Friday, November 30, 2001, Chandigarh, India






National Capital Region--Delhi

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Enron heading for collapse
Houston, November 29

Energy trading behemoth Enron Corp. tottered at the edge of one of the biggest corporate collapses in the US history on Wednesday as its rescue by rival Dynegy Inc. blew apart.

  • Share slumps to 61 cents 

  • Market value falls

  • To halt payments

  • Faces $ 3.9b loss

No help in sight despite high links
Houston, November 29

The near collapse of Enron Corporation comes at a time when it has never had more political friends in high places — or is perhaps further away frosm help.

Citigroup, J.P. Morgan face losses
New York, November 29

Citigroup Inc. and J.P. Morgan Chase & Co. Inc., which have combined to lend more than $1 billion to Enron Corp. , are faced with potential losses of more than $400 million if the struggling energy trading group collapses, an analyst said on Wednesday.

Naik rules out cut in petro prices
New Delhi, November 29
The government today ruled out any reduction in the price of petroleum products in near future even as crude prices have come down from $ 27 a barrel to $ 16-17 a barrel.



EARLIER STORIES

 

Indian wheat for S. Korea
New Delhi, November 29
India has clinched a deal for the export of 80,000 tonnes of wheat to South Korea next year, but overall shipments are not picking up in a big way and underpricing each other has become a norm amongst the exporters.

CII alternatives to octroi
Chandigarh, November 29
The CII has recommended substitution of octroi in Punjab with a VAT compatible broad - based alternative model. The CII has suggested alternatives to octroi. It said the sales tax on petrol can be shared with local bodies. Petrol dealers within the municipal limits can be allowed to deposit this amount directly to the local bodies.

ROUND-UP

Mascarenhas rejoins duty; to retire today
Mumbai, November 29
Mr M.P. Mascarenhas today took over as the Managing Director of Air-India, a day after the Union Civil Aviation Ministry revoked his suspension. Mr Mascarenhas, who has been with the airline for 33 years, arrived early today from Delhi and took charge again from officiating MD J.N. Gogoi. 

  • IBM to slash 1,000 jobs

  • GM to cut 10 pc workforce again

  • Godrej, IIT sign agreement

  • Kirloskar Bros bags 30 cr order

  • KFC earns $ 250 m from ChinaTop







 

Enron heading for collapse

Houston, November 29
Energy trading behemoth Enron Corp. tottered at the edge of one of the biggest corporate collapses in the US history on Wednesday as its rescue by rival Dynegy Inc. blew apart.

Share slumps to 61 cents 

Shares of Enron, which was only recently ranked No. 7 on the Fortune 500 list of the biggest US corporations, slumped 85 per cent to an all-time closing low of 61 cents. Major credit rating agencies slashed their ratings on Enron’s bonds to junk status, triggering expectations a company that was a darling of Wall Street just a year ago will be forced into bankruptcy.

The dizzying plunge in Enron’s fortunes shook financial markets worldwide, rocking the London Metal Exchange and weighing on US stocks as it left creditors, such as banking giants J.P. Morgan Chase and Citigroup Inc., facing substantial losses.

Enron’s latest crash marked another low in a stunning free-fall that began with a $638 million quarterly loss six weeks ago. Surprise disclosures, including the admission it overstated earnings by almost $600 million since 1997 and kept huge debts off its books, led investors to rapidly lose faith in a company valued at almost $ 80 billion a little more than a year ago.

Market value falls

After trading on Wednesday, Enron’s market value was barely $450 million. A US regulatory probe into its murky off-balance sheet dealings and the unexpected departures of a chief executive in August and a chief financial officer in October helped fuel the fall.

Enron “entrapped the sophisticates,” said Robert Stovall, senior strategist at Prudential Securities, referring to what was once an almost fawning admiration for Enron by institutional investors. “I think this is going to become a classic case.”

Stovall, with nearly 50 years of Wall Street experience, said he could not recall any previous corporate unraveling that could match Enron’s.

“You would have to go to pre-SEC days for that,” he said, referring to the creation of the US Securities and Exchange in the aftermath of the stock market crash of 1929.

Enron set a New York Stock Exchange record with 181.86 million shares changing hands, almost 33 per cent more than the previous record set by Lucent Technology on January 7, 2000.

