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Hidden Debts, Deals Scuttle Last Chance
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Enron's stock closed at $8.41 a share that day, a 90 percent plunge from its peak the year before.
An Unlikely Savior
The company's only hope for survival now hinged on a takeover by its smaller Houston rival, Dynegy Inc. For Lay, it was a humbling position. Dynegy had been Enron's overlooked little brother, following its footsteps through the 1990s. Outside of the energy-marketing industry, Dynegy was an unknown. That was about to change.
On Nov. 9, as both Moody's Investors and Standard & Poor's downgraded Enron's debt to just above junk-bond status, Dynegy announced an agreement to buy its rival.
The deal would combine the companies under Dynegy's founder and chief executive, Chuck Watson. Although it might take six months to complete, Dynegy and its major investor, ChevronTexaco Corp., pledged to pump $1.5 billion immediately into Enron's parched bank accounts. Enron put up a large pipeline network as collateral.
That day was a triumph for Watson -- who would run the combined companies -- after years spent in Enron's shadow. Now, incredibly, Enron had stumbled and fallen into his lap.
He insisted that Enron's problems were manageable.
"We know the company well," Watson said at a news conference. "It's not like we just started fresh. I'm confident that it's as solid as we thought it was."
But Watson and Dynegy were in for some surprises.
Four days earlier, Andersen had notified Enron about "possible illegal acts" involving the Chewco partnership. No one told Dynegy, company executives would later say.
Soothing Analysts
As part of the Dynegy deal, Lay was scheduled to get a "golden parachute" -- a payoff that amounted to $60 million to buy out his three-year contract. But on Nov. 13, after the perk was disclosed by Bloomberg News, Lay announced that he would forgo it. It didn't look good at a time when many of his employees and investors were losing millions as the company's stock plunged.
The next day, Nov. 14, he presided over a conference call with analysts, working hard to persuade Wall Street and the energy markets that the deal would succeed.
Lay shouldered responsibility for the mismanagement and concealment that marred the company's performance. Investigations were continuing and might turn up new facts but the culture of secrecy had ended, he promised.
