Enron announced yesterday that it, along with certain of its subsidiaries has filed voluntary petitions for Chapter 11 reorganisation with the US Bankruptcy Court for the Southern District of New York.
As part of the reorganisation process, Enron, a leading energy, commodities and services company also filed suit against Dynegy Inc. in the same court, alleging breach of contract in connection with Dynegy’s wrongful termination of its proposed merger with Enron and seeking damages of at least $10 billion.
Enron’s lawsuit also seeks the court’s declaration that Dynegy is not entitled to exercise its option to acquire an Enron subsidiary that indirectly owns Northern Natural Gas Pipeline.
In a related development aimed at preserving value in its North American wholesale energy trading business, Enron said that it is in active discussions with various leading financial institutions to provide credit support for, recapitalise and revitalise that business under a new ownership structure.
It is anticipated that Enron would provide the new entity with traders, back office capabilities and technology from Enron’s North American wholesale energy business, and that the new entity would conduct counterparty transactions through EnronOnline, the company’s existing energy trading platform, subject to the approval of the Bankruptcy Court.
In connection with the company’s Chapter 11 filings, Enron is in active discussions with leading financial institutions for debtor-in-possession (DIP) financing and expects to complete these discussions shortly.
Dynegy’s chairman and CEO Chuck Watson described Enron’s lawsuit against the company ‘frivolous and disingenuous.’
‘We want to be perfectly clear on this point: Enron’s lawsuit against Dynegy has no merit whatsoever in law or in fact, and is one more example of Enron’s failure to take responsibility for its demise,’ said Mr Watson. ‘Enron’s rapid disintegration is the result of a general loss of public confidence in its credibility.’