Enron Corp.’s emergence from bankruptcy would put it back into the mix as a North American natural gas pipeline operator, according to the bankruptcy plan filed Friday in New York. Similar to the preview detailed last March (see NGI, March 24), Enron would spin off two separate companies, one holding its North American interests, the other its international businesses. Portland General Electric (PGE) would be the third entity, although a sale is still possible.

The massive plan still requires the approval of U.S. Bankruptcy Judge Arthur Gonzalez of the Southern District of New York, who is overseeing Enron’s entire bankruptcy proceedings. However, creditors indicated they had tentatively approved of the plan in late June (see NGI, July 7; June 30).

Under the proposed restructuring, Enron would spin off CrossCountry Energy Corp. to hold its North American natural gas pipelines. This would include Enron’s interests in the Texas-to-California Transwestern Pipeline system, Citrus Corp. and Northern Plains Natural Gas Co., along with some related service companies that provide pipeline support. Enron has a 50% ownership in Citrus, which is parent to the 4,900-mile Florida Gas Transmission (FGT) pipeline. The Northern Plains asset includes several Midwest pipes: Northern Border Pipeline, Midwestern Gas Transmission, Viking Gas Transmission and Guardian Pipeline.

Prisma Energy International Inc., introduced in the court documents on Friday, would include Enron’s international operations. PGE, its third entity, could be sold before Enron emerges from bankruptcy, the company said. If the Oregon utility is sold, the plan calls for creditors to obtain stock in only the two remaining entities, CrossCountry and Prisma.

“This is a good day in what has been a very complicated process,” said Stephen F. Cooper, Enron’s acting CEO and chief restructuring officer. “We have, with the support of our Creditors’ Committee and the Enron North America Examiner, filed a plan that maximizes recovery for our stakeholders, creates platforms to distribute value and preserves jobs through the creation of our new business entities.”

Cooper noted that “having reached agreement with a broad base of our economic stakeholders, we can expedite this process and hopefully avoid lengthy bankruptcy maneuvering and the associated legal expenses.”

However, whether the company could make it on its own is questionable. Enron provided no recovery estimate to the court, but would base its estimate on the assets’ values and the claims against them. The total recovery pool estimate most likely would be filed in an amended court document in August, according to Enron. Creditors are owed nearly $67 billion. Since Enron filed for bankruptcy nearly 19 months ago, it has spent $500 million in legal fees also.

Under the restructuring, most of the creditors would receive between 14.8 and 18.3 cents on the dollar, representing about 78% of the total amount Enron owes to various creditors. With confirmation, all of Enron’s unsecured creditors would receive 70% of their claims in cash and 30% in stock in the spun-off companies. If the figures are correct, Enron would hold the two-thirds majority of creditor support required to confirm the plan.

One lawyer representing several of Enron’s creditors said Friday that the bankruptcy plan “is designed to do rough justice for all creditors.” Howard Seife of Chadbourne & Park LLP called the plan “as fair as we could make it.” And Aaron R. Cahn, who also represents some of the creditors through the firm of Carter Ledyard & Milburn LLP, noted that negotiations in the past few months had produced a plan that offered more for his clients and would “go a long way to getting a consensual confirmation.”

Gonzalez will schedule a hearing on Enron’s disclosure statements to determine whether all of the creditors know enough with the plan to make an informed decision whether they accept it or not. A confirmation hearing is expected to be held later this year, and with approval, Enron could emerge from bankruptcy.

In related news, a federal judge in Houston is considering a proposal to schedule October 2005 as the beginning of civil trials against Enron, its former executives and investment firms. U.S. District Judge Melinda Harmon had put all of the Enron-related lawsuits on hold until she had reviewed the defendants’ requests to dismiss them.

Attorneys proposed last Thursday that they could produce nearly 100 million documents by the end of 2003. They also proposed conducting nearly 500 depositions next year. However, Harmon still must rule on those proposals.

The lawsuits are led by the University of California, the lead plaintiff in a $25 billion claim. The consolidated complaint now includes at least nine financial institutions, two law firms, more than 30 former Enron executives and former accountant Arthur Andersen LLP. The lawsuit alleges that the group defrauded investors in the years before Enron declared bankruptcy through a series of misleading accounting methods, inflated profits and debt.

Harmon last year had set a trial date of December 2003, but the lawsuits continued to grow. All of the lawsuits were then put on hold so that Harmon could consider the defendants’ requests to either dismiss the cases or release them from litigation. Last December, Harmon denied most of the defendants’ motions to be dismissed from the case. She and the New York-based Gonzalez also have ordered several parties to attempt settlements through a mediator (see NGI, June 2). That work is ongoing, according to the court.

The entire bankruptcy filing and related documents are available on Enron’s web site at www.enron.com/corp/por/.

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