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News > Companies
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Enron draws on credit
graphic October 26, 2001: 7:52 a.m. ET

Energy trading firm secures cash as future borrowing ability is in question.
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  • Enron, under fire, replaces CFO - Oct. 25, 2001
  • Enron takes charge from partnership - Oct. 19, 2001
  • Enron faces SEC investigation - Oct. 22, 2001
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  • Enron Corp.
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    NEW YORK (CNNmoney) - Enron Corp. is tapping into its credit lines as the energy marketer's ability to raise cash has come into question after the disclosure that dealings with its former chief financial officer's partnerships are under investigation by federal regulators.

    Houston-based Enron said it drew on its existing credit lines to provide more than $1 billion in cash, but a newspaper reported that the company drew on about $3 billion in credit in a bid to bolster confidence in its financial position.

    "This is an important step in our plan to restore investor confidence in Enron," Chief Executive Kenneth Lay said in a statement. "Additionally, we will update investors over the next several days regarding our plans to maintain our long-term credit rating."

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    Several agencies are scrutinizing Enron's debt rating after the company reported a $618 million third-quarter loss and a $1.2 billion reduction in shareholder equity associated with the transactions with two partnerships created by its former chief financial officer, Andrew Fastow.

    The move to boost its cash comes a day after the company named Jeff McMahon to replace Fastow, whose dealings regarding the limited partnerships are under investigation by the Securities and Exchange Commission.

    If Enron's credit rating were cut below investment grade, which is still several notches away, it would be more expensive for the company to borrow money. If it were to default on loans, Enron would then have to issue millions of shares of stocks to its creditors, diluting the value of its existing outstanding shares, the Journal said in its report.

    Check energy stocks here

    Enron (ENE: Research, Estimates) stock, which has tumbled in recent weeks, fell six cents to close at $16.35 Thursday. graphic

      RELATED STORIES

    Enron takes charge from partnership - Oct. 19, 2001

    Enron faces SEC investigation - Oct. 22, 2001

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    Enron Corp.





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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