Enron bankers meet amid finance questions

By Alex Frew McMillan CNN Hong Kong

MUMBAI, India (CNN) -- Enron Corp. is racing to round up fresh bank loans in the United States, with other funding sources drying up after a scandal recently claimed its chief financial officer.

The backers of Enron's Indian subsidiary, Dabhol Power Co., are also slated to get together in London at the end of this week.

Senior officers from the Industrial Development Bank of India, ICICI and the State Bank of India will gather Nov. 2 and 3 to discuss Enron's attempts to sell out of Dabhol.

The Houston-based energy giant has decided to scupper its 65 percent interest in Dabhol and the $3 billion Dabhol power plant near Mumbai, after finding it impossible to get paid for power.

The Indian government has so far refused Enron's offer to sell out to it at cost.

No comment on ongoing Tata talks

The Tata group, India's largest conglomerate, has expressed an interest in Enron's Dabhol stake. But Ratan Tata, the head of the business empire, insists that a buy-in will only happen at the right price.

When asked about the Tata talks, P.P. Vora, chairman of the Industrial Development Bank, said he couldn't offer specifics.

"These are on-going negotiations," Vora said.

Enron Chairman and CEO Kenneth Lay visited India in July and thought he had lined up a solution to its debacle of an investment, the largest in India by an overseas company.

But relations with the local state of Maharashtra, which has defaulted on its bills and refuses to accept any more power from the Dabhol plant, and the Indian government, which has reneged on an agreement to guarantee the state's bills, soured again.

Lay and Enron's management have now got much bigger fish to fry.

Its stock collapsed to a six-year low after the company on Oct. 16 booked a $1.0 billion special charge and wrote down shareholders' equity by another $1.2 billion. The charges came due to losses at a limited partnership it did business with.

Enron now admits it is under investigation by the U.S. Securities and Exchange Commission, America's stock watchdog.

CFO replaced to boost confidence

Last Thursday, Enron replaced Chief Financial Officer Andrew Fastow. Questions surround transfers from Enron to two limited partnerships that Fastow ran, which the SEC is examining for conflicts of interest.

Wall Street analysts have complained that Enron is being tight-lipped about the matter. Lay said he was replacing Fastow partly in an effort to restore investor confidence.

CEO Jeff Killing had already returned the CEO title to Lay in August after just six months, saying he wanted a change in lifestyle.

But the Fastow scandal has still caused Enron trouble in finding buyers for its bonds. Faced with that source of funding drying up, the company secured $3.3 billion in bank loans last week.

Large companies like Enron typically favor "paper" - corporate bonds - over bank loans as a way of raising money.

Late Sunday, it held a special board meeting to mull steps to help it restore confidence. It is also trying to get extra funding from its lenders.