NEW YORK (AP) The Swiss investment bank that is buying Enron Corp.’s power-trading business will share a third of its profits with Enron and its creditors, a source familiar with the situation said yesterday.
The plan to revive Enron’s trading business in a bankruptcy proceeding calls for UBS Warburg to purchase the unit without paying any cash up front, said the source, who spoke on the condition of anonymity.
Enron and its creditors will get 33 percent of the new business’ pretax profits for at least two years, the source said. UBS Warburg, a division of Switzerland’s UBS AG, will have the option of buying one-third of Enron’s stake after three years, and buying the rest of its stake in subsequent years.
Terms of the deal were scheduled to be made public yesterday morning in U.S. Bankruptcy Court in Manhattan, but the release of the documents was pushed back twice first to yesterday afternoon, and then to 11 p.m. EST. Enron lawyer Brian Rosen gave no reason for the delays in court documents updating the situation.
Spokesmen for UBS Warburg and Enron didn’t immediately return telephone calls seeking comment.
The source said USB Warburg is expected to lease Enron’s Houston office and employ about 800 of the division’s workers.
Enron’s energy-trading business generated about 90 percent of the company’s $101 billion in revenue in 2000. The deal does not include existing contracts Enron has to supply power, valued at between $6 billion and $7 billion.
Enron collapsed late last year amid revelations of complex partnerships used to keep billions of dollars in debt off its books and mask financial problems so the company could continue to get cash and credit to run the trading business.
UBS Warburg won the bidding for the trading operation, beating out Citigroup Inc., a large Enron creditor. UBS Warburg was selected after intense negotiations during a court-sponsored auction that began Thursday morning and ended more than 24 hours later.
A creditors’ committee approved the deal, but other Enron creditors have questioned it, saying they want more information about how the agreement was reached and how the proceeds will be allocated.
The deal must be approved by Judge Arthur J. Gonzalez. A hearing is set for Friday.
Some two dozen Enron creditors already had filed objections to the sale before the selection was announced. Dissatisfied creditors will have 10 days to appeal Judge Gonzalez’s ruling.
Before its collapse late last year, Enron was the world’s largest energy merchant and the nation’s seventh-largest company by revenue. Enron differed from competitors in its penchant for complex bets on everything under the sun advertising space, broadband, paper, the weather and more than 1,000 other products.
Trading of Enron shares, which sold for $83 a year ago but have changed hands at no higher than $1 since December, were halted Friday and Monday on the New York Stock Exchange for the sale announcement.