EOTT ENERGY PARTNERS LP - 8-K/A - 20021217 - EXHIBIT_2
EXHIBIT 2.2
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
In re: )
EOTT ENERGY PARTNERS, L.P. ) CASE NO. 02-21730
)
EOTT ENERGY FINANCE CORP ) CASE NO. 02-21731
)
EOTT ENERGY GENERAL PARTNER, L.L.C. ) CASE NO. 02-21732
)
EOTT ENERGY OPERATING LIMITED )
PARTNERSHIP ) CASE NO. 02-21733
)
EOTT ENERGY PIPELINE LIMITED )
PARTNERSHIP ) CASE NO. 02-21735
)
EOTT ENERGY CANADA LIMITED )
PARTNERSHIP ) CASE NO. 02-21734
)
EOTT ENERGY LIQUIDS, L.P. ) CASE NO. 02-21736
)
EOTT ENERGY CORP ) CASE NO. 02-21788
)
Debtors ) (Jointly Administered under Case
) No. 02-21730)
THIRD AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SEC. 1125 IN
SUPPORT OF THE JOINT CHAPTER 11 PLAN OF THE DEBTORS
YOU ARE BEING SENT THIS DISCLOSURE STATEMENT AND THE CORRESPONDING
SOLICITATION MATERIALS BECAUSE YOU ARE A CLAIMHOLDER OR INTERESTHOLDER
OF ONE OR MORE OF THE DEBTORS. THIS DISCLOSURE STATEMENT DESCRIBES A
JOINT CHAPTER 11 PLAN THAT, WHEN CONFIRMED BY THE BANKRUPTCY COURT,
WILL GOVERN HOW YOUR CLAIM OR EQUITY INTEREST WILL BE PAID. THE
DEBTORS ENCOURAGE YOU TO READ THE DISCLOSURE STATEMENT CAREFULLY. THE
DEBTORS BELIEVE THAT ALL CLAIMHOLDERS AND INTERESTHOLDERS SHOULD VOTE
IN FAVOR OF THE JOINT CHAPTER 11 PLAN.
HAYNES AND BOONE, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Telephone: (214) 651-5000
Facsimile: (214) 651-5940
DATED: December 6, 2002 Attorneys for the Debtors
TABLE OF CONTENTS
ARTICLE I INTRODUCTION......................................................... 1
A. Filing of the Debtors' Bankruptcy Case................................ 1
B. Purpose of Disclosure Statement....................................... 1
C. Hearing on Confirmation of the Plan................................... 2
D. Sources of Information................................................ 3
ARTICLE II EXPLANATION OF CHAPTER 11........................................... 3
A. Overview of Chapter 11................................................ 3
B. Plan of Reorganization................................................ 3
ARTICLE III VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS.................... 4
A. Ballots and Voting Deadline........................................... 4
B. Special Procedures for Ballots of Holders of Senior Notes and Class
7.1A Common Units..................................................... 5
C. Claimholders and Interestholders Entitled to Vote..................... 6
D. Bar Date for Filing Proofs of Claim and Proofs of Equity Interests.... 6
E. Definition of Impairment.............................................. 7
F. Classes Impaired Under the Plan....................................... 7
G. Vote Required for Class Acceptance.................................... 7
H. Information on Voting and Ballots..................................... 7
1. Transmission of Ballots to Claimholders and Interestholders...... 7
2. Ballot Tabulation Procedures..................................... 8
3. Execution of Ballots by Representatives.......................... 9
4. Waivers of Defects and Other Irregularities Regarding Ballots.... 9
5. Withdrawal of Ballots and Revocation............................. 9
I. Confirmation of Plan.................................................. 10
1. Solicitation of Acceptances...................................... 10
2. Requirements for Confirmation of the Plan........................ 10
3. Acceptances Necessary to Confirm the Plan........................ 11
4. Cramdown......................................................... 11
ARTICLE IV BACKGROUND OF THE DEBTORS........................................... 12
A. Corporate Information and Debtors' Relationship to Subsidiaries and
Affiliates............................................................ 12
B. Description of the Debtors' Businesses................................ 13
C. The Debtors' Relationship with Enron and Affiliates................... 14
1. Ownership of General and Limited Partner Interests in EOTT....... 14
2. Management Agreements............................................ 14
3. Additional Agreements............................................ 15
4. Enron Pension Plan Participation................................. 16
D. Capitalization of Debtors............................................. 18
1. Description of Equity Interests.................................. 18
2. Pre-Petition Credit Facility with Standard Chartered Bank........ 18
3. Commodity Repurchase Agreement with Standard Chartered Trade
Services Corporation............................................. 19
4. Receivable Purchase Agreement with Standard Chartered Trade
Services Corporation............................................. 19
5. Forbearance Agreement............................................ 20
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6. Senior Notes..................................................... 20
