By the OGJ Online Staff
HOUSTON, Nov. 1, 2001 Embattled Enron Corp. Thursday said it arranged for an additional $1 billion credit line from Salomon Smith Barney Inc. and JP Morgan Chase & Co.
The credit line is secured by Northern Natural Gas Co. and Transwestern Pipeline Co., Enron's pipeline assets.
"With more than $1 billion in cash currently on our balance sheet, this additional credit capacity will further solidify Enron's standing in the wholesale energy markets," said CEO Kenneth Lay in a statement.
The credit line commitments are subject to terms and conditions, including final due diligence.
Chief financial officer Jeffrey McMahon called the credit line another step in the company's effort to enhance market and investor confidence. McMahon was appointed after the ouster of Andrew Fastow, 2 weeks ago.
Fastow was removed by the board because of personal involvement in the off-balance sheet transactions that are at the center of a Securities and Exchange Commission investigation. The day before his removal, however, Lay personally gave Fastow a vote of confidence publicly in a conference call.
Enron is under extreme pressure because of losses in the third quarter and tightening credit from downgrades by credit ratings agencies. Shares of the company, which still maintains an investment grade credit rating, have declined nearly 60% in 2 weeks fueled by unanswered questions about a number of complicated off-balance sheet transactions. News the SEC inquiry had been upgraded to a formal investigation Wednesday short circuited a budding recovery in the stock price.
The stock rose 20% Wednesday in trading on the New York Stock Exchange, closing at $13.90. But Enron shares slipped again Thursday to $12.65/share in mid-morning trading as investors mulled news of the SEC investigation and another downgrade by financial analysts, despite the new credit facility.