In yet another short in the long unraveling wires holding Enron Corp. together, the bankrupt company and UBS Warburg on Monday delayed the official announcement of a transaction that would send Enron’s energy wholesale unit into the hands of the Swiss-based investment banking conglomerate. The transaction, set to be announced first Monday morning and then the afternoon, was instead moved to 11 p.m. EST Monday night.

If the deal is finalized as suggested by sources, it will be sharply different from one envisioned by Enron just weeks ago. Then, Enron boasted of a joint venture partnership where it would hold a 49% equity. However, the apparent UBS deal — with no cash upfront — would have Enron exiting the trading and marketing arena and basically giving up its equity in what was once the heart of its business.

UBS, whose Swiss parent has been involved in the country’s deregulation, would house its new entity in Houston. The new business would be staffed by former Enron employees, have Enron office space and use Enron technology. Enron would share about 33% of the profits before taxes with its creditors. Also, Enron’s contracts entered into before the bankruptcy to purchase or sell natural gas and power will not move to UBS following the sale, but would be liquidated.

Under a supposed 10-year plan suggested early Monday, UBS would retain key Enron employees to run the operation and would be expected to offer jobs to most of the 800 or so people who remain in the Houston office. Enron also would offer UBS a variety of its financial hedging tools.

The transaction would be structured whereby UBS would be able to buy Enron’s interest in the new entity’s profits within five years. In the third, fourth and fifth years of the deal, UBS would pay cash options using a formula based on profits made the previous year to reduce Enron’s stake from 33% to 22%, then to 11% and finally to zero percent. If UBS did not exercise its options to purchase Enron’s stake by the end of the fifth year, Enron’s profit share would increase at the end of seven-and-a-half years, and would reach 45% by the end of the 10-year period. Enron apparently would retain a residual interest in the business and all of the liabilities.

Despite holding no equity, Enron could use the profits — which could be substantial if it were to recapture some of its former business — to shore up its balance sheet and to emerge from bankruptcy as soon as the end of this year. Until it declared bankruptcy in December, the energy trading unit generated almost all of Enron’s profits, which approached $100 billion in 2000.

The UBS bid was announced on Friday with approval by Enron’s 15-member unsecured creditor committee, which was formed by the U.S. Bankruptcy Court of New York to represent the banks, trade creditors and bond holders that Enron owes. The plan still must be approved by Judge Arthur J. Gonzales of the U.S. Bankruptcy Court in Manhattan. Gonzalez is scheduled to make a decision on Friday (Jan. 18) whether to approve the transaction or not. Some creditors may also raise objections to void it before it could be approved.

Besides retaining a portion of the profits, Enron still has several major assets to help it emerge from Chapter 11 protection, including Transwestern Pipeline, shares in Florida Gas Transmission and Northern Border Pipeline, natural gas production assets and natural gas storage facilities.

Still, Enron faces a difficult uphill battle before it begins to make money again. While most analysts were hesitant to discuss the transaction before it is finalized, Jay Dobson, an electric utility analyst for Deutsche Bank Alex. Brown wrote, “there is only about a 1%, 2%, maybe 3% probability that the old Enron business re-emerges as a major player among energy traders.” Jeff Dietert, an analyst with Simmons & Co., said “it’s like they are starting over.” He said Enron would be a “small fraction of its former self” and will “take a lot of time to rebuild.”

UBS Warburg, which won the Enron bidding war, operates globally as a client-driven securities and investment banking firm. It provides products, research and advice and comprehensive access to global capital markets, for both of its own corporate and institutional clients and for other parts of the UBS Group, which is an integrated organization with four business units.

Another unit, UBS Switzerland, is a private banking business with $397 billion of invested assets. The third unit, UBS Asset Management, is an institutional asset manager and mutual fund provider with invested assets of $385 billion. Asset Management’s key brands include Brinson Partners, O’Connor, Phillips & Drew and Global Asset Management. The fourth unit, UBS PaineWebber, became part of the UBS Group in November 2000, and it has 9,030 financial advisers managing more than $435 billion of assets.

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