Enron

Company Description

Enron Corp. ("Enron" or the "Company") is an international integrated energy concern that, at the time of its bankruptcy petition, ranked seventh in the Fortune 500. With over $100 billion in revenue, approximately 25,000 employees and assets around the world, Enron maintained a leadership position in products and services related to the sale and delivery of natural gas, electricity and other commodities to wholesale and retail customers.

Situation Overview

Beginning in late 2001, Enron issued a series of disclosures regarding certain "related party transactions" that rocked the financial markets and undermined investor confidence in Enron's financial position. As a result of these disclosures, Enron's trading business deteriorated as counterparties decreased volume and required Enron to post additional collateral. In order to prevent a bankruptcy filing and preserve as much value in the business as possible, Enron entered into a merger agreement with Dynegy, Inc. (one of its chief competitors). When Dynegy ultimately terminated the merger, Enron's debt was downgraded to below investment grade, which triggered a liquidity crisis leaving the Company with no choice but to file for Chapter 11.

Transaction Summary

Blackstone was retained as Enron's financial advisor in November 2001 to assist it in its merger discussions with Dynegy, and has since assisted the Company in navigating one of the largest and most complex bankruptcies in history.

Blackstone has assisted and advised Enron on numerous transactions and strategic decisions impacting its Chapter 11 cases. Specifically, Blackstone valued all of the Company's major assets and, using these valuations, assisted the Company in identifying the core assets around which it could reorganize and those assets for which a sale, given the Chapter 11 filing, would best maximize value. Blackstone has assisted the Company in negotiating the terms of and completing more than $3.0 billion in asset sales, including the sale of its industry-leading energy trading business to UBS and its wind turbine manufacturing business to General Electric. Blackstone has also assisted the Company in establishing a new natural gas transportation Company and a new international power Company, both of which will be spun out to Enron's creditors in conjunction with the Company's emergence from Chapter 11. In connection with Blackstone's M&A advisory, transaction support and reorganization-related work for the Company, we have been called upon on several occasions to provide expert witness testimony before the U.S. Bankruptcy Court.

Finally, Blackstone continues to play a central role in structuring and negotiating Enron's plan of reorganization. In connection with the plan process, Blackstone developed a custom, proprietary financial model (>6,000 pages). This model evaluated the rights of various creditors, including those of numerous special purpose entities, with respect to assets held by the estate and these entities. Enron has been using this model to negotiate a consensual restructuring with its many constituents and expedite the Company's emergence from Chapter 11. As stated by Enron, the Blackstone Model is the cornerstone to Enron's successful emergence from Chapter 11.

With Blackstone's expertise, Enron has been able to stabilize its business, monetize numerous assets and identify a clear path out of bankruptcy, all within 18 months of its Chapter 11 filing.