Dynegy Inc. (Houston, TX) reported that it has cancelled its planned $8.4 billion acquisition of Enron Corp. (Houston, TX). Dynegy officials announced the decision shortly after two agencies downgraded Enron's credit rating to junk status, triggering an obligation to immediately repay billions of dollars in debt.
Enron suspended payment of some debt and its executives were "evaluating and exploring other options to protect our core energy businesses," stated Kenneth Lay, the company's chairman and CEO. "To do this, we will work to retain the employees necessary to the continuing operations of our trading and other core energy businesses."
Dynegy stated that Enron had breached its acquisition agreement, triggering a "material adverse" clause and causing it to call off the deal. "Sometimes, a company's best deals are the very ones it did not do," said Dynegy Chairman and CEO Chuck Watson.
Dynegy said it is no longer trading with Enron and that the dissolution of the deal does not reflect a failure of the energy trading business. The downgrades make $3.9 billion of Enron debt due immediately, and up to $16.0 billion in other debt (originally due next year) could come due earlier.
