Magazine for Senior Financial Executives: Partnerships within partnerships – News watch – Enron’s finances

Partnerships within partnerships – News watch – Enron’s finances – Brief Article

Ronald Fink

The debt that Fastow discussed with CFO was needed for a partnership called Marlin, which helped finance the Atlantic Water Trust, Enron’s unconsolidated subsidiary. The Atlantic Water Trust in turn invested in Azurix, a subsidiary that owned a majority of the water facilities of a U.K. company known as Wessex.

“What we did,” Fastow told CFO, “is we set up a trust, issued Enron Corp. shares into the trust, and then the trust went to the capital markets and raised debt against the shares in the trust, using the shares in the trust as collateral.”

During the 1999 interview, Fastow boasted that the Atlantic Water Trust was so effective at minimizing Enron’s balance-sheet exposure that several banks that had not been involved in the transaction later ‘came back and marketed it to us” as their own invention.

Fastow was flattered. “We like to see our ideas get marketed back to us every once in a while,” said Enron’s ex-finance chief. Neither Fastow nor his lawyers were willing or able to comment for this article.

Credit analysts insist that they did not know the full extent of arrangements such as Marlin before the 10-Q filing on November 19. But earlier, in his comments to CFO, Fastow had argued that the company had supplied enough information, if only in supplemental form, to keep analysts informed. “We have disclosures about it in footnotes,” he told CFO in the spring of 1999, “which help our investors and the rating agencies understand all of this.”.

COPYRIGHT 2002 CFO Publishing Corp.

COPYRIGHT 2002 Gale Group