Dealers reported a small trade of Enron Corporation's bank debt at 25 last Tuesday in a series of small trades following the company's Chapter 11 filing and debtor-in-possession financing. The debt dropped to 20 1/2 on Monday after the company filed for bankruptcy over the weekend, it bounced back to 25 after Citibank and J.P. Morgan offered $1.5 billion in DIP financing. Dealers say the bankruptcy filing can improve optimism on a company. "It puts a timetable on things," as one explained. Deutsche Bank and UBS Warburg are among the desks rumored to be active in the credit, although officials at both firms could not be reached for comment. Calls to Sharonda Stevens, company spokeswoman, were not returned.
Market players say banks needed time to assess the tangled web that had become Enron Corporation before deciding to sell. "Banks may also be feeling some pressure to get it off their books before the end of the year," a trader said. Sensing the potential for upside, vultures are said to be the only ones interested in buying the credit now. "[In the 20s], there's a lot more opportunity for upside than downside," a dealer said on Monday. Some dealers remained skeptical that levels would continue to improve.
Two weeks ago Enron's debt dropped from the high 99 range to the low 50s after the company's debt was downgraded to junk status. Dynegy Corp. pulled out on its bid for the company, and Enron paper lost another 30 points in value. Enron has a $2.25 billion deal that breaks down into two tranches. Pricing is 35 basis points over LIBOR. Citigroup, Barclays, ABN-AMRO Bank, J.P. Morgan and Royal Bank of Scotland are the lead arrangers.