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Bank to acquire Enron trading

UBS Warburg won’t pay but will share profits

SHARE Bank to acquire Enron trading

NEW YORK — A Swiss investment bank won't pay anything to acquire Enron Corp.'s energy trading business nor assume any of the troubled company's debts but will share a third of the energy operation's profits with Enron and its creditors.

UBS Warburg, a division of Swiss banking giant UBS AG, and Enron will file for approval of the deal with the Federal Trade Commission and the Justice Department within five business days, according to documents filed Tuesday in U.S. Bankruptcy Court in Manhattan.

The plan to revive Enron's trading business calls for UBS Warburg to purchase the unit without paying any cash up front, said Mark Palmer, an Enron spokesman.

Enron and its creditors will initially get 33 percent of the new business' pretax profits and UBS Warburg the remainder, the documents indicate. After three years, UBS Warburg can begin to buy out some of those profit-sharing rights and eventually buy the rights to all of the profits.

"This is an extremely positive deal for Enron and its creditors that confirms the substantial value of Enron's trading operation," said Enron chief financial officer Jeff McMahon. "We believe this is a first step among many towards an overall plan of reorganization and planned emergence from bankruptcy."

Palmer said UBS Warburg is expected to lease Enron offices in Houston and employ about 800 of the division's workers. Court documents also indicated that UBS Warburg plans to lease Enron office space in Portland, Ore.; Toronto; and Calgary, Alberta.

Enron's energy trading business generated about 90 percent of the company's $101 billion in revenue in 2000. The deal does not include existing contracts Enron has to supply power, valued at between $6 billion and $7 billion.

Enron collapsed late last year amid revelations of complex partnerships used to keep billions of dollars in debt off its books and mask financial problems so it could continue to get cash and credit to run the trading business.

UBS Warburg won the bidding for the trading operation, beating out Citigroup Inc., a large Enron creditor.

The investment bank was selected after intense negotiations during a court-sponsored auction that began Thursday morning and ended more than 24 hours later.

The deal with UBS Warburg is for 10 years, but allows the investment bank to exercise a series of options to buy out Enron's profit-sharing agreement starting in the third year of the pact, Enron said in a statement.

A creditors' committee approved the deal, but other Enron creditors have questioned it, saying they want more information about how the agreement was reached and how the proceeds will be allocated.

The deal must be approved by Judge Arthur J. Gonzalez. A hearing is set for Friday.

Some two dozen Enron creditors had already filed objections to the sale before the selection was announced. Dissatisfied creditors will have 10 days to appeal Gonzalez's ruling.

Before its collapse late last year, Enron was the world's largest energy merchant and the nation's seventh largest company by revenue. Enron differed from competitors in its penchant for complex bets on everything under the sun — advertising space, broadband, paper, the weather and more than 1,000 other products.

Trading of Enron shares, which sold for $83 a year ago but have changed hands at no higher than $1 since December, has been halted since Friday on the New York Stock Exchange pending the sale announcement. UBS' U.S.-traded shares fell 4 cents to $49.17 Tuesday morning on the NYSE.