Enron Shares Fall 10% as Moody’s Cuts Credit Rating

Enron Corp. shares declined Monday for a ninth day as Moody’s Investors Service lowered its credit rating, creating concern that the largest energy trader will be cut off from raising the cash it needs to fund day-to-day operations.

Moody’s lowered Enron’s senior unsecured long-term debt ratings to Baa2, two levels above junk, from Baa1 and also placed the Houston-based company’s P-2 rating for commercial paper on review for downgrade.

Moody’s said it may downgrade Enron’s commercial paper rating, which would make it harder for the firm to borrow the short-term cash needed to run its trading businesses. Ahead of a potential cut, Enron took out bank lines to repay $2billion in commercial paper last week.

“They’ve pretty much already written off coming to the commercial paper market,” said Shannon Bass, who holds Enron bonds in the $50 million he helps manage at Pacific Investment Management Co. “The real issue now is trying to get their house in order.”

Enron shares plunged $1.59, or 10%, to close at a seven-year low of $13.81 on the New York Stock Exchange, continuing a slide that dates back to Oct. 17, the day after Enron reported $1.01 billion in losses from investments outside its energy trading business. The stock has fallen about 60% since Oct. 17.

Enron has lost more than $50 billion in market value this year. On Dec. 31, Enron had a market value of $62.7 billion. On Monday, the value was $10.5 billion.

Moody’s said the rating cut was prompted by the “deterioration in Enron’s financial flexibility” since the write-downs and charges. The partnership investments had not previously been disclosed, leading “to a substantial loss in investor confidence.”

Last week, Enron ousted Finance Chief Andrew Fastow after the Securities and Exchange Commission asked about transactions he conducted for partnerships he headed.