Enron Corp. creditor J. P. Morgan Chase & Co. Tuesday sued the crippled Houston energy giant in a New York bankruptcy court for a reported $2.1 billion, claiming rights to certain assets, which the New York bank said were not protected by Enron’s Chapter 11 reorganization filing.
J.P. Morgan claimed the assets were sold before Enron filed for bankruptcy protection Dec. 2 and the Houston company holds the assets in dispute as a servicer for the alleged owners. The legal maneuver further complicates what attorneys says is already one of the most complex bankruptcy filings ever.
J. P. Morgan and Citigroup Inc. each have hundreds of millions of dollars in exposure to Enron. JP Morgan is also a partner with Citibank in an effort to line up $1.5 billion debtor-in-possession financing for Enron. The funding would allow Enron to operate while it reorganizes.
Enron said Dec. 3 it was to gain access to $250 million of the money immediately, and will get an additional $250 million after furnishing lenders a “satisfactory” business plan. Another $1 billion will be made available to the company after certain conditions, including a successful syndication, are met, Enron said.
The loan is backed by proceeds of the sale of Portland General Electric Co., which Enron has agreed to sell to Northwest Natural Gas Co. for $1.8 billion, plus $1.1 billion in assumed debt and preferred stock. The Oregon gas company Tuesday asked Washington state regulators to approve an application allowing it to become a holding company as part of its plan to buy Portland General from Enron.
Just prior to filing for Chapter 11 reorganization, Enron also used $450 million of $1 billion in secured credit lines from the investment banking arm of JP Morgan and Salomon Smith Barney, the investment banking arm of Citigroup Inc. Enron said the funds were secured by the assets of Northern Natural Gas Co., its largest pipeline.
Dynegy Inc. also claims Northern Natural Gas was used as collateral for $1.5 billion in cash advanced to Enron, under terms of a terminated merger agreement. Dynegy claimed it gets the pipeline in exchange for the cash infusion that Dynegy’s major stakeholder ChevronTexaco Corp. contributed to the proposed deal.
J.P. Morgan’s lawsuit was filed a day before Enron largest unsecured creditors were scheduled to meet to begin forming a committee to negotiate for a share of the Houston company’s assets. J. P. Morgan said last month it has $500 million of unsecured exposure to Enron entities, including derivatives, letters of credit, and other loans.