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As part of an effort to extricate itself from paying the expenses on behalf of its 2,500 subsidiaries, bankrupt Enron Corp. has received a court’s blessing to collect $800 million from those affiliates one last time so it can pay their bills. Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York approved a complicated formula Thursday that establishes just what the overhead expenses are for Enron’s bankrupt affiliates for 2002, according to one of Enron’s lawyers, Martin Bienenstock at Weil, Gotshal & Manges. “The motion that was approved by the court determines how much each of the debtors should pay, and how much they pay depends on the size of their postpetition [intercompany] claims,” he said. “The formula for allocating the expense is the same for everybody.” Enron made those expense payments for its affiliates because it was more cost-effective to handle them through the battery of accountants and personnel out of its Houston headquarters. But the system came under attack by the creditors of the company’s Enron North America unit earlier this year. ENA collected $480 million from its power and gas customers and then gave it to Enron so it could pay ENA’s overhead bills. The ENA creditors objected, because cash was moving from ENA to Enron and, thus, potentially further away from them. An examiner, Harrison Goldin of Goldin Associates in New York, was appointed to look into the matter at ENA and in February stopped any further payments from the unit to Enron. In addition, ENA filed a $480 million postpetition claim against Enron, said Mark Slane, a member of Goldin’s group at ENA. In an attempt to shift the burden of paying their overhead expenses to its affiliates, Enron then created a formula to allocate their share of such bills for the rest of this year. Under that formula, Enron determined ENA had $300 million in expenses to be paid. “Enron proposed a formula that would permit ENA to put its projected $300 million in expense for the rest of the year towards its existing expense claims against its parent,” Slane said. Applied against the $480 million claim that ENA has filed against Enron, the net claim that ENA now has against its parent is $180 million. Enron worked out the complex formula over a seven-month period before winning court approval for it Thursday, Slane said. Enron, its creditors committee, the ENA examiner, Enron’s restructuring adviser Zolfo Cooper and PricewaterhouseCoopers, its accounting firm, all worked on the ENA portion before reaching a consensus, he said. Copyright �2002 TDD, LLC. All rights reserved.

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