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SEC OKs Enron Plan for Exiting Chapter 11

The approval stems from the settlement of a dispute over the utility holding company act.

March 11, 2004|From Reuters

Enron Corp. won approval for its reorganization plan from the Securities and Exchange Commission, after settling a dispute over a Depression-era anti-monopoly law that threatened to disrupt its emergence from Chapter 11.

The plan still requires Bankruptcy Court approval.

Enron agreed to be subject to the Public Utility Holding Company Act, according to utility law experts and regulatory documents filed Wednesday.

By agreeing, Enron ended a long-standing dispute with the SEC over whether it should remain exempt from the act, the 1935 law that prohibits companies that own public utilities from owning other businesses.

Enron had been exempt from the act since 1997, allowing it to own Portland General, a public utility based in Oregon, along with other businesses, ranging from trading operations to pipelines.

After its bankruptcy filing in December 2001, the company lost its exemption after an SEC ruling. That meant Enron was violating the law by continuing to run a mix of businesses.

Without the SEC's clearance, Enron's reorganization plan could have stalled, lawyers say. Enron will seek final approval for the plan in U.S. Bankruptcy Court on April 20.

"A judge would have difficulty confirming a bankruptcy plan submitted by a company whose future was in doubt because of a fundamental violation of the holding company act," said Scott Hempling, a Washington-based lawyer who represents regulators and consumer organizations.

Under its reorganization, Enron plans to sell Portland General to a consortium backed by U.S. private equity firm Texas Pacific Group and investment banks. It needs the SEC's approval first. Afterward, Enron will ask to be deregistered as a public utility holding company.

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