Swiss bank takes control of Enron energy trading

Associated Press

NEW YORK — Enron Corp. will give up its crown jewel energy-trading business to a Swiss investment bank in return for a third of the division’s profits, and experts expect the bank will try to remake the division with a new name and management.

Documents filed in bankruptcy court Tuesday show that UBS Warburg, a division of Switzerland’s largest bank, won’t pay anything upfront to acquire the trading operation or assume any Enron debt.

Traders and other employees deemed crucial to the division’s success will be kept on, but the documents didn’t specify whether top Enron managers are among the group of workers that will be asked to stay.

Some of those employees will be awarded bonuses from an $11 million fund as an incentive to stay with the company, and Enron will supply $6 million of the cash, according to the documents filed in U.S. Bankruptcy Court in Manhattan.

A spokesman for Enron didn’t immediately return a telephone message seeking comment about Enron’s future or the future of the trading operation. UBS Warburg spokesman David Walker said his firm would not comment until after Judge Arthur Gonzalez decides whether to approve the deal. A hearing is scheduled for Friday.

Key among the changes UBS Warburg will probably make are a name change for the trading operation, a decision to show top managers the door, and the effort to retain the traders, said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University.

"I think those people will stay and they’ll have a new boss," he said. "As for top management, almost everybody is a liability now."

Under terms of the deal, Enron and its creditors will initially get 33 percent of the new business’ pretax profits, and UBS Warburg the remainder, the documents said.

After three years, UBS Warburg can begin to buy out some of those profit-sharing rights and eventually buy the rights to all of the profits. And after five years, UBS can sell the business.