JP Morgan Chase, one of Enron's biggest creditors, has filed a $2.1 billion lawsuit against the troubled energy trader, in a move to protect some money it loaned.
The New York-based bank - which up until now has been an Enron ally even after the company revealed a string of questionable financial transactions and filed for bankruptcy protection - claimed rights in a suit filed in the US bankruptcy court in New York yesterday to Enron assets such as accounts receivables, commercial paper, cash, and other property.
The suit comes the day before the first formal meeting of Enron's largest unsecured creditors at New York's Hilton Hotel, which is expected to be a heated exchange. Enron is the largest bankruptcy in US.history and has drawn widespread attention.
Citigroup and JP Morgan each have hundreds of million dollars of exposure to Enron. They also are trying to line up investors to participate in a $1.5 billion loan to help Enron run its business while it reorganises. Citigroup was not immediately available to comment on JP Morgan's suit.
JP Morgan acted as an agent in two credit facilities - called Choctaw and Zephyrus - whose proceeds helped fund two accounts receivables transactions between Enron and Sequoia, the suit said.
In the $485 million Choctaw loan, proceeds went to buy the preferred equity in a special purpose entity known as Cherokee formed to lend Sequoia money. Another group, Cheyenne Finance, contributed $750 million to buy all the common equity of Cherokee, the suit said.
Lenders separately contributed $482 million to the Zephyrus facility, which took a stake in another special purpose entity set up to loan money to Sequoia, the suit said.
The suit precedes a creditor meeting that is expected to set up a committee or committees of various kinds of creditors to negotiate for a share of Enron's assets.
The committee will likely include eight to ten financial institutions that are Enron's largest creditors, including JP Morgan.
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