E. Settlement Agreement with Enron....................................... 20
F. Restructuring Agreement............................................... 21
G. Historical Financial Information...................................... 22
H. Assets and Liabilities................................................ 22
1. Assets........................................................... 22
2. Pipeline and Transportation Assets and Properties................ 23
3. Liquids Assets................................................... 24
4. Liabilities...................................................... 25
I. Existing Litigation and Proceedings................................... 27
1. Administrative Proceedings....................................... 27
2. Significant Legal Proceedings.................................... 28
J. Miscellaneous Potential Litigation.................................... 36
K. Preference and Other Avoidance Litigation............................. 36
ARTICLE V EVENTS LEADING TO BANKRUPTCY......................................... 37
ARTICLE VI POST-BANKRUPTCY OPERATIONS AND SIGNIFICANT EVENTS................... 39
A. Post-Bankruptcy Operations............................................
39
B. First Day Motions.....................................................
39
C. The Emergency Motion for Authority to Pay or Honor Prepetition
Obligations to Critical Customers and Vendors......................... 40
D. Postpetition Financing with Standard Chartered Bank, SCTSC, and
Lehman................................................................ 40
E. Creditors Committee................................................... 42
F. Employment of Professionals........................................... 42
G. Schedules and Statement of Financial Affairs.......................... 42
H. Settlement with Enron................................................. 42
ARTICLE VII DESCRIPTION OF THE PLAN............................................ 43
A. Introduction.......................................................... 43
B. Designation of Claims and Equity Interests............................ 43
1. Identification of Classes........................................ 43
C. Treatment of Claims and Equity Interests.............................. 44
1. Treatment of Unclassified Claims................................. 44
a. Payment of Administrative Claims, Professional Fee Claims,
and Allowed Priority Unsecured Tax Claims................... 44
b. Bar Dates for Unclassified Claims........................... 45
c. U.S. Trustee Fees........................................... 45
2. Classification and Treatment of Classified Claims and Equity
Interests........................................................ 45
a. General..................................................... 45
b. Treatment of Allowed Priority Unsecured Non-Tax Claims
(Classes 1A, 1B, 1C, 1D, 1E, 1F, 1G and 1H)................. 46
c. Treatment of Allowed Secured Tax Claims and Allowed
Indemnifiable Secured Tax Claims (Classes 2A, 2B, 2C, 2D,
2E, 2F, 2G and 2.1H)........................................ 46
d. Treatment of Class 2.2H Allowed Non-Indemnifiable Secured
Tax Claims.................................................. 47
e. Treatment of Allowed Enron Secured Claim (Classes 3.1A,
3.1B, 3.1C, 3.1D, 3.1E, 3.1F, 3.1G and 3.1H)................ 47
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f. Treatment of Allowed Trade Partner Secured Claims (Classes
3.2A, 3.2B, 3.2C, 3.2D, 3.2E, 3.2F, and 3.2G)............... 47
g. Treatment of Allowed M&M Lienholder Secured Claims (Classes
3.3A, 3.3B, 3.3C, 3.3D, 3.3E, 3.3F, and 3.3G)............... 48
h. Treatment of Allowed Other Secured Claims and Allowed
Indemnifiable Other Secured Claims (Classes 3.4A, 3.4B,
3.4C, 3.4D, 3.4E, 3.4F, 3.4G and 3.2H)...................... 48
i. Treatment of Class 3.3H Allowed Non-Indemnifiable Other
Secured Claims.............................................. 49
j. Treatment of Allowed Convenience Claims (Classes 4A, 4B, 4C,
4D, 4E, 4F, 4G and 4H)...................................... 50
k. Treatment of Allowed General Unsecured Claims and Allowed
Indemnifiable General Unsecured Claims (Classes 5A, 5B, 5C,
5D, 5E, 5F, 5G and 5.1H).................................... 50
l. Treatment of Class 5.2H Allowed Non-Indemnifiable General
Unsecured Claims............................................ 51
m. Treatment of Allowed Subordinated Claims (Classes 6A, 6B,
6C, 6D, 6E, 6F, 6G and 6H).................................. 51
n. Treatment of Allowed Equity Interests of EOTT (Class
7.1A)....................................................... 51
o. Treatment of Allowed GP Interests (Class 7.2A), Allowed
Subordinated Units (Class 7.3A), and Allowed Additional
Partnership Interests (Class 7.4A).......................... 51
p. Treatment of Equity Interests (Classes 7B, 7C, 7D, 7E, 7F,
and 7G)..................................................... 51
ARTICLE VIII MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN................ 51
A. Introduction.......................................................... 51
B. Substantive Consolidation............................................. 52
