Message-ID: <18964254.1075862342597.JavaMail.evans@thyme> Date: Tue, 20 Nov 2001 12:18:16 -0800 (PST) From: peggy.mahoney@enron.com To: j..kean@enron.com, pr <.palmer@enron.com>, karen.denne@enron.com Subject: Enron Corp.: IN THE MONEY: Enron Melts As Many See Merger In Jeopardy Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Mahoney, Peggy X-To: Kean, Steven J. , Palmer, Mark A. (PR) , Denne, Karen X-cc: X-bcc: X-Folder: \SKEAN (Non-Privileged)\Kean, Steven J.\Deleted Items X-Origin: Kean-S X-FileName: SKEAN (Non-Privileged).pst I'm sure you are already seeing these.......any word from Dynegy? Peggy IN THE MONEY: Enron Melts As Many See Merger In Jeopardy By Carol S. Remond 11/20/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- Investors are running for the exits as doubts about Enron Corp.'s (ENE) planned merger with Dynegy Inc. (DYN) mount. Debt and equity markets are taking news of Enron's never ending credit woes with renewed pessimism Tuesday, sending the company's stock down almost 24% and its bonds sharply lower. And with so much riding on Dynegy's financial support, risk arbitrageurs, those investors who bet on the stock price of companies involved in merger, aren't willing to play. "There is just too much risk," said a trader at a New York risk arbitrage firm. "Nobody wants to even get close to the deal." Perhaps most telling about the uncertainty surrounding Enron and the merger with Dynegy is the fact that even a 68% risk premium over the value of the Dynegy deal has so far failed to attract investors. "The deal appears in real jeopardy here," a bond trader said. Under the merger plan, Enron holders would receive 0.2685 Dynegy share for each Enron share. At Dynegy's current share price of $41.77, that means the value of the deal is about $11.20 a share for Enron holders. But Enron stock recently traded as low as $6.68 a share, almost 68% below the value of the merger. Adding to doubts about Enron's long-term viability, the company said in a delayed quarterly filing late Monday that its ability to continue as a going concern depends on a number of factors, including being able to retain an investment grade credit rating. Dynegy declined to comment on whether its decision to merge with Enron would be affected by the company's latest Securities and Exchange Commission filing, including the disclosure that Enron will have to repay $690 million in debt by next Tuesday if it doesn't come up with collateral for a loan. An Enron spokeswoman wasn't available to comment on the merger plan. Among other bad news, Enron's latest report warned investors that the company faces immediate demand for $3.9 billion in debt if its credit rating is downgraded any further. Earlier this month, Standard & Poor's Corp. and Moody's Investors Service cut Enron's credit ratings to "BBB-" and "Baa3", just one notch higher than below-investment grade, or "junk" status. The rating agencies warned that they may cut their respective ratings again. Neither S&P nor Moody's were available for comment Tuesday. Meanwhile, as investors look at the Dynegy deal as Enron's one and only hope to avoid bankruptcy, bondholders are also showing renewed worries. Enron's 7 7/8% bonds due in 2003 are down about 10 cents on the day, now trading at about 70 cents on the dollar. Subordinated bonds due in 2005 are also sharply lower, changing hands at about 62 cents on the dollar. Enron has set a number of partnerships over the years to hedge investment risks, and in some cases keep debt off its balance sheet. In the wake of a SEC probe into its accounting and disclosure practice, the company recently restated its earnings, reducing profits taken over previous years by more than $500 million. Enron also took steps to consolidate some debt back on its books. Carol S. Remond; 201-938-2074; Dow Jones Newswires carol.remond@dowjones.com Folder Name: Enron Corp. Relevance Score on Scale of 100: 100 ______________________________________________________________________ To review or revise your folder, visit http://www.djinteractive.com or contact Dow Jones Customer Service by e-mail at custom.news@bis.dowjones.com or by phone at 800-369-7466. (Outside the U.S. and Canada, call 609-452-1511 or contact your local sales representative.) ______________________________________________________________________ Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved