Enron Off-Balance Sheet Debt Trades With Price Hike

Debt linked to the Choctaw Investors and Zephyrus Investment, off-balance sheet vehicles of Enron Corp., sparked the market last week with several large block trades.

  • 16 Jan 2004
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Debt linked to the Choctaw Investors and Zephyrus Investment, off-balance sheet vehicles of Enron Corp., sparked the market last week with several large block trades. The recent trades come within days of the bankruptcy court's approval of Enron's disclosure statement. Early in the week, Dresdner Bank was said to have sold a $30 million piece of Choctaw around the 68-69 context. An official from Dresdner said he could not confirm or deny any trade. That sale was later followed by a $10 million trade in the 753Ž8 range.

There were two trades linked to Zephyrus as well. Both went off in the 37-38 range and at least one of the trades was said to be a $10 million slice. The facilities were up significantly with the last trades clocking in at 64 on Choctaw in mid-November and approximately 31 on Zephyrus, according to one loan market source.

The market has also bid Enron's corporate bank debt up beyond the value the company had assigned the paper in its plan of reorganization. The company's reorganization plan valued Enron's unsecured claims at about 17 cents on the dollar. In comparison, the bank debt has been trading in the 26-27 range.

While the reason for the run-up in Enron debt was unclear, one investor expressed skepticism for whether or not the debt claims are worth the amounts where they are trading. He referred to the off-balance sheet debt in particular as a high-risk investment. "You don't know if your claim is going to hold up," he said, referring to the claims' relationship to questionable activities. Furthermore, there is still the outstanding litigation against the banks that could potentially impact lenders' allowed claims, he added.

The bankruptcy court approved Enron's disclosure statement on Jan. 9. Reports indicate that a confirmation hearing would be held in April. A spokesman for the bank did not return calls by press time.

  • 16 Jan 2004

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4 Credit Suisse 1,822 6 7.89
5 Societe Generale 1,814 4 7.86

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