Enron Corp. was still not talking Monday, but the questions continue nonetheless about the troubled energy trading giant’s future. Is it — or parts of it — for sale? Is a takeover in sight? Is Chairman and CEO Kenneth L. Lay, most responsible for Enron’s meteoric rise from pipeline company to global trading giant, about to resign? There were no answers, only rumors Monday. But Fitch, a credit ratings service, downgraded the Houston-based corporation once again, and warned of even more downgrades if Enron fails to reduce its debt. Fitch advised Enron to consider selling some of its assets.

Meanwhile, energy analysts also continue weighing in on Enron’s future — and future prospects. Credit Suisse First Boston’s Curt Launer said Monday that the “constant news flow” regarding Enron has “brought it to a point beyond valuation characteristics.” He said that debt downgrade fears and “other drastic actions have produced enormous trading volume and additional speculation.”

“The basic needs for Enron are maintaining an investment grade credit rating, securing additional financing and capital, making appropriate balance sheet adjustments and taking other actions to ensure the ongoing success of its merchant and energy services units,” said Launer. Credit Suisse analysts now expect Enron to “issue” either directly to a new capital source or indirectly to debt holders behind some of the partnerships about $2 billion in new equity. Of that, $1 billion would go to “new investors” and the other $1 billion would be for debt holders in Enron’s Marlin and Whitewing partnerships, which are being investigated by the U.S. Securities and Exchange Commission (SEC).

Since Enron released its third quarter earnings report in mid-October, its stock has taken a nosedive, losing about 70% of its value from the beginning of October. But what may hurt the long-term future of the largest global energy trader could be its credit ratings, and therefore, its ability to borrow money. Fitch, which continued the Rating Watch Negative designation it placed on the company two weeks ago, again downgraded Enron’s outstanding senior unsecured debt, this time to BBB- from BBB+; subordinated debt to BB from BBB; and preferred stock to B+ from BBB-.

Fitch also downgraded Enron’s commercial paper F3 from F2, and lowered the senior unsecured debt ratings of its pipeline subsidiaries, Northern Natural Gas Co. and Transwestern Pipeline Co., to BBB- from A-. Fitch also warned it would “consider further downgrades if Enron were unable to make progress in reducing debt, if its wholesale marketing and trading business were to show signs of material deterioration, or if expenses and charges related to the disposition of non- core businesses and investments exceed present estimations.”

Fitch analyst Ralph Pellecchia said the downgrade “reflects the difficulties Enron faces in managing its liquidity position in the face of an erosion in investor confidence.” He said that the downgrade follows the “recognition of a substantial diminution in value of its global merchant investments, which were partly financed with an aggressive use of off-balance sheet vehicles.” However, on a positive note, Pellecchia noted that the company “should be able to manage through this challenging environment, ultimately recognizing the values of the company’s core businesses.”

Late last month, Enron drew down the bulk of its committed bank facilities and paid down outstanding commercial paper, giving it about $1 billion of cash to support normal business activities. Enron also is in the process of executing a new $1 billion secured bank facility that pledges the assets of Northern Natural and Transwestern. Unsecured creditors are structurally subordinated to the secured lenders reducing asset coverage.

“While its current cash position appears adequate, securing additional capital sources through asset sales or raising additional capital would be a favorable development,” said Pellecchia.

Fitch noted in its downgrade that Enron’s core businesses “have continued to generate strong, predictable performance and have significant value.” With the disposition of Portland General Electric (PGE) on schedule for sale to Northwest Natural Gas Co. next year, Pellecchia noted that “combined, the pipelines and PGE generate nearly 25% of earnings before interest and taxes.” Although there have been rumors that the sale was also falling through, the transaction is still on schedule to close by the end of 2002.

Enron also reportedly is continuing efforts to dispose of its 65% stake in the Dabhol Power Co, power project in India. The company’s assets in that venture are estimated to be worth $870 million, according to analysts.

Fitch’s Pellecchia said wholesale and retail energy services segments have also consistently reported predictable and growing returns, and specifically, commodity marketing and trading activities, which comprise the most profitable and largest part of wholesale operations, have generated steady volume growth and stable unit margins. The trading operations are estimated by some to comprise about 65% of the company’s business.

Enron’s stock closed down again on Monday, but only slightly compared to its beating in recent days. After fluctuating all day, on speculation in a British newspaper that Enron was a possible takeover target of London-based Royal Dutch/Shell Group, the shares ended down 13 cents to stand at $11.17. For now, some analysts are anxiously waiting for some real news, next expected when Enron’s third quarter balance sheet information is officially filed with the SEC — expected no later than Nov. 15.

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