Bankers and analysts disagreed unanimously with comments made by former Enron ceo Jeffrey Skilling, apportioning blame to the banks on the collapse of the energy company, suggesting material adverse change clauses in loans should be prohibited for federally insured banks. Skilling, in front of a senate panel yesterday, said the company would have survived had many banks not invoked the MAC clauses in loan agreements.
"That allows them to cut off credit for even the most modest problems," Skilling stated. He then suggested that federally insured banks should be prohibited from including such clauses in loan agreements. "I think if the company had some time and had access to some liquidity (it) would have been fine," Skilling claimed. Thomas McCandless, a senior v.p. covering regional banks at Keefe Bruyette & Woods said, "It's standard underwriting language. I don't think anybody in the banking community would agree with that." Other bankers also disagreed and said MAC clauses could not be taken away.
The Federal Deposit Insurance Corporation does not require these MAC clauses to be in the loans, said FDIC spokesman David Barr. "They have been around for a long time, for the protection of the banks." He declined comment on whether the FDIC would have the ability or inclination to prohibit the clauses.