Enron files for bankruptcy

Beleaguered energy company Enron has filed for Chapter 11 bankruptcy protection in the US, the firm said.

Enron also filed a lawsuit against would-be suitor Dynegy Inc for wrongful termination of its 8.4 billion dollar proposed merger.

In a statement yesterday, the company said it was suing Dynegy for wrongful termination of the merger and seeking at least 10 billion dollars in damages.

Both actions were filed in US Bankruptcy Court for the Southern District of New York.

In the statement, Houston-based Enron said it was in ‘‘active discussions’’ with several financial institutions to secure credit for the continued operation of its wholesale energy trading business, as well as additional funding to keep the rest of the company operating.

In its lawsuit, Enron claimed that Dynegy terminated the merger agreement ‘‘when it had no contractual right to do so’’.

It also claimed Dynegy had no right to exercise an option to acquire Enron’s northern natural gas pipeline because it ‘‘can only be triggered by a valid termination’’ of the merger agreement.

Enron said it would ask the court to consider several motions to continue payments for its workers’ payroll and health benefits, as well as keeping vendors paid.

Chapter 11 bankruptcy frees a company from the threat of creditors’ lawsuits while it reorganises its finances. The debtor usually retains control of the business and its assets.

The bankruptcy filing had been expected by several analysts and stockholders, many of whom were stunned by the company’s fall from grace.

Enron’s loss of credibility in the market stemmed from revelations that its chief financial officer was running partnerships that allowed the company to keep half a billion dollars in debt off its books.

In early November, Enron restated its earnings back to 1997, eliminating more than 580 million dollars in reported income.

Dynegy swooped in to rescue its neighbour with an 8.4 billion dollar buyout, but even top officials at the smaller rival were surprised when Enron later disclosed it had a 690 million dollar debt within a week.

Amid negotiations to reduce the purchase price, the Dynegy-Enron deal fell apart after Enron’s credit was reduced to junk status.

Congressional leaders are calling for hearings into the Enron fallout, the Securities and Exchange Commission is investigating. Both investors and employees have filed several lawsuits.

On Friday, accounting firm Arthur Andersen LLP said that the SEC had issued it subpoenas related to its auditing of Enron’s accounts. Andersen said it had provided the information.

Andersen also said its own review would be expanded to include procedures at its Houston office, which did the Enron audits.

ENRON CHRONOLOGY

July 1985: Houston Natural Gas merges with InterNorth, a natural gas company based in Omaha, Nebraska, to form the modern-day Enron, an interstate and intrastate natural gas pipeline company with approximately 37,000 miles of pipe.

1989: Enron begins trading natural gas commodities. Over the years, the company becomes the largest natural gas merchant in North America and the United Kingdom.

December 2000: Enron announces that president and chief operating officer Jeffrey Skilling will take over as chief executive in February. Kenneth Lay will remain as chairman. Shares hit 52-week high of 84.87 on December 28.

August 2001: Skilling resigns after running the company for just six months; Lay becomes CEO again.

October 16, 2001: Enron reports a 638 million third-quarter loss and discloses a 1.2 billion reduction in shareholder equity, partly related to partnerships run by chief financial officer Andrew Fastow.

October 22, 2001: Enron acknowledges US Securities and Exchange Commission inquiry into a possible conflict of interest related to the company’s dealings with those partnerships.

October 24, 2001: Enron ousts Fastow.

October 31, 2001: Enron announces the SEC inquiry has been upgraded to a formal investigation.

November 8, 2001: Enron files documents with SEC revising its financial statements for past five years to account for 586 million in losses.

November 9, 2001: Dynegy Incorporated announces an agreement to buy its much larger rival Enron for more than 8 billion in stock.

November 19, 2001: Enron restates its third-quarter earnings and discloses it is trying to restructure a 690 million obligation that could come due November 27.

November 20, 2001: Concerns about Enron’s ability to weather its spiralling financial problems send the company’s stock down nearly 23% to its lowest level in nearly 10 years.

November 21, 2001: Enron reaches critical agreement to extend 690 million debt payment.

November 26, 2001: Enron shares fall another 15% as investors continued to doubt that the deal will completed. Shares finish day at 4.01.

November 28, 2001: Dynegy backs out of deal after Enron’s credit rating is downgraded to junk bond status. Enron shares plunge below 1 amid the heaviest single-day trading volume ever for a NYSE or Nasdaq-listed stock.

December 2, 2001: Enron files for Chapter 11 bankruptcy protection; sues Dynegy for wrongful termination of merger.