Enron Corp. got the go-ahead Wednesday from the U.S. federal bankruptcy judge handling its case to proceed with an auction of its commodities trading operations, setting a Jan. 7 deadline for bids. Enron said it wanted to complete the sale by Jan. 11. Judge Arthur Gonzalez approved expedited procedures to allow Enron to auction hardware, software, employment contracts for traders and other assets.

In its bankruptcy filings, Enron claimed the trading system is worth $50 million, and expects a $25 million deposit from any bidder. Enron asked the judge to order bids from companies rated “A-” or better by Standard & Poor’s Service, but Gonzalez ordered that bids may come from lesser-rated buyers. Enron also will allow bids for all or part of its wholesale trading unit.

According to Enron lawyer Martin J. Bienenstock, 14 potential bidders have expressed an interest, but none appear able to purchase Enron’s “book” of trading contracts. The book, according to Bienenstock, is worth $5-$7 billion. Bidders may be concerned about possible contract liabilities, and Bienenstock said the expedited auction will not allow for a full review of the book by potential buyers. However, he said Enron would rather have a completed auction sooner to avoid losing traders to other companies.

Those raising objections to Enron’s auction plan include the U.S. Department of Energy (DOE), which is objecting on behalf of federal regional power marketers, which purchase power to resell to public utilities and companies. The DOE is concerned that supplies to the power markets could be interrupted with an auction.

In other news, JP Morgan Chase & Co., one of Enron’s leading creditors, admitted Wednesday that its stake in Enron (secured by assets) is $965 million — more than double what it had previously disclosed. It already has disclosed that it has $600 million in unsecured exposure to the bankrupt company, but had said in November that its secured stake was only $400 million.

To recoup its losses, JP Morgan Chase has filed lawsuits against several insurance companies that issued surety bonds to guarantee Enron’s assets. Those being sued by JP Morgan include Chubb Corp., CNA Financial Corp. and Citigroup Inc.’s Travelers Property Casualty unit. The surety bonds were issued to guarantee obligations of Enron North America Corp. and Enron Natural Gas Marketing Corp. under prepaid forward natural gas and crude oil contracts.

In a statement, JP Morgan Chase said, “At issue in the case is approximately $1.1 billion, of which JP Morgan Chase’s share is approximately $965 million. The litigation seeks a declaration that the insurance companies are required to pay under the bonds.” Payment is due Friday (Dec. 21), said the bank. The bank also disclosed that an unnamed “European financial institution” has failed to pay on a $165 million letter of credit backing an Enron-related swap contract, but indicated it will “seek enforcement of the letter of credit.”

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