C. The Closing........................................................... 52
1. Cancellation of the Indenture and Senior Notes, Authorization and
Execution of the New Indenture and Issuance of the New Notes..... 52
2. Reorganization of the Debtors' Corporate Structure............... 53
3. Execution and Issuance of Plan Notes............................. 54
4. Consummation of the Exit Credit Facility......................... 54
5. Consummation of the Enron Settlement Agreement................... 54
6. Establishment of Reserves........................................ 54
7. Liquidation of EOTT GP........................................... 55
ARTICLE IX PRO FORMA FINANCIAL PROJECTIONS, FEASIBILITY, REORGANIZATION VALUE
AND RISKS...................................................................... 55
A. Financial Projections and Feasibility................................. 55
B. Reorganization Value.................................................. 55
C. Risks Associated with the Plan........................................ 56
ARTICLE X ALTERNATIVES TO PLAN AND LIQUIDATION ANALYSIS........................ 56
A. Dismissal............................................................. 56
B. Chapter 7 Liquidation................................................. 56
C. Alternative Plan...................................................... 57
ARTICLE XI CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN... 57
A. EOTT's Partnership Status............................................. 58
B. The Reorganization.................................................... 59
C. Ownership and Disposition of New Notes................................ 61
D. Ownership of the LLC Warrants......................................... 62
E. Ownership and Disposition of New LLC Units............................ 62
F. Treatment of Classholders other than Noteholders...................... 69
ARTICLE XII CONCLUSION......................................................... 71
iii
LIST OF EXHIBITS
Third Amended Joint Chapter 11 Plan of the Debtors.......... Exhibit A
Order under 11 U.S.C. sec. 1125 and Fed. R. Bankr. P. 3017
(i) Approving Disclosure Statement, (ii) Fixing Time for
Filing Acceptances or Rejections of Joint Chapter 11 Plan,
and (iii) Establishing Procedures Relating to the
Solicitation of Votes on the Plan......................... Exhibit B
Organizational Chart........................................ Exhibit C
Financial Projections and Notes and Assumptions............. Exhibit D
Chapter 7 Liquidation Analysis.............................. Exhibit E
iv
ARTICLE I
INTRODUCTION
EOTT Energy Partners, L.P., EOTT Energy Finance Corp., EOTT Energy General
Partner, LLC, EOTT Energy Operating Limited Partnership, EOTT Energy Pipeline
Limited Partnership, EOTT Energy Canada Limited Partnership, EOTT Energy
Liquids, L.P., and EOTT Energy Corp. submit this Disclosure Statement pursuant
to Bankruptcy Code section 1125 in support of the Joint Chapter 11 Plan of
Debtors, as it may be amended (the "PLAN"). A copy of the Plan is attached to
this Disclosure Statement as EXHIBIT A.
This Disclosure Statement(1) sets forth certain information regarding the
prepetition operations and financial history of the Debtors, events leading to
the Debtors' bankruptcy, significant events that have occurred during the
Bankruptcy Case, and the means for implementing a restructuring of the Debtors'
financial affairs. This Disclosure Statement also describes terms and provisions
of the Plan, including certain alternatives to the Plan, certain effects of
confirmation of the Plan, certain risk factors associated with the Plan, and the
manner in which distributions will be made under the Plan. Additionally, this
Disclosure Statement discusses the confirmation process and the voting
procedures and requirements for voting on the Plan.
A. FILING OF THE DEBTORS' BANKRUPTCY CASE
On October 8, 2002, the Debtors (except for EOTT Energy Corp. (hereinafter
"EOTT GP") filed voluntary chapter 11 petitions in the Bankruptcy Court. On
October 21, 2002, EOTT GP filed its voluntary chapter 11 petition in the
Bankruptcy Court. The Debtors' bankruptcy cases are jointly administered under
bankruptcy case no. 02-21730. The Debtors continue to operate their businesses
and manage their property and assets as debtors-in-possession pursuant to
Bankruptcy Code sections 1107 and 1108.
B. PURPOSE OF DISCLOSURE STATEMENT
This Disclosure Statement is submitted in accordance with Bankruptcy Code
section 1125 for the purpose of soliciting acceptances of the Plan from holders
of certain Classes of Claims and Equity Interests. Acceptances of the Plan are
being sought only from Claimholders whose Claims, or Interestholders whose
Equity Interests, are "impaired" (as that term is defined in Bankruptcy Code
section 1124) by the Plan and who are receiving or retaining property under the
Plan. Holders of Claims or Equity Interests that are not Impaired are deemed to
have accepted the Plan. Holders of Claims or Equity Interests that are not
receiving or retaining any property under the Plan are deemed to have rejected
the Plan.
