The reorganization plan outlines the disbursement of cash and stock that 350 classes of creditors would receive for their claims against the failed energy giant.
The Houston-based company — which declared bankruptcy 19 months ago following a massive accounting scandal — owes an estimated $67 billion to 20,000 creditors.
“This is a good day in what has been a very complicated process,” Stephen Cooper, Enron’s acting CEO and chief restructuring officer, said in a press statement Friday.
Under the plan, the majority of Enron’s unsecured creditors would receive between 14.4 cents to 18.3 cents on the dollar. The highest rate of return would be 75 percent; the lowest zero percent.
Investors who own 1.2 billion of Enron’s common stock would get nothing under the plan. Only in the “extremely unlikely event that Enron’s total assets exceed total allowed claims,” would such creditors be reconsidered for debt recovery, according to a company press statement.
Several of Enron’s largest creditors — including major financial institutions like J.P. Morgan Chase & Co. and Citigroup Inc. — provided Enron with unsecured loans, which means their payback will likely be far less than their investments.
Only those creditors with loans secured against Enron’s hard assets, such as pipelines, stand to recover full payment of their debt.
Enron plans to pay back its biggest creditors through proceeds from asset sales and auctions, according to the company’s press statement.
The restructuring plan also outlines the creation of two companies, the U.S.-based CrossCountry Energy Corp. and a second international firm, temporarily named InternationalCo. Major creditors would receive equity in both companies.
CrossCountry Energy Corp. owns all or part of Enron’s three North American natural gas pipelines. InternationalCo. holds 19 international energy assets, including pipelines and power plants.
Enron’s remaining assets include Portland General Electric, a Pacific Northwest utility, for which the company is soliciting bids. If Enron does not sell the U.S.-based utility, it will be split off as a third independent company in which creditors would be given stock.
Cooper on Friday said that Enron’s official creditors committee had already signed off on the reorganization plan, adding that the company could emerge from bankruptcy by the end of the year.
“Having reached agreement with a broad base of our economic stakeholders, we can expedite this process and hopefully avoid lengthy bankruptcy maneuvering and the associated legal expenses,” Cooper said in a press statement.
Before the plan can go into effect, however, a U.S. bankruptcy court in New York must approve the proposal. U.S. Bankruptcy Judge Arthur Gonzalez is scheduled to hold a hearing later this fall to determine whether Enron’s reorganization statements provide creditors with enough information to make sound decisions, Enron spokesperson Mark Palmer told Reuters Friday.
Additionally, half of Enron’s creditors and holders of two-thirds of the total $67 billion claim amount must also agree to the restructuring plan.
Although Enron has not released an official accounting of how much creditors would receive from the company, Enron spokesperson Mark Palmer told the Online NewsHour that a preliminary analysis of its Chapter 11 plan and related statements projected that creditors could receive around $12 billion of the $67 billion they say they’re owed. Enron expects to release an official estimate of the amount creditors can expect to recover this August.