Enron files for Chapter 11 bankruptcy

Mumbai: On 2 December, Enron Corp filed for Chapter 11 bankruptcy. It has also slapped Dynegy Inc, the company's rival and one-time suitor, with a $10 billion breach of contract lawsuit for pulling out of a last-ditch merger effort, reports from Houston, Texas, said.

The filing sought protection from creditors. In the meantime, Enron, which is heaving under a burden of at least $16 billion in debt, is tries to reorganise its finances. Under Chapter 11 of the US bankruptcy code, a company can continue to operate if the company and creditors work out a reorganisation plan.

The lawsuit, filed in the federal bankruptcy court in the southern district of New York, accuses Dynegy of wrongfully terminating a $9-billion merger deal on 28 November. Enron also said it would implement substantial work force cuts, primarily at its Houston headquarters.

Enron was the top US energy trader with $100 billion in revenues and $1 billion in profits last year, but has unraveled with stunning speed since mid-October when it declared a third-quarter loss and a billion-dollar reduction in shareholder equity linked to questionable off-balance sheet deals.

Its descent into bankruptcy was hastened as partners fled its key energy trading business and was sealed on 28 November when its credit rating fell to junk status and Dynegy pulled out of a hastily arranged merger announced on 9 November.