The Debtors have prepared this Disclosure Statement pursuant to Bankruptcy
Code section 1125, which requires that a copy of the Plan, or a summary thereof,
be submitted to all holders of Claims against, and Equity Interests in, the
Debtors, along with a written disclosure statement containing adequate
information about the Debtors of a kind, and in sufficient detail, as far as is
reasonably practicable, that would enable a hypothetical, reasonable investor
typical of Claimholders and Interestholders to make an informed judgment in
exercising their right to vote on the Plan.
This Disclosure Statement was approved by the Bankruptcy Court on December
10, 2002. A copy of the Order Under 11 U.S.C. Section 1125 and Fed. R. Bankr. P.
3017 (i) Approving Disclosure Statement, (ii) Fixing Time for Filing Acceptances
or Rejection of Joint Chapter 11 Plan, and (iii) Establishing Procedures
Relating to the Solicitation of Votes on the Plan is attached as EXHIBIT B.
Such approval is required by the Bankruptcy Code and does not constitute a
judgment by the Bankruptcy Court as to the desirability of the Plan or the value
or suitability of any consideration offered under the Plan. Such approval does
indicate, however, that the Bankruptcy Court has determined that the Disclosure
Statement meets the requirements of
1 Except as otherwise provided in this Disclosure Statement, capitalized terms
used herein have the meanings ascribed to them in the Plan, including the
Glossary of Defined Terms attached to the Plan as Exhibit A. Any capitalized
term used in this Disclosure Statement that is not defined in the Plan shall
have the meaning ascribed to that term in the Bankruptcy Code or Bankruptcy
Rules, whichever is applicable.
1
Bankruptcy Code section 1125 and contains adequate information to permit the
Claimholders and Interestholders whose acceptance of the Plan is solicited to
make an informed judgment regarding acceptance or rejection of the Plan.
THE APPROVAL BY THE BANKRUPTCY COURT OF THIS DISCLOSURE STATEMENT DOES
NOT CONSTITUTE AN ENDORSEMENT BY THE BANKRUPTCY COURT OF THE PLAN OR A
GUARANTEE OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED
HEREIN. THE MATERIAL CONTAINED IN THIS DISCLOSURE STATEMENT IS
INTENDED SOLELY FOR THE USE OF CLAIMHOLDERS AND INTERESTHOLDERS IN
EVALUATING THE PLAN AND VOTING TO ACCEPT OR REJECT THE PLAN AND,
ACCORDINGLY, MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN THE
DETERMINATION OF HOW TO VOTE ON, OR WHETHER TO OBJECT TO, THE PLAN.
THE REORGANIZATION OF THE DEBTORS PURSUANT TO THE PLAN IS SUBJECT TO
NUMEROUS CONDITIONS AND VARIABLES, AND THERE CAN BE NO ASSURANCE THAT
THE PLAN, AS CONTEMPLATED, WILL BE EFFECTUATED.
THE DEBTORS BELIEVE THAT THE PLAN AND THE PROPOSED TREATMENT OF CLAIMS
AND EQUITY INTERESTS IS IN THE BEST INTERESTS OF CLAIMHOLDERS AND
INTERESTHOLDERS AND THEREFORE URGE YOU TO VOTE TO ACCEPT THE PLAN.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS IT PASSED ON THE ACCURACY
OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL. THE PLAN SHOULD BE REVIEWED CAREFULLY.
NEITHER THE FILING OF THE PLAN NOR ANY STATEMENT OR PROVISION
CONTAINED IN THE PLAN OR IN THE DISCLOSURE STATEMENT, NOR THE TAKING
BY ANY PARTY IN INTEREST OF ANY ACTION WITH RESPECT TO THE PLAN, SHALL
(i) BE OR BE DEEMED TO BE AN ADMISSION AGAINST INTEREST AND (ii) UNTIL
THE EFFECTIVE DATE, BE OR BE DEEMED TO BE A WAIVER OF ANY RIGHTS ANY
PARTY IN INTEREST MAY HAVE (a) AGAINST ANY OTHER PARTY IN INTEREST OR
(b) IN ANY OF THE ASSETS OF ANY OTHER PARTY IN INTEREST, AND, UNTIL
THE EFFECTIVE DATE, ALL SUCH RIGHTS ARE SPECIFICALLY RESERVED. IN THE
EVENT THAT THE PLAN IS NOT CONFIRMED OR FAILS TO BECOME EFFECTIVE,
NEITHER THE PLAN NOR THE DISCLOSURE STATEMENT, NOR ANY STATEMENT
CONTAINED IN THE PLAN OR IN THE DISCLOSURE STATEMENT, MAY BE USED OR
RELIED ON IN ANY MANNER IN ANY SUIT, ACTION, PROCEEDING OR
CONTROVERSY, WITHIN OR WITHOUT THE DEBTORS' BANKRUPTCY CASE, INVOLVING
THE DEBTORS, EXCEPT WITH RESPECT TO CONFIRMATION OF THE PLAN.
