Enron creditors want bankruptcy case moved to Houston

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Posted 12:37PM on Monday, January 7, 2002

NEW YORK - A group of Enron Corp. creditors will try Monday to convince a New York bankruptcy judge to move the case to a court in Houston, where the energy company is based. Large creditors, such as energy traders Dynegy Inc. and El Paso Corp., and smaller ones, such as the Southern Ute Indian Tribe of Colorado, believe it would be more convenient and economical to hear the case near the location of many Enron creditors and assets. Dynegy and El Paso are based in Houston. In a motion filed by Dynegy and other creditors, lawyers also say there is "an emotional interest to be served" by moving the case to Houston, where thousands of Enron employees were laid off and many more witnessed the rapid evaporation of their retirement plans when the company's stock plummeted. Also Monday, at least two companies were expected to make bids for a majority stake in Enron's wholesale energy trading unit, a lawyer for the company said. Enron lawyer Martin Bienenstock, of Weil, Gotshal and Manges LLP in New York, said he expects Enron's core business, which needs a credit-worthy partner to resume operations, to fetch "probably two bids or more" by the 4 p.m. deadline. An auction is scheduled for Thursday. With regard to the change-of-venue hearing, analysts say creditors also are hoping for a potentially more favorable hearing in Houston, whose economy has suffered as a result of Enron's demise. Lawyers for Enron, and a handful of creditors opposed to relocating the proceedings, are expected to argue that it would be less expensive and more accommodating if the case were administered in New York, home to the armies of lawyers and bankers working on both sides. Howard B. Comet, an attorney for Weil, Gotshal and Manges, said it would also be easier for business partners and potential witnesses involved in Enron's worldwide operations to participate if the proceedings took place in New York. "The focus of the financial restructuring is here," Comet said. Citigroup Inc. of New York, Barclays Bank PLC of London and Dresdner Bank AG of Frankfurt are among the creditors opposed to changing venues. Under the federal rules of bankruptcy procedure, a case may be transferred from one district court to another "in the interest of justice or for the convenience of the parties." The basic criteria considered by judges ruling on previous change-of-venue motions have been: the proximity of creditors, debtors and witnesses; the location of assets, and the cost. "Judges have considerable discretion in making the call," said Robert Christmas, a bankruptcy expert with the law firm Nixon Peabody LLP in New York. Christmas said moving the case to Houston would create "an atmosphere of pressure that does not exist in New York." "That gives creditors the ability to have unhappy employees tramping around the courthouse," he said. Christmas said few cases of this size have ever been moved, but that Judge Arthur J. Gonzalez could be swayed by the fact that so many of Enron's energy-trading partners are located in and around Houston. Cases have been moved in the past if there were a lot of small creditors based in one area. However, new technologies have made it possible for interested parties to participate in the proceedings from thousands of miles away. For example, Houston-based lawyers for Enron creditors gave testimony last week via teleconference. Enron collapsed late last year when revelations of questionable accounting practices and mounting debt caused investors and traders to lose confidence in the company. Its stock price, trading above $85 a year ago, is now firmly below $1 per share. Enron's filed for protection from creditors under Chapter 11 of federal bankruptcy law on Dec. 2 in the U.S. Bankruptcy Court for the Southern District of New York. One of the company's smaller subsidiaries, Enron Metals and Commodity Corp., is based there. Lawyers for the Southern Ute tribe, a natural gas supplier, said the decision to file for bankruptcy in New York "is indicative of Enron's desperation to avoid facing the facts at its home in Houston."