To halt payments

Dynegy accused Enron of breaching representations it made when a takeover agreement was negotiated on November 9, invoking an escape clause that let it pull out of the all-stock deal valued at $9.3 billion at the time. Enron said it would cease payments on all but its core operations.

Already awash in some two dozen shareholder and employee lawsuits alleging misrepresentation, Enron on Wednesday founded a litigation committee that was certain to take aim at Dynegy’s pullout.

Enron can expect more lawsuits, especially from big investors like mutual and pension funds, Baylor University investments professor William Reichenstein said.

“The big question now is whether there is anything left to go after. That remains very much in doubt,” he said.

Faces $ 3.9b loss

The loss of Enron’s investment-grade credit rating forces some $3.9 billion in debts to come due immediately, a major problem for a company that has spent most of the $5.5 billion it sought in recent weeks to stay afloat. Enron said in a recent regulatory filing that it was unlikely to ‘’continue as a going concern’’ were its credit rating to be slashed to junk status.

Dynegy apparently took that warning to heart.

“We knew when to say ‘no’ and this morning we said ‘no,’” Dynegy Chairman and Chief Executive Officer Chuck Watson said during a brief conference call with investors.

Dynegy said it would exercise an option to buy Enron’s Northern Natural Gas Pipeline with the $ 1.5 billion it and partner ChevronTexaco Corp. put into the deal. Enron said it was reviewing Dynegy’s actions, including its “assertion that it is entitled” to buy the pipeline.

The stock peaked at $ 90.56 in August 2000, riding high on the cresting wave of the technology boom after Enron took its trading outfit online and promised to bring its business model into the broadband communications arena. Reuters
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No help in sight despite high links

Houston, November 29
The near collapse of Enron Corporation comes at a time when it has never had more political friends in high places — or is perhaps further away frosm help.

The company and its chief executive Ken Lay have long been heavy contributors to powerful Republicans, including President George W. Bush, and have lines of communication to the White House and Congress.

But, say senior Republicans, its financial wounds are so deep and heavily self-inflicted that it is likely to get little more than sympathy from its well-connected friends.

Enron said it was exploring its options and in the meantime would quit paying most of its bills. Most analysts believe it will soon file for bankruptcy protection.

The stunning fall from grace follows a long period in which Enron and Lay built up political contacts that made it the envy of the corporate world.

Political experts estimate Lay has given $1 million to Bush political campaigns over the years. Last year, the Bush election campaign accorded Lay the title of Bush "Pioneer" for raising at least $100,000 for Bush's run for the presidency.

When Bush was the Governor of Texas, Lay served on his Governor's Business Council, which helped push the Bush legislative agenda, and he was a key energy adviser during the presidential campaign.

According to the Center for Responsive Politics, which tracks money in politics, Enron and its employees gave $2.4 million in the 2000 election year. Reuters
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Citigroup, J.P. Morgan face losses

New York, November 29
Citigroup Inc. and J.P. Morgan Chase & Co. Inc., which have combined to lend more than $1 billion to Enron Corp. , are faced with potential losses of more than $400 million if the struggling energy trading group collapses, an analyst said on Wednesday.

Citigroup and J.P. Morgan, which acted as advisers on the Dynegy deal, have total commitments to Enron of between $700 million to $800 million.

Now, the payment of some of these loans could be in jeopardy.

Included in that exposure is a $1 billion joint credit line the banks extended to Enron when the Dynegy merger was announced. Enron has already drawn down the entire credit line, according to company spokesman Vance Meyer.

That credit line is fully secured by Enron’s Trans Western and Northern Natural Gas pipeline systems. Northern Natural’s future was somewhat clouded on Wednesday by Dynegy’s claim that it would exercise an option to buy the pipeline for $1.5 billion, but sources familiar with the situation said both banks expect to be repaid in full either way.

J.P. Morgan late on Wednesday said it has about $500 million of unsecured exposure to Enron and another $400 million in exposure secured by the Trans Western and Northern Natural pipelines.

Citibank declined to comment, although analysts said the impact on the company’s bottomline could be very real depending on how the situation plays out.