C. HEARING ON CONFIRMATION OF THE PLAN
The Bankruptcy Court has set January 30, 2003, at 10:00 a.m. Central
Standard Time as the time and date for the hearing (the "CONFIRMATION HEARING")
to determine whether the Plan has been accepted by the requisite number of
Claimholders and Interestholders and whether the other requirements for
confirmation of the Plan have been satisfied. Claimholders and Interestholders
may vote on the Plan by completing and delivering the enclosed Ballot to Logan &
Company, Inc. (Attn: EOTT Balloting Center), 546 Valley Road, Second Floor,
Montclair, New Jersey 07043, on or before 4:00 p.m. Central Standard Time on
January 23, 2003. If the Plan is rejected by one or more Impaired Classes of
Claims or Equity Interests, the Bankruptcy Court may still confirm the Plan, or
a modification thereof, under Bankruptcy Code section 1129(b) (commonly referred
to as a "cramdown") if it determines, among other things, that the Plan does not
discriminate unfairly and is fair and equitable with respect to the rejecting
Class or Classes of Claims or
2
Equity Interests Impaired under the Plan. The procedures and requirements for
voting on the Plan are described in more detail below.
D. SOURCES OF INFORMATION
Except as otherwise expressly indicated, the portions of this Disclosure
Statement describing the Debtors, their businesses, properties and management
have been prepared from information furnished by the Debtors or from public
filings made by the Debtors.
Certain of the materials contained in this Disclosure Statement are taken
directly from other readily accessible documents or are digests of other
documents. While the Debtors have made every effort to retain the meaning of
such other documents or portions that have been summarized, they urge that any
reliance on the contents of such other documents should depend on a thorough
review of the documents themselves.
The statements contained in this Disclosure Statement are made as of the
date hereof unless another time is specified, and neither the delivery of this
Disclosure Statement nor any exchange of rights made in connection with it
shall, under any circumstances, create an implication that there has been no
change in the facts set forth herein since the date of this Disclosure
Statement.
No statements concerning the Debtors, the value of their property, or the
value of any benefit offered to the holder of a Claim or Equity Interest under
the Plan should be relied on other than as set forth in this Disclosure
Statement. In arriving at a decision, parties should not rely on any
representation or inducement made to secure their acceptance or rejection that
is contrary to information contained in this Disclosure Statement, and any such
additional representations or inducements should be immediately reported to
counsel for the Debtors, Trey A. Monsour, Haynes and Boone, LLP, 901 Main
Street, Suite 3100, Dallas, Texas 75202 [(214) 651-5000].
ARTICLE II
EXPLANATION OF CHAPTER 11
A. OVERVIEW OF CHAPTER 11
Chapter 11 is the principal reorganization chapter of the Bankruptcy Code.
Under chapter 11, a debtor-in-possession attempts to reorganize its business and
financial affairs for the benefit of the debtor, its creditors, and other
interested parties.
The commencement of a chapter 11 case creates an estate comprising all of
the debtor's legal and equitable interests in property as of the date the
petition is filed. Unless the Bankruptcy Court orders the appointment of a
trustee, Bankruptcy Code sections 1101, 1107 and 1108 provide that a chapter 11
debtor may continue to operate its business and control the assets of its estate
as a "debtor-in-possession."
The filing of a chapter 11 petition also triggers the automatic stay under
Bankruptcy Code section 362. The automatic stay halts essentially all attempts
to collect prepetition claims from the debtor or to otherwise interfere with the
debtor's business or its bankruptcy estate.
Formulation of a plan of reorganization/liquidation is the principal
purpose of a chapter 11 case. The plan sets forth the means for satisfying the
claims of creditors against, and interests of equity security holders in, the
debtor. Unless the Bankruptcy Court shortens the time period or a trustee is
appointed, only the debtor may file a plan during the first 120 days of a
chapter 11 case. After the Exclusive Period has expired, a creditor or any other
interested party may file a plan, unless the debtor files a plan within the
Exclusive Period.
