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In another bizarre twist to Enron Corp.’s bankruptcy, the company’s own post-petition lender, J.P. Morgan Chase & Co., is suing the Houston energy concern to recoup more than $2.1 billion associated with a complex off-balance sheet transaction. The lawsuit was filed as a motion in the bankruptcy Monday and as an adversarial action Tuesday. Both filings seek a return of the trade receivables that backed credit facilities arranged by Morgan for a special-purpose entity known as Sequoia. Morgan officials were unavailable for comment, but according to the court filings, Sequoia was created to monetize some of Enron’s receivables. The filings claim that such off-balance-sheet transactions were bankruptcy-remote and therefore would be protected from other creditors in the event of the bankruptcy. How or if the lawsuit would affect the $1.5 billion debtor-in-possession financing that J.P. Morgan and Citigroup Inc. have committed to Enron is unclear, though the transaction’s bankruptcy-remoteness suggests it may be separated from the DIP. While the receivables backing Sequoia were valued at $2.1 billion, it’s unclear how much funds Morgan and its fellow banks actually contributed to the entity. Others lending in this deal include Bank of America Corp., BNP Paribas and Fleet National Bank. The complex deal was designed to allow Enron and other entities to speed up the collection of receivables without having to wait for actual payment. Sequoia had previously granted Morgan liens on all the assets related to the entity. Both motions were filed by New York law firm Kelley Drye & Warren. In a separate matter, Wiser Oil Co. filed a motion that may lead to a full-blown objection to Enron’s efforts to use its DIP. Dallas-based Wiser, an unsecured creditor of Enron North America, wants the company to reveal certain information regarding its pre-petition and post-petition finances. That motion will be heard Dec. 18 in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. Wiser believes that unlike other Enron units, Enron NA was capable of paying off its full creditors. However, Enron would have to pool all of its assets to collateralize the $1.5 billion DIP facility. Therefore, Wiser is afraid that it would be “forced” into a pool of unsecured creditors and not see a recovery of its claims. Currently, Wiser is owed $1 million by Enron NA because of oil and gas hedging contracts the two entered into. Wiser holds 26 other contracts, believed to be worth $6 million, that have yet to mature. “We want to find out if Enron North America is giving up collateral which would be a detriment to the creditors that they owe money to,” said Deborah Reperowitz, Wiser’s attorney and a lawyer with the Newark, N.J.-based offices of Reed Smith. Reperowitz said that Wiser was talking to other oil companies that also had contracts tied into Enron NA and confirmed that Dynegy Corp., Enron’s estranged merger partner, wasn’t one of them. Copyright (c)2001 TDD, LLC. All rights reserved.

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