Enron asks court to approve settlement on three transactions via Barclays Bank

By Carlise Newman

Chicago, Dec. 15 - Enron Corp. and its subsidiaries filed motions in court requesting approval for settlement agreements on three transactions with Barclays Bank plc or on which Barclays was agent.

For the Cash IV transaction, Enron is seeking approval of a settlement with Barclays and with the trustee State Street Bank.

Under the Cash IV transaction, Enron agreed to transfer its rights to a contractual asset securitization holding trust, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

The trust and Enron also entered into four swap agreements, including a commodity swap, PPI swap, currency swap and interest swap to eliminate cash flow volatility. The trust also borrowed funds from Barclays to purchase the swap agreements. Enron guaranteed to the trustee and Barclays the payment of all obligations.

Under the proposed settlement agreement, half of the $12.8 million in the trust will be distributed to Enron and Barclays. Amounts in the operative account will be distributed 62.5% to Barclays and 37.5% to Enron.

The trustee will receive $1.8 million owed to it. The trustee will assign its interests in the trust estate to Barclays and Enron.

Enron is also seeking approval of a settlement agreement for the Cash V structure. This involves: Credit Lynonnais; Bank of Novia Scotia; Bayerische Landesbank Girozentrale; Mizuho Global Ltd.; KBC Bank NV; UFJ Bank Ltd.; Metropolitan Life Insurance Co.; Texas Life Insurance Co.; Principal Life Insurance Co.; Barclays Bank; and State Street Bank and Trust Co.

Under that structure, Enron and Virginia Electric and Power entered into a power purchase agreement in which Enron provided electricity capacity to Virginia Electric in return for monthly payments. Enron sold the rights to the payments. To purchase an asset equal to the purchase price, Enron issued two tranches of notes, one of $67.9 million and one of $59 million, to a syndicate of lenders led by Barclays. Enron also issued certificates of ownership totaling $3.9 million.

Virginia Power failed to make the capacity payments under the power purchase contract and Enron Power has a claim against the company for those payments, the court filing said.

Under the settlement agreement, Enron's trustee will pay Barclays its share of the $69,000 distribution account and $41,700 from the collection account. Enron will be reimbursed for up to $1 million of costs from the Virginia Power claim.

The next $2.6 million in recoveries will be split between Enron and the Cash V investors, with Enron receiving 20% of the amount recovered and the investors receiving 80%. Those parties will also share the next $10 million in recoveries.

Any recovery between $12.6 and $32.6 million will also be split 60% to Enron and 40% to the investors and recovery of $32.6 million and above will be split 75% and 25% respectively.

Under an agreement with Barclays and Wilmington Trust Co., Enron hopes to settle all issues regarding the Nikita transaction.

Under that transaction, Nikita contributed common units, subordinated convertible equity units and partnership interests in EOTT Energy Corp., a subsidiary of Enron, to Timber 1 LLC for $80 million and a class A membership in Timber 1.

To fund the purchase, Timber 1 issued a class B membership interest to Besson Trust. Besson funded the interest by entering into a $176.9 million credit facility with Barclays, from which it borrowed $71.9 million. Besson also issued a certificate of ownership to Credit Suisse First Boston equal to $8.1 million. CSFB assigned the certificate to DLJ Capital Funding.

Enron guaranteed the payment of all obligations under the Nikita swap return documents to Besson Trust. Besson filed a proof of claim of $61.7 million.

Under EOTT's reorganization plan, in exchange for EOTT common units, Timber received 65,536 LLC units and 169,902 warrants to buy common units of EOTT Energy LLC.

Under the settlement agreement, Timber 1 will make a settlement payment of $819,203 to Barclays.

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