Fremont General, Enron settle lawsuit; $25.5 million claim reduced

By Caroline Salls

Pittsburgh, April 27 - Fremont General Corp. has entered into an agreement with Enron Creditors Recovery Corp. to settle a lawsuit and resolve a $25.5 million proof of claim filed by Enron, according to an 8-K filed Monday with the Securities and Exchange Commission.

The agreement is subject to bankruptcy court approval.

Before its bankruptcy filing in December 2001, Enron issued unsecured commercial paper to various entities, including Fremont, with maturities of up to 270 days, according to the filing.

In a series of transfers, the 8-K said Enron allegedly paid more than $1 billion to those entities, including $25.43 million to Fremont, before the commercial paper's maturity.

Fremont said representatives of Enron's bankruptcy estate filed lawsuits in 2003 alleging that the payments made on the commercial paper are avoidable and recoverable under various sections of the Bankruptcy Code.

Under the settlement, Enron will have a $4 million general unsecured non-priority claim against Fremont.

However, when Enron receives $2 million in distributions from Fremont's bankruptcy estate, the claim will be deemed to be satisfied in full, and Enron will have no further right to any distributions from Fremont's estates.

In exchange for the claim, Enron has agreed to dismiss its lawsuit.

Fremont General, a financial services holding company located in Santa Monica, Calif., filed for bankruptcy on June 18, 2008 in the U.S. Bankruptcy Court for the Central District of California. Its Chapter 11 case number is 08-13421.

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