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News > Companies
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Enron seeks partner for trading
graphic December 4, 2001: 6:26 p.m. ET

Holds talks with J.P. Morgan and UBS for funds for venture.
By Luisa Beltran
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  • Court approves Enron financing - Dec. 3, 2001
  • Dynegy countersues Enron - Dec. 3, 2001
  • Enron files for protection, seeks $10B in Dynegy suit - Dec. 2, 2001
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  • Enron
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    NEW YORK (CNN/Money) - Enron Corp. is in talks with J.P. Morgan Chase and UBS Warburg to form a joint venture to run its energy trading business, a source familiar with the situation told CNN/Money Tuesday.

    The banks will provide much needed cash and the joint venture will acquire Enron's software and traders. In return, Enron and its creditors would receive part of future profits, according to the source, who asked not to be named.

    Salomon Smith Barney, which along with J.P Morgan advised Enron on its failed merger with Dynegy, may also play a part, the source said.

    The development comes a day after Enron secured $1.5 billion in so-called debtor-in-possession financing from J.P. Morgan and Salomon, a unit of Citigroup, after it filed the largest corporate bankruptcy in U.S. history.

    Under the new structure, Enron, which has said it was in talks with unidentified institutions to recapitalize the energy trading unit, would retain a significant stake in the business.

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    Shares of Enron (ENE: Research, Estimates) soared Tuesday but are still off 98 percent from their high of $84.87 hit over the past year.

    Negotiations with the bankers are understood to be fluid and could change at any time. However, UBS is expected to seek approval from its board Wednesday to submit its formal offer to Enron, the source said.

    Financial terms were not disclosed. However, Enron's energy trading operations were valued at about $1.5 billion to $2 billion as of Sept. 30. The unit could now be worth more since Enron used investments gained from its failed merger with Dynegy Inc. to pay off various liabilities, another source familiar with the matter said.

    Houston-based Enron and UBS declined to comment. J.P. Morgan declined to comment; Salomon could not be reached for comment.

    News of the possible venture came as Energy Secretary Spencer Abraham said he may order a review of the impact of Enron's bankruptcy on the nation's energy markets. Abraham considers congressional hearings the most appropriate for such an inquiry, news agencies quoted him as saying.

    Check energy stocks here

    Enron, the once mighty energy trader, is now reorganizing under Chapter 11 of the U.S. Bankruptcy Code. In Chapter 11, a company is protected from creditors while it tries to reorganize and pay off its debts. On Monday, in addition to lining up the bankruptcy financing, Enron said it would cut 4,000 workers, mainly from its headquarters in Houston.

    Enron is also suing Dynegy for at least $10 billion in damages, claiming that the failed takeover by its smaller cross-town rival helped drive it into bankruptcy.

    Houston-based Dynegy has retaliated by filing its own lawsuit against Enron subsidiaries not in bankruptcy in an attempt to protect Dynegy's claim on Northern Natural Gas (NNG), a natural gas pipeline that is one of Enron's most valuable assets. As part of their now failed merger, Dynegy had agreed to inject $1.5 billion in Enron in return for a claim on the pipeline. graphic

      RELATED STORIES

    Court approves Enron financing - Dec. 3, 2001

    Dynegy countersues Enron - Dec. 3, 2001

    Enron files for protection, seeks $10B in Dynegy suit - Dec. 2, 2001

      RELATED LINKS

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