B. PLAN OF REORGANIZATION
After a plan has been filed, the holders of claims against, or equity
interests in, a debtor are permitted to vote on whether to accept or reject the
plan. Chapter 11 does not require that each holder of a claim against, or equity
interest in, a debtor vote in favor of a plan in order for the plan to be
confirmed. At a minimum, however, if there is an impaired class, a plan must be
accepted by a majority in number and two-thirds in
3
amount of those claims actually voting from at least one class of claims
impaired under the plan. The Bankruptcy Code also defines acceptance of a plan
by a class of equity interests as acceptance by holders of two-thirds of the
number of shares actually voted.
Classes of claims or equity interests that are not "impaired" under a plan
of reorganization are conclusively presumed to have accepted the plan, and
therefore are not entitled to vote. A class is "impaired" if the plan modifies
the legal, equitable, or contractual rights attaching to the claims or equity
interests of that class. Modification for purposes of impairment does not
include curing defaults and reinstating maturity or payment in full in cash.
Conversely, classes of claims or equity interests that receive or retain no
property under a plan of reorganization are conclusively presumed to have
rejected the plan, and therefore are not entitled to vote.
Even if all classes of claims and equity interests accept a plan of
reorganization, the Bankruptcy Court may nonetheless deny confirmation.
Bankruptcy Code section 1129 sets forth the requirements for confirmation and,
among other things, requires that a plan be in the "best interests" of impaired
and dissenting creditors and interestholders and that the plan be "feasible."
The "best interests" test generally requires that the value of the consideration
to be distributed to impaired and dissenting creditors and interest holders
under a plan may not be less than that which those parties would receive if the
debtor were liquidated under a hypothetical liquidation occurring under chapter
7 of the Bankruptcy Code. A plan must also be determined to be "feasible," which
generally requires a finding that there is a reasonable probability that the
debtor will be able to perform the obligations incurred under the plan and that
the debtor will be able to continue operations without the need for further
financial reorganization or liquidation.
The Bankruptcy Court may confirm a plan of reorganization even though fewer
than all of the classes of impaired claims and equity interests accept it. The
Court may do so under the "cramdown" provisions of Bankruptcy Code section
1129(b). In order for a plan to be confirmed under the cramdown provisions,
despite the rejection of a class of impaired claims or interests, the proponent
of the plan must show, among other things, that the plan does not discriminate
unfairly and that it is fair and equitable with respect to each impaired class
of claims or equity interests that has not accepted the plan.
The Bankruptcy Court must further find that the economic terms of the
particular plan meet the specific requirements of Bankruptcy Code section
1129(b) with respect to the subject objecting class. If the proponent of the
plan proposes to seek confirmation of the plan under the provisions of
Bankruptcy Code section 1129(b), the proponent must also meet all applicable
requirements of Bankruptcy Code section 1129(a) (except section 1129(a)(8)).
Those requirements include the requirements that (i) the plan comply with
applicable Bankruptcy Code provisions and other applicable law, (ii) the plan be
proposed in good faith, and (iii) at least one impaired class of creditors or
interestholders has voted to accept the plan.
ARTICLE III
VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS
A. BALLOTS AND VOTING DEADLINE
A Ballot for voting to accept or reject the Plan is enclosed with this
Disclosure Statement (along with a return envelope), and has been mailed to
Claimholders and Interestholders (or their authorized representative) entitled
to vote. After carefully reviewing the Disclosure Statement, including all
exhibits, each Claimholder or Interestholder (or its authorized representative)
entitled to vote should indicate its vote on the enclosed Ballot. All
Claimholders and Interestholders (or their authorized representative) entitled
to vote must:
- carefully review the Ballot and corresponding instructions,
- execute the Ballot, and
- return it in the enclosed return envelope, or otherwise forward it to the
address indicated on the Ballot, by the Voting Deadline for the Ballot to
be considered.
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If you believe you are a holder of a Claim or Equity Interest in an
Impaired Class under the Plan and entitled to vote to accept or reject the Plan,
but did not receive a Ballot with these materials, please contact the Tabulation
Agent, Logan & Company, Inc. (Attn: EOTT Balloting Center), 546 Valley Road,
Second Floor, Montclair, New Jersey 07043, Telephone: (973) 509-3190, or Linda
Breedlove, Legal Assistant, Haynes and Boone, LLP (counsel for the Debtors), 901
Main Street, Suite 3100, Dallas, Texas 75202, Telephone: (214) 651-5930.
With respect to holders of the Senior Notes, only those Noteholders who own
Senior Notes on December 6, 2002 (the "VOTING RECORD DATE") are entitled to vote
on the Plan. Likewise, with respect to Class 7.1A Common Unit Equity
Interestholders, only those Interestholders owning such Equity Interests on the
Voting Record Date are entitled to vote on the Plan. See Section B of this
Article III for further special voting instructions with regard to Senior Notes
and Class 7.1A Common Units.
