Enron Corp. last week reached a settlement over some of the disputes related to Marlin Water Trust, one of the special purpose vehicles it established in 1998. The trust, set up by former CFO Andrew Fastow, was used to refinance a portion of the purchase price of Wessex Water, a cornerstone asset in the company’s water subsidiary, Azurix Corp.

Under the proposed settlement, holders of Marlin notes would receive approximately $127.5 million in cash, which includes the proceeds of collateral held by The Bank of New York, as Indenture Trustee, and the payment of amounts owed by Azurix, a non-debtor affiliate of Enron.

Additionally, The Bank of New York, as an Indenture Trustee and at the direction of holders of 69% of the Marlin notes, has agreed to reduce its $1.1 billion claim to a $507.5 million general unsecured claim.

Stephen F. Cooper, acting CEO of Enron, said the settlement would “help avoid lengthy and costly litigation. We remain hopeful that we will also be successful in settling claims that have arisen from other special purpose entities.”

Azurix was formed as a global water company in December 1998, but it never made money for Enron. When Enron released its third quarter 2001 earnings in the fall of 2001 — a few weeks before the company had to declare bankruptcy, its billion-plus charges for the quarter included $287 million in charges related to asset impairments recorded by Azurix (see NGI, Oct. 22, 2001).

Enron last week filed a motion with the U.S. Bankruptcy Court of New York seeking approval of the settlement. The parties to the settlement are Enron, the Official Unsecured Creditors’ Committee, The Bank of New York and holders of 69% of the Marlin notes. The full motion and proposed settlement agreement can be viewed at www.enron.com/corp/pressroom/Marlin9019Motion.pdf.

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