Associated Press
HOUSTON — Enron Corp.’s breathtaking descent from power-brokering dynamo to corporate junk ran its course Wednesday, when a smaller rival abandoned plans to buy the energy trader and Enron’s stock melted down to less than a dollar a share.
The collapse made bankruptcy seem inevitable for a company that just months ago was the country’s seventh largest in revenue — but crumbled after revealing questionable partnerships and admitting it overstated profits for years.
In quick succession Wednesday, two rating agencies dropped Enron’s credit rating to junk, obliging it to make good on billions of dollars of debt it probably can’t pay. Dynegy Inc. immediately backed out of an $8.4 billion acquisition plan that was already being renegotiated.
Investors went on a record one-day rush to unload shares — 339 million of them — and sent Enron stock down 85 percent to 61 cents.
Enron was valued at $80 billion little more than a year ago, its name gracing a Houston major league ballpark. By the end of the trading day, it was worth about $500 million — and one Enron share was worth less than a sixth the price of a hot dog at Enron Field.
In its heyday, Enron lavished contributions on politicians. The company and its employees have been the single biggest group of contributors to President George W. Bush’s Texas and national campaigns.
But even the company’s political clout couldn’t prevent its apparent downfall, and analysts said Enron has no other obvious rescuers.
Enron’s money-losing broadband unit and power operations in India and Brazil are now up for sale. And its inability to convince investors or energy traders to stick with it has left Enron without the swagger the company once so boldly displayed.
"I’m not sure they have any other alternatives (to bankruptcy), unless banks are willing to siphon more money into a black hole," said Prudential Securities analyst Carol Coale. "Investors will not buy it."
The credit rating downgrades by Standard &Poor’s and Moody’s Investors Service made $3.9 billion of Enron debt due immediately. Up to $16 billion in other debt originally due next year could come due earlier.
Dazed workers trickled out of Enron’s downtown Houston headquarters Wednesday afternoon, across the street from the company’s new $200 million, 40-story glass tower, saying they couldn’t predict Enron’s future — or their own.
"We are just waiting to see what transpires with the whole fiasco here," employee Donte Martin said as he left the building.
Just a year ago, Enron shares were trading at $84.88. On Wednesday, 339,737,800 shares changed hands, setting a new one-day trading record for the New York Stock Exchange.
Analysts blamed the company’s fall on a combination of arrogance and a penchant for secrecy.
"They didn’t explain things," said Morgan Stanley Dean Witter analyst Jim McAuliffe. "They are very cocky and self-assured."
Dynegy and Enron struck a deal for a merger several weeks ago, and had been in frantic talks over the last several days to restructure the deal as Enron’s worth spiraled downward.
When Dynegy backed out, Enron suspended payment of some debt and shut down its online trading operation.
Executives were "evaluating and exploring other options to protect our core energy businesses," said Kenneth Lay, the company’s chairman and chief executive.
Associated Press
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