The Bankruptcy Court has directed that, in order to be counted for voting
purposes, Ballots for the acceptance or rejection of the Plan must be received
no later than January 23, 2003 at 4:00 p.m. Central Standard Time (the "VOTING
DEADLINE"). EXCEPT WITH REGARD TO BENEFICIAL HOLDERS OF SENIOR NOTES OR OF CLASS
7.1A COMMON UNITS THAT MAY BE VOTING THROUGH A RECORD OR NOMINAL HOLDER (SEE
DISCUSSION IN SECTION III.B BELOW), completed Ballots should either be returned
in the enclosed envelope, or otherwise sent, to the Tabulation Agent at the
following address, so as to be received by the Voting Deadline:
Logan & Company, Inc.
Attn: EOTT Balloting Center
546 Valley Road, Second Floor
Montclair, New Jersey 07043
BALLOTS MUST BE RECEIVED AT THE ABOVE ADDRESS NO LATER THAN JANUARY 23,
2003, AT 4:00 P.M. CENTRAL STANDARD TIME. ANY BALLOTS RECEIVED AFTER THE VOTING
DEADLINE WILL NOT BE COUNTED (BUT SEE SPECIAL INSTRUCTIONS IN SECTION B HEREIN
FOR HOLDERS OF SENIOR NOTES AND CLASS 7.1A COMMON UNITS). IF YOUR BALLOT IS
DAMAGED OR LOST, YOU MAY REQUEST A REPLACEMENT BALLOT BY SENDING A WRITTEN
REQUEST TO THE SAME ADDRESS LISTED ABOVE.
B. SPECIAL PROCEDURES FOR BALLOTS OF HOLDERS OF SENIOR NOTES AND CLASS 7.1A
COMMON UNITS
With regard to the public debt and certain equity securities of EOTT, the
holders of which are entitled to vote on the Plan (i.e., the Senior Notes and
the Class 7.1A Common Units), any person who is a "record holder" of the Senior
Notes or of the Class 7.1A Common Units (i.e., a person shown as the registered
holder of Senior Notes in the registry maintained by an indenture trustee or a
registrar of the Senior Notes, or by a transfer agent of the Common Units) on
the Voting Record Date -- including any bank, agent, broker or other nominee who
holds Senior Notes or Class 7.1A Common Units in its name (the "NOMINAL HOLDER"
or "NOMINEE") for a beneficial holder or holders -- should receive solicitation
packages ("SOLICITATION PACKAGES") for distribution to the appropriate
beneficial holders. A Nominee shall, upon receipt of the Solicitation Packages,
promptly forward the Solicitation Packages to the beneficial owners so that such
beneficial owners may vote on the Plan pursuant to Bankruptcy Code section 1126.
The Debtors shall provide for reimbursement, as an administrative expense, of
all the reasonable expenses of Nominal Holders in distributing the Solicitation
Packages to said beneficial owners. Nominal Holders will have two options for
obtaining the votes of beneficial owners of Senior Notes or of the Class 7.1A
Common Units, consistent with usual customary practices for obtaining the votes
of securities held in street name: (i) the Nominal Holder may prevalidate the
individual Ballot contained in the Solicitation Package (by indicating that the
record holders of the Senior Notes or Class 7.1A Common Units voted, and the
appropriate account numbers through which the beneficial owner's holdings are
derived) and then forward the Solicitation Package onto the beneficial owner of
the Senior Notes or Class 7.1A Common Units, which beneficial owner will then
indicate its acceptance or rejection of the Plan and otherwise indicate his
choices to the extent requested to do so on the Ballot, and then return the
individual Ballot directly to the Tabulation Agent in the return envelope to be
provided in the Solicitation Package by the Voting Deadline, or (ii) the Nominal
Holder may forward the Solicitation
5
Package to the beneficial owner of the Senior Notes or Class 7.1A Common Units
for voting, along with a return envelope provided by and addressed to the
Nominal Holder, with the beneficial owner then returning the individual Ballot
to the Nominal Holder by the Voting Deadline, the Nominal Holder will
subsequently summarize the votes, including, at a minimum, the number of
beneficial owners voting to accept and to reject the Plan who submitted Ballots
to the Nominal Holder and the amount of such Senior Notes or Class 7.1A Common
Units so voted, in an affidavit (the "AFFIDAVIT OF VOTING RESULTS"), and then
return the Affidavit of Voting Results to the Tabulation Agent within two (2)
business days after the Voting Deadline. By submitting an Affidavit of Voting
Results, each such Nominal Holder certifies that the Affidavit of Voting Results
accurately reflects votes from its beneficial owners holding such Senior Notes
or Class 7.1A Common Units as of the Voting Record Date.
