 'questionable' to object to a sale that may benefit the bankrupt company's estate without knowing the offer.

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