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August 16, 2004 at 08:00 PM
NEW YORK (HedgeWorld.com)–Six appeals have been taken from the U.S. bankruptcy court’s order approving Enron Inc.’s reorganization plan, and the list includes one appeal from two hedge fund bondholders, Appaloosa Management LP, Chatham, N.J., and Angelo, Gordon & Co., New York, both debtors of Enron’s most important subsidiary, Enron North America Corp.
Brian Rosen, of Weil, Gotshal & Manges LLP, New York, counsel for the debtors, said Aug. 6 that of the other five appeals, three come from government agencies, one from American Electric Power and the other from Upstream Energy Services (an unsecured creditor of ENA).
Enron itself will liquidate, according to the plan, in the process spinning off three entities, Mr. Rosen said: Cross Country Energy, Portland General Electric and Prisma Energy International Inc. The first two will be sold to generate cash for debtors, and Prisma shall inherit what remains of Enron. Assuming the consummation of both of those sales, debtors will receive their pay-offs in 92% cash and 8% Prisma equity. Mr. Rosen expects that this process will be complete, and Prisma will emerge from the protection of the bankruptcy court, some time in September.
The bankruptcy judge, Arthur J. Gonzalez, overruled the last of more than 100 objections to the final debtors’ plan July 15, after a three-week trial, approving a plan that was in all essentials the same as that put forward by the debtors in January (see Previous HedgeWorld Story).
For the hedge funds involved, the crucial issue throughout the litigation has been whether the assets of Enron Inc. would be consolidated with those of ENA, the parent corporation’s cash cow. The two hedge fund appellants, as holders of ENA bonds, had an interest in preventing consolidation, because in doing so they prevented the dilution of their share of that cash flow. Other hedge funds, such as Racepoint Partners LP and Baupost Group LLC, are on the opposite side of this issue, owning Enron’s instruments and encouraging the consolidation of the debtors.
