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Enron in talks with banks for new credit line

Energy trading giant Enron Corp said on Monday it is in talks with banks for additional credit, in a new move to shore up investor confidence after it tapped about $3 billion in credit last week, and to stop a plunge in the company's stock that set new six-year lows.

Enron declined to comment on the size of the credit line, which banks it is in talks with and when it expects to complete an agreement on the new credit line.

Enron shares crashed through a psychological barrier of $15 a share, shedding $1.66, or 10.65 per cent, to $13.85 in early morning trade on the New York Stock Exchange. The stock has lost more than half of its value in the past two weeks, losing more than $14 billion in market capitalisation.

"We want to restore investor and market confidence and nothing instils confidence like cash," said Enron spokesman Mark Palmer in Houston.

Enron shares have tumbled since the company reported its first-quarterly loss in more than four years on October 16. The company also wrote down $1.2 billion in equity, including transactions with partnerships formerly run by its chief financial officer who was forced to step down from Enron last week.

The sell-off was sparked by investor concern about the transparency of the transactions, which the Securities and Exchange Commission is examining. Enron last week replaced CFO Andrew Fastow as part of efforts to restore investor confidence.

The Wall Street Journal reported Monday the beleaguered energy trader is negotiation with bank for a new credit line of between $1 billion to $2 billion to prop up share prices following last week's selling that sent shares plummeting.

Enron said it drew about $3 billion in new credit lines last week, and has a net cash liquid position in excess of $1 billion.

"Clearly, both the stock and bond market view Enron as being in dire straits," said independent research firm Gimme Credit analyst Carol Levenson.

"We are not of the opinion that drawing down all of one's backup bank lines is a demonstration of financial strength, but instead it's an act of desperation."

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