Back From The Bankruptcy

Dynegy sales a pipeline company to billionaire Warren Buffett's energy group for nearly $2bn, moving decisively back from the brink of bankruptcy. The deal was finalised days after Dynegy warned regulators that it might be forced to seek bankruptcy protection from creditors if it couldn't complete the sale. Dynegy overcame a final hurdle in completing the transaction on Thursday, when the Houston-based energy trader settled a $10bn lawsuit by Enron that included provisions aimed at easing the transition of the Northern Natural Gas pipeline company to a new owner. MidAmerican Energy, controlled by billionaire Warren Buffett's Berkshire Hathaway, paid $928m in cash and assumed $950m in Northern Natural debt to buy the pipeline. Earlier this year, MidAmerican bought the Kern River Gas Transmission Company from Williams, another distressed energy trader. Those have been the two biggest purchases of the numerous assets energy traders have put on sale to shore up their balance sheets amid the growing crisis of confidence in their credibility. Regulators are investigating many traders for deceptive transactions and the major ratings agencies have downgraded many of them below investment grade. Dynegy had only bought the pipeline company from Enron, the bankrupt energy trader, in February for $1.5bn, and the assumption of debt. That Dynegy had to sell it so quickly - and at such a steep discount - underlined the fragility of its financial position. The energy trader has been under heightened pressure since Enron collapsed in December, days after Dynegy declined to go through with their merger. Enron had sought $10bn in damages, charging that Dynegy's withdrawal had forced it into bankruptcy. Dynegy paid Enron $25m to settle the lawsuit. In exchange, Enron agreed to release Dynegy from all claims relating to the terminated merger and to dismiss the litigation. Enron also agreed to continue providing transition services until January 31 2003 to Northern Natural Gas once MidAmerican's purchase of the pipeline was completed ©

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