NEWS OF THE WEEK BUSINESS
ENRON JETTISONS CHEMICAL TRADING Energy trading giant's bankruptcy will impact petrochemicals, polymers
O
NCE M I G H T Y ENRON HAS
filed for Chapter 11, but it has pledged to stay afloat. To cut costs, the beleaguered company has, among other actions, shut down its trading operations in petrochemicals and polymers. Enron filed for voluntaryreorganization last week in U.S. Bankruptcy Court in New^brk, where it is also filing a suit against rival Dynegy asking for more than $10 billion in damages for
FINANCIAL
breaking up their merger agreement late last month. Enron's stock price has plummeted from $85 at the beginning of the year to about $1.00 as of press time. To hold down the fort, the company has secured $1.5 billion in financing from Citigroup and J P Morgan Chase and announced layoffs in the Houston area, where it employs some 7,500 people—a move that includes the chemical trading staff. Enron is focusing on its core energy trading businesses, like electricity andnaturalgas. When, andifj thefirmwill resume chemical trading, much of it done on its enron online.com website, is uncertain.
WOES
HUNTSMAN FACES CAPITAL CRUNCH Chemical downturn spells trouble for family-owned companies
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economic troubles have caught up with the fast-grow ing but debt-ridden companies owned by the Huntsman family Huntsman Corp. and Hunts man Polymers Corp., the family's North American businesses, will not make bond interest payments due in December and January. The companies have hired the in vestment banking firm of Dresdner Kleinwort Wasserstein to help negotiate a debt restructur ing with bondholders. In what Huntsman President
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HE CHEMICAL INDUSTRY'S
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and C E O Peter R. Huntsman calls a vote of confidence, Hunts man Corp. has won a commit ment from Deutsche Bank Alex. Brown, its lead lender, for up to $150 million in financing. How ever, this money will be used to meet ongoing operational cash needs, not for bond payments. Huntsman International, the former ICI business that repre sents the H u n t s m a n family's largest holding, is doing only slightly better. This mosdy European business continues to post operating prof
Jim Wîlker, a senior analyst with Forrester Research, is not surprised by Enron's problems in the marketplace. Unlike CheMatch or ChemConnect, which only provide a place for companies to exchange chemicals, Enron holds a position in the chemicals it exchanges—the company makes a profit between the bid and ask prices of the transaction. "Once the market loses confidence in your ability to stand behind deals, it just backs away," Walker says. Walker notes that chemical exchanges are actually losing a customer instead of a competitor. "Enron would go to CheMatch or ChemConnect with a deal to look for the other end of the deal," he explains. ChemConnect is optimistic despite the setback. "The potential loss of a market participant, even one as significant as Enron, will not slow ChemConnect's nor the market's growth," says Eric Τ Paulsen, ChemConnect's vice president of trading services.—ALEX TULLO
its. However, beginning Sept. 30 it was out of compliance with the fi nancial covenants established by lenders and couldn't borrow more money Peter Huntsman said last week that the lenders have amended the covenants and that now Huntsman International "may pro ceed with business as usual." The family had been counting on financial aid from the privateequity firms Blackstone Capital Partners andBain Capital, which in June tentatively agreed to acquire an interest in Huntsman Interna tional for $550 million. Some of the money was to be channeled to Huntsman Corp. However, the let ter ofintent expired recendywith out a deal. Despite these setbacks, Peter Huntsman says he believes the companies will emerge stronger and more competitive than be fore. Bankruptcy, a spokesman adds, is not being considered.— MICHAEL MCCOY
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