“The after-tax impact to (earnings per share) — should Enron go completely under — based on Citigroup’s 5.2 billion shares outstanding and J.P. Morgan’s 2 billion shares outstanding would be less than $ 0.05 for Citigroup and $ 0.10 for J.P. Morgan,” analyst Richard Strauss of Goldman Sachs said in a research report.

That works out to less than $ 260 million for Citigroup, and $ 200 million for J.P. Morgan. Such losses could cut Citigroup’s fourth-quarter earnings per share by nearly 6 per cent, and slash J.P. Morgan’s quarterly earnings by as much as 20 per cent. Reuters
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Naik rules out cut in petro prices
Tribune News Service

New Delhi, November 29
The government today ruled out any reduction in the price of petroleum products in near future even as crude prices have come down from $ 27 a barrel to $ 16-17 a barrel.

Replying to supplementaries raised by Smajawadi Party MP Ramji Lal Suman and others during question hour, Petroleum Minister Ram Naik admitted that though the cost of production of petroleum products had declined, still there was a massive deficit in the oil pool account, estimated at Rs 12,000 crore.

Mr Naik said the fall in prices of crude oil would definitely benefit the consumers in the post-administrative price mechanism (APM) period after April 1, 2002.

The minister said the programme for the continuation of subsidy on kerosene oil and LPG cylinders at the rate of 33 per cent and 15 per cent in the post-APM period would be announced in the next Budget.

The subsidy over and above 15 per cent worked out around Rs 92 per cylinder at the current rate of prices, Mr Naik pointed out.

He said on account of the devaluation of rupee, the increase in oil pool deficit was estimated to be around Rs 1,000 crore and Rs 3,300 crore during the year 1999-2000 and 2000-2001, respectively.

The increase in oil pool deficit is estimated to be around Rs 650 crore during the period from April, 2001 to November, 2001 on account of the devaluation of rupee.

Replying to another question, Mr Naik said decline in the crude oil prices in the internatinal market helped in reducing the oil import bill, the oil pool deficit and the consumer prices of decontrolled products.

The decrease in crude prices by $ 1 per barrel for a month reduced the oil import bill by around Rs 260 crore, he said. 
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Indian wheat for S. Korea

New Delhi, November 29
India has clinched a deal for the export of 80,000 tonnes of wheat to South Korea next year, but overall shipments are not picking up in a big way and underpricing each other has become a norm amongst the exporters.

“One of the multinational companies (MNCs) has got an order to export 80,000 tonnes of wheat to South Korea at $ 96.5 per tonne for January and February 2002 delivery, to be used as feed,” official sources said.

Underpricing could be gauged by the fact that the same MNC which was exporting to South Korea also had an order to ship 20,000 tonnes to Philippines in January and February for milling purposes, but the price was the same $ 96.5 per tonne. PTI
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CII alternatives to octroi
Tribune News Service

Chandigarh, November 29
The CII has recommended substitution of octroi in Punjab with a VAT compatible broad - based alternative model. The CII has suggested alternatives to octroi.

It said the sales tax on petrol can be shared with local bodies. Petrol dealers within the municipal limits can be allowed to deposit this amount directly to the local bodies.

Increase in water supply and sewerage charges to recover basic cost of these services, introduction of commercial tax on retail outlets based on floor area, location, etc and advertisement tax can promise sizeable income.

The CII has also suggested increase in percentage of net proceeds of the stamp duty, the Punjab Motor Vehicle Act, the electricity duty, entertainment tax and show tax.
Top

 
ROUND-UP

Mascarenhas rejoins duty; to retire today

Mumbai, November 29
Mr M.P. Mascarenhas today took over as the Managing Director of Air-India, a day after the Union Civil Aviation Ministry revoked his suspension. Mr Mascarenhas, who has been with the airline for 33 years, arrived early today from Delhi and took charge again from officiating MD J.N. Gogoi. He lays down office tomorrow afternoon on reaching the age of superannuation. PTI

IBM to slash 1,000 jobs

NEW YORK: International Business Machines Corp said on Wednesday that it would cut nearly 4.6 per cent of the jobs in its microelectronics division amid the worst-ever decline in semiconductor industry revenues.

