Deutsche Bank won an auction of approximately $220 million in Enron Power Marketing Inc. (EPMI) claims sold last week by the Connecticut Resources Recovery Authority (CRRA), a semi-public agency that handles trash for the state. Five bidders participated and the cover bid was around the 49 5/8 context, market participants said.
CRRA lost approximately $220 million on this failed contract with Enron and decided to put the claim for sale in the market, a spokesman explained. The waste company has decided not to wait for the end of the bankruptcy process to get a settlement for the claim, he said, adding, "We are trying to maximize our return." The expected bankruptcy settlement for the claim was $82.7 million. "[CRRA] sold the claim at a substantial premium," he added.
The EPMI claims were guaranteed by the parent Enron Corp. The claims have double dips, and since the claim is guaranteed by the parent the value doubles, a trader added. As part of the settlement there is also an equity component. CRRA did not want equity in PRISMA, the name for the restructured Enron. "We are not in a position of playing in the equity market," the spokesman said.
Auctioning the claim also eliminates the risks, as the claims' objections process could impact their value, the spokesman said. He added that the waste company was also trying to gauge the market. "We've learned there might be a market for this type of claims," he noted. By selling the claim, CRRA could also accelerate the reception of the funds. "It could take years to get the money back from the bankruptcy process," the spokesman concluded.