Enron Corp.‘s liquidating chapter 11 plan accelerated on Wednesday when the company closed the $2 billion sale of its prized remaining assets — its interest in three natural gas pipelines.
Enron’s Bankruptcy Court approved the sale in September of Enron’s interest in the three natural gas pipelines to CCE Holdings LLC, a joint venture of Southern Union Co. and a unit of GE Commercial Finance. CCE Holdings will assume $430 million in debt as a part of the deal.
A $1.25 billion sale of Portland General Electric, which is Enron’s Pacific Northwest utility, is still up in the air pending regulatory approval. If approved, a Texas Pacific Group-backed holding company will acquire the utility and assume $1.1 billion in debt.
Once the Portland General deal closes, the scraps of Enron will become Prisma Energy International Inc., which will own Enron’s remaining pipeline and power assets. When that happens and sufficient claims objections have been resolved (probably sometime in mid to late 2005), Enron will begin distributing dividends to its unsecured creditors. The total amount to be distributed is expected to be approximately $12 billion comprised of 92% in cash and 8% in Prisma stock. That computes to about a 20% dividend on unsecured claims against Enron.
Meanwhile, the Enron name will live on primarily for the benefit of lawyers, who will continue to pursue litigation claims on behalf of the Enron estate for years to come.

This Atlanta Constitution-Journal (free registration required) article takes the first stab at an issue that deserves more scrutiny — the nearly $1 billion legal fee tab that the attorneys involved in the Enron chapter 11 case are charging the estate in that case:

The lead law firm, Weil, Gotshal & Manges of New York, is seeking $158 million in fees and expenses. Some New York lawyers are charging $15 a minute ? $900 an hour ? for their work. And other law firms have billed hundreds of dollars an hour for time their lawyers spent reading newspapers to keep up with the case.

One of [Atlanta’s] most venerable law firms, Alston & Bird, has billed Enron nearly $90 million for its 18-month examination of the company’s bankruptcy.
If that number seems staggering, consider this: Just preparing its bills in the case took Alston & Bird employees nearly 1,700 hours, for which the firm billed $496,000, according to documents filed with the bankruptcy court.

All told, more than 200 Alston & Bird lawyers, many billing at least $500 an hour, worked on the Enron examination, according to documents the law firm filed with the court. Nineteen of the firm’s attorneys submitted bills for more than $1 million apiece in legal fees.
Eighty-nine of the firm’s paralegals, librarians, analysts and clerks worked on the Enron case. The firm’s lawyers and support staff calculated they spent 264,332 hours on the examination, . . .

The professionals interviewed in the story fall over themselves defending the amount of fees incurred in the Enron case, and the reporter does not try to challenge their assertions much. Certainly the Enron case justified some premium over the normal legal cost of a typical large chapter 11 case because of the size and emergency nature of the case. Moreover, the fact that the Enron Bankruptcy Judge in New York declined early in the case to transfer venue of the case to Houston also contributed to the high cost attributable to attorneys’ fees. Those $900 per hour fees that were routinely approved in New York likely would not have passed muster in Houston.
Nevertheless, the $1 billion legal tab to date is scandalous, and is particularly galling because that tab does not include the additional legal cost that lawyers will incur in the future pursuing claims on behalf of the Enron estate. Moreover, apart from the attorneys’ fees charged to the Enron estate, there are hundreds of millions of additional charges attributable to other professionals (such as accountants and management and investment banking experts) that are being charged to the Enron estate. It would not surprise me to see the ultimate legal tab attributable to lawyers feeding from the Enron trough to climb another 25% before the case is closed.
Here’s hoping that an enterprising investigative reporter or law professor takes on this subject. My sense is that an objective cost-benefit analysis would reflect that the value of benefits truly derived for the Enron estate from the high legal cost incurred is far less than the attorneys involved in the case would lead us to believe.