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Friday, 30 November, 2001, 13:00 GMT
Enron 'to file for bankruptcy'
Enron graphic
Energy giant Enron is likely to file for bankruptcy early next week, in the biggest corporate failure in US history, reports said.

A source told news agency Reuters that Enron chiefs were working with lawyers and advisers towards filing "early next week" for court protection.

If wrongdoing occurred, [we will] make sure that the people who are responsible for that will answer

Harvey Pitt, Securities and Exchange Commission

The move could come as early as Monday, the Financial Times said.

Under so-called "chapter 11" bankruptcy protection, Enron chiefs would win time to devise a plan for ending a financial crisis, prompted by a collapse in investor confidence, and the breakdown of a life-saving takeover deal.

The scale of the collapse of a firm which claimed $61.8bn (43.45bn) of assets at the end of September has shocked financiers worldwide, raising fears over Enron's creditors and investors.

The failure is being investigated by the Securities and Exchange Commission - America's financial watchdog - and a congressional panel.

"You can be sure that we will investigate the situation thoroughly... and if wrongdoing occurred, make sure that the people who are responsible for that will answer," commission chairman Harvey Pitt said.

Jobs to go

The reports came as 5,400 staff at European Enron units, which have already been placed under administration, awaited news of job cuts which were due to have been announced at 1100 GMT.

"Hundreds of people we will have to release by the end of today," Tony Lomas, of administrator PricewaterhouseCoopers, told BBC Radio 4's Today programme.

"The company paid its payroll up to the end of today. We have to decide if we ask people to come into work next week."

Power supplies cut

Enron Europe on Friday morning stopped delivering electricity, a move expected to affect in particular Germany, where the firm accounted for 30% of wholesale power trading, and Scandinavia.

Other suppliers are thought capable of meeting the shortfall, meaning power cuts should be avoided.

Enron-owned Wessex Water, and power stations in Poland, Italy and Turkey and the UK, have avoided administration.

Enron's Teesside power station is still operating, the firm said.

Administrators have been seeking buyers for Enron's European interests, with the FT reporting at least approaches for Enron Metal, bought last year for 300m.

British utility Innogy said it would be interesting in buying UK power operations "at the right price".

Changing fortunes

Enron's financial crisis was sparked six weeks ago, when a discrepancy in accounts prompted an investigation by US financial watchdogs and a collapse in the firm's share price.

Enron exposure
Abbey National: 115m
Canadian Imperial Bank: $215m
National Australia Bank: Aus$200m
Centrica: 30m
TotalFinaElf: $25m
Citigroup: $7-800m

Enron later admitted that profits between 1997 and 2001 were $600m lower than had been claimed.

While the loss of investor confidence threatened the operations of a company burdened with $13bn of debt, a takeover bid from rival energy group Dynegy looked to have provided Enron with a lifeline.

But after Dynegy on Wednesday withdrew from the talks, and a downgrading of Enron bonds made $3.9bn of debt due repayable immediately, crisis again loomed large.

Enron shares, which topped $80 last year, lost a further 15 cents to 36 cents in the US on Thursday.

Global fears

Enron creditors throughout the world have been counting the cost of the firms plight.

Four of Australia's biggest banks have announced liabilities of $50-$100m between them.

French bank Credit Lyonnais has admitted unsecured exposure of $250m, while Holland's ABN Amro was part of a syndicate that loaned $3bn to a project in India.

In the US, JP Morgan Chase said it had $500m of unsecured exposure.

But three senior US officials have escaped the Enron meltdown, selling their shares earlier this year to avoid conflict of interest problems.

Patrick Heren, industry expert
"It...was in the end let down by its own inability to control its overweening ambition"
See also:

21 Nov 01 | Business
Crisis fears hit Enron shares
09 Nov 01 | Business
Traders wary of Enron's fate
09 Nov 01 | Business
Enron admits inflating profits
01 Nov 01 | Business
Troubles multiply at Enron
22 Oct 01 | Business
Probe sends Enron shares tumbling
05 Oct 01 | Business
Q&A: Bankruptcy made simple
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