As much as $100 million of Enron Corporation's bank debt traded last week in the 22-23 range as vultures continue to pick at the paper. Both Goldman Sachs and Deutsche Bank were rumored to have moved large pieces over the week, although officials at both shops declined to comment. It could not be determined whether the desks were selling off their own exposure or acting as brokers. An estimated $200 million of Enron bank debt has traded over a two week span, according to dealers. Levels have stayed in line with the bonds and have not moved much in that time.
Late last week company officials announced a restructuring plan that would attempt to relieve some of the $40 billion the company has in debt. The plan includes raising $6 billion from asset sales. Calls to Jeffery McMahon, cfo, and spokeswoman Sharonda Stevens were not returned.
Dealers are calling Enron's debt structure so complicated that some desks are having trouble tracking what is actually trading. "Some of the debt is stuff we've never seen before," said a dealer. He added not only are dealers sifting through the company's bank debt structure, but they're trying to determine what is and isn't bank debt. Most desks involved in Enron are said to be acting in a broker capacity, rather than selling off their own exposure. The dealer said the most actively traded bank debt is unsyndicated bilateral lines. Since bilateral agreements are subject to whatever the lender and borrower agree to, it is difficult to determine what is pushing these to trade. "Maybe there's a unique maturity, a unique purpose, a unique price," a banker said.
Vultures are said to be buying the debt from desks with small exposure to the credit. Specific firms could not be ascertained. One market watcher said, "What worries me is not who's buying it; it's who's selling it. There's a lot of upside on this. My guess is whoever's selling it is doing window dressing for the end of the year and wants Enron off its books."
There is some concern that any proceeds from asset sales are being offset by announcements of new liabilities, traders noted. One dealer said the credit could be "one announcement away from zero." But despite the initial shock over the company's financial standing, market players report growing comfort in the credit. "It does have some valuable assets," said the banker. "At this point, people feel they have enough information not to get hurt."