Английский язык. Практический курс для решения бизнес-задач

That rapidly rising stock price – up 55% in ‘99 and 87% in 2000 – gave Skilling and Fastow a hot currency for luring investors into their off-balance-sheet deals. They quickly became dependent on such deals to finance their expansion efforts. Trouble is, Enron’s stock came tumbling back to earth when market valuations fell in 2001. Its far-flung operational troubles were taking their own toll. In its broadband business, for instance, overcapacity and drop of share prices made it hard to find creditworthy parties for trading. And after spending some $1.2 billion to build and operate a fiber-optic network, Enron found itself with an asset whose value was rapidly deteriorating.

«Something to prove.» And the international problems weren’t going away. Enron’s 65% stake in the $3 billion Dabhol power plant in India was mired in a dispute with its largest customer, which refused to pay for electricity. Some Indian politicians have despised the deal for years, claiming that cunning and even corrupt Enron executives cut a deal that charged India too much for its power.

Enron’s ill-fated 1998 investment in the water-services business was another drag on earnings. Many saw the purchase of Wessex Water in England as a «consolation prize» for Rebecca Mark, Enron executive who had negotiated the Dabhol deal. The Wessex deal formed the core of Azurix Corp., to be run by Mark. But British regulators reduced the rates the utility could charge. Meanwhile, Mark acquired more high-priced water assets. «Once (Skilling) put her there, he let her go wild,» says a former executive. «And she’s going to go wild because she has something to prove.»

But if Azurix was a prime example of Enron’s investment strategy, it also demonstrated how the company tried to disguise its problems with financial alchemy. To set up the company, Enron formed a partnership called the Atlantic Water Trust, in which it held a 50% stake. That kept Wessex off Enron’s balance sheet. Enron’s partner in the joint venture was Marlin Water Trust, which consisted of institutional investors. To attract them, Enron promised to back up the debt with its own stock if necessary. But if Enron’s credit rating fell below investment grade and the stock fell below a certain point, Enron could be responsible for the partnership’s $915 million in debt.

Some partnerships had been questioned by an executive, Sherron Watkins, the whistle-blower of the scandal. She voiced her alarm in a letter to Lay saying, «I am incredibly nervous that we will implode in a wave of accounting scandals.»

The end for Enron came when its murky finances frightened off investors and Dynegy. Dynegy’s bankers spent hours studying a supposedly final draft of Enron’s about-to-be-released report – only to discover two pages of damning new numbers when the quarterly statement was made publicly available. Debt coming due in the fourth quarter increased from under $1 billion to $2.8 billion. Even worse, cash on hand shrunk from $3 billion to $1.2 billion. Dynegy «had a two-hour meeting with the new treasurer of Enron, who had been in that seat for two weeks,» said a source close to the deal. «He had no clue where the numbers came from.»

Respect for assets. On Dec. 5, a suit was filed against Fastow, Skilling, and 27 other Enron executives. They were charged with illegally making more than $1 billion off stock sales before Enron collapsed.

Would the cash squeeze have caught up to Enron, even without Skilling’s and Fastow’s fancy financing? Credit analysts argue that the debt would have been manageable without the crisis of confidence that dried up Enron’s trading business and access to the capital markets. But even they have a new respect for old-fashioned, high-quality assets. «When things get really tough, hard assets are the kind you can depend upon,» says S&P’s Shipman. That’s something Enron’s whiz-kid financiers failed to appreciate.

Source: Business Week (online), December 17, 2001 (abridged)

Essential Vocabulary

1. vertically integrated companies – вертикально-интегрированные компании

2. market maker

– «делатель рынка»: участник финансового рынка, который постоянно котирует цены покупателя и продавца и вступает по ним в сделки по финансовым инструментам за свой счет или за счет своих клиентов

3. off-balance-sheet – забалансовый

4. stock analyst – аналитик акций

5. affiliate n – аффилированная компания

6. shareholder equity (SE)

– ценность компании для акционеров: все активы минус все обязательства компании

7. uncertainty n – неопределенность

uncertain a – неопределенный

8. resignation n – уход в отставку, отставка

resign v – отказываться от должности, слагать обязанности, уходить в отставку