An IBM spokesman said around 1,000 management and non-management positions would be eliminated out of the current 21,500 spots. The cuts are less than 1 per cent of IBM’s 320,000 person work force. Reuters

GM to cut 10 pc workforce again

DETROIT: General Motors Corp said on Wednesday that it will cut its European salaried work force by another 10 per cent, or nearly 1,500 jobs, in 2002 as part of a restructuring of its money-losing operations there.

The cuts planned for next year are in addition to the previously announced 10 per cent cut in GM’s salaried work force in Europe this year, said GM spokesman Jerry Dubrowski. Reuters

Godrej, IIT sign agreement

MUMBAI: Godrej Industries today signed an MoU with the IIT for research and development projects. Speaking at a function, Godrej Industries Chairman Adi Godrej said IIT Bombay was an institution of international repute in higher education, research and development. This partnership would benefit the company’s business, while providing practical experience to the students, he said. UNI

Kirloskar Bros bags 30 cr order

MUMBAI: Kirloskar Brothers has received a letter of intent (LoI) from Gujarat Mineral Development Corporation Ltd for the supply of water pumps to its Akrimota thermal power project.

The order was expected to be completed in fiscal year 2002-03, the company informed the Bombay Stock Exchange today. PTI

KFC earns $ 250 m from China

BEIJING: Kentucky Fried Chicken (KFC) earned at least 2 billion yuan (about $ 250 million) from the Chinese mainland annually since the end of 1999, the state statistical bureau says. Tricon Global Restaurants Inc said it had opened over 520 KFC chain stores in 130 cities in China. Over 99 per cent of the KFC stores in China have made a handsome profit, the president of Tricon in China, Mr J. Samuel Su said. PTI

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BIZ BRIEFS

CEO resigns
Mumbai, November 29
Rana Talwar, Director and group Chief Executive of Standard Chartered Plc, has resigned with immediate effect even as media reports in London said he was “ousted as a result of culture clash”. Indian born Talwar has been replaced by Mervyn Davies, group Excutive Director since 1997, the bank said in a release here today. PTI

IT returns
Mandi, November 29
The Commissioner of Income Tax, Himachal Pradesh Ms Vimal Vashisht, yesterday called upon the people to voluntarily file their Income Tax returns without any fear or hesitation and assured them that nobody would be harassed. Addressing the members of business community at Jogindernagar, the Commissioner advised the people with taxable income to file their Income Tax returns within the specified time to avoid penalties and interest. TNS

E-Com degree
Shimla, November 29
The Department of Commerce of Himachal Pradesh University will start master’s degree in E-Commerce from the next academic session. Prof. Sunil Gupta, Chairman, said the department had already started a PG diploma in E-Commerce in August 2000. TNS

Computer literacy
Shimla, November 29
Mr Prem Kumar Dhumal, Chief Minister, said here today that the endeavour of the state government was to make Himachal Pradesh a model state in the field of information technology and biotechnology. He was speaking on the occasion of the launching of World Computer Literacy Day TNS

Price index up
Shimla, November 29
All-India Price Index Number for Industrial Workers (CPI-IW) on base 1982-100 for the month of October, 2001 has increased by three points at 468 which is mainly due to increase in prices of rice, wheat, onion, potato and kerosene oil, according to the Labour Bureau. The consumer price index number for October, 2001 had increased by five points. UNI

BP scheme
Chandigarh, November 29
BP reached out to over 33,000 truck drivers in the North and gifted them a personal accident insurance cover of Rs 1 lakh valid for six months and chocolates for the family. The promotion was run from 10-12 November. TNS

Millers’ demand
Paonta Sahib, November 29
The Himachal Rice Millers Association president, Mr Sanjay Goyel has demanded that the Himachal Pradesh Government should grant levy. He said the mill owners should be given minimum support. TNS

HDFC branch
Chandigarh, November 29
HDFC Bank opened its first branch in Ambala today. This is the 37th branch of the bank in the Northern region, said Ms Neena Singh, Regional Business Manager . She said the bank has a network of 138 branches and more than 330 ATMs across 60 cities in the country. TNS

Markets closed
Mumbai, November 29
Most of the major markets, including the BSE, NSE, cotton, Interbank foreign exchange (Forex) and money will remain closed on Friday on account of “Guru Nanak Jayanti”. PTI
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