Judge approves Enron's plan to emerge from bankruptcy

- A federal bankruptcy judge in New York recently approved Enron's plan to emerge from bankruptcy proceedings, marking another step in the one-time energy giant's journey out of scandal.

But while U.S. Bankruptcy Judge Arthur Gonzalez approved the plan submitted in May 2004, legal experts said it will take months before Enron's creditors are paid.

The company still has to work out several tax issues and has to work on change of control arrangements for some subsidiaries, said Enron spokeswoman Karen Denne.

"Undoubtedly, this was an extremely complex bankruptcy," acting chief executive and chief restructuring officer Stephen F. Cooper said in a statement. "We will continue working diligently to address those issues."

Under the plan approved recently, creditors will receive less than 20 cents on the dollar. Holders of Enron stock -- which was worth $90 a share in December 2000 -- will get nothing. And employees must rely on lawsuits to recover some of what they lost.

The largest remaining business will be Prisma Energy International, with 4,800 employees. In about two years, once all the units are sold off, the Enron name will no longer exist, Denne said.

In June, Enron announced a $2.35 billion sale of its CrossCountry Energy business. That will be acquired by a joint venture owned by Southern Union Company and GE Commercial Finance Energy Financial Services.

Yet Enron still has about $63 billion in claims from creditors but only about $12 billion are expected to be paid out unless the company can recover money from lawsuits.

"Even though the plan is confirmed it doesn't become effective until the conditions have been met," said Sandy Mayerson, practice group leader for bankruptcy and creditors' rights at Holland & Knight. "You're breaking new ground with a case the size of Enron."

Meanwhile, echoes of Enron's collapse resonated recently at Citigroup Inc., which confirmed in its earnings report that it is taking a $4.95 billion charge in its second quarter for litigation matters, including those related to the collapse of the energy concern.

That charge includes the reserves Citigroup set aside to pay $120 million to federal agencies and the Manhattan District Attorney's office in a settlement reached in July 2003. The agencies were investigating the role Citigroup played in advising Enron and another energy company Dynegy.

The charge also includes the $2.65 billion Citigroup agreed to pay to New York state's pension fund and other WorldCom shareholders.

Despite the huge charge, though, Citigroup still managed to beat Wall Street estimates for the second quarter by a nickel a share. Citigroup's stock closed down 89 cents, off about 2 percent, to $44.21 a share recently.