Pursuant to 28 U.S.C. sec.sec. 157 and 1334, 11 U.S.C. sec. 105, and
Bankruptcy Rule 1007(i) and (j), the Nominees shall maintain the individual
Ballots of its beneficial owners and evidence of authority to vote on behalf of
such beneficial owners. No such Ballots shall be destroyed or otherwise disposed
of or made unavailable without such action first being approved by prior order
of the Bankruptcy Court.
IN THE EVENT THAT BALLOTS ARE SUBMITTED BY BENEFICIAL OWNERS OF SENIOR
NOTES OR OF CLASS 7.1A COMMON UNITS DIRECTLY TO THE NOMINEES (AS OPPOSED TO THE
TABULATION AGENT), (i) SUCH BALLOTS MUST BE RECEIVED BY THE NOMINEES BY THE
VOTING DEADLINE IN ORDER TO BE COUNTED AND (ii) THE AFFIDAVITS OF VOTING RESULTS
REQUIRED OF THE NOMINEES THEN MUST BE RECEIVED BY THE TABULATION AGENT WITHIN
TWO (2) BUSINESS DAYS AFTER THE VOTING DEADLINE.
C. CLAIMHOLDERS AND INTERESTHOLDERS ENTITLED TO VOTE
Any Claimholder or Interestholder of the Debtors whose Claim or Equity
Interest is Impaired under the Plan is entitled to vote if either (i) the
Debtors have scheduled the Claimholder's Claim or Interestholder's Equity
Interest (and such Claim or Equity Interest is not scheduled as disputed,
contingent, or unliquidated) or (ii) the Claimholder or Interestholder has filed
a proof of claim or interest on or before the deadline set by the Bankruptcy
Court for such filings. RETURNING THE BALLOT FORM THAT YOU RECEIVED DOES NOT
CONSTITUTE FILING A PROOF OF CLAIM OR EQUITY INTEREST. See section D below for
a discussion of proofs of claim and proofs of equity interests. Any holder of a
Claim or Equity Interest as to which an objection has been filed (and such
objection is still pending) is not entitled to vote, unless the Bankruptcy Court
(on motion by a party whose Claim or Equity Interest is subject to an objection)
temporarily allows the Claim or Equity Interest in an amount that it deems
proper for the purpose of accepting or rejecting the Plan. Such motion must be
heard and determined by the Bankruptcy Court prior to the Confirmation Hearing
on the Plan. In addition, a Claimholder's or Interestholder's vote may be
disregarded if the Bankruptcy Court determines that the Claimholder's or
Interestholder's acceptance or rejection was not solicited or procured in good
faith or in accordance with the applicable provisions of the Bankruptcy Code.
Under Bankruptcy Code section 1126(f), a class that is not impaired under a
chapter 11 plan, and each holder of a claim or equity interest in such class,
are conclusively presumed to have accepted the chapter 11 plan. Under Bankruptcy
Code section 1126(g), a class is deemed not to have accepted a chapter 11 plan
if the holders of claims or equity interests in such class do not receive or
retain any property under the chapter 11 plan on account of such claims or
equity interests. Holders of claims or equity interests that are unimpaired
under the Plan, or that are not entitled to receive or retain any property under
the Plan, are not entitled to vote to accept or reject the Plan. The Debtors
will not be soliciting votes from such Claimholders or Interestholders.
D. BAR DATE FOR FILING PROOFS OF CLAIM AND PROOFS OF EQUITY INTERESTS
The Bankruptcy Court has established January 8, 2003 as the deadline for
filing proofs of claim and proofs of interest in the Bankruptcy Case. A proof of
claim or equity interest form was sent to you at the commencement of the
Bankruptcy Case, and copies of the form are available from the Clerk of the
Bankruptcy Court.
6
E. DEFINITION OF IMPAIRMENT
Under Bankruptcy Code section 1124, a class of claims or equity interests
is impaired under a plan of reorganization unless, with respect to each claim or
equity interests of such class, the plan:
(1) leaves unaltered the legal, equitable, and contractual rights of the
holder of such claim or equity interest; or
(2) notwithstanding any contractual provision or applicable law that
entitles the holder of a claim or equity interest to receive
accelerated payment of such claim or equity interest after the
occurrence of a default:
(a) cures any such default that occurred before or after the
commencement of the case under the Bankruptcy Code, other than a default
of a kind specified in Bankruptcy Code section 365(b)(2);
(b) reinstates the maturity of such claim or equity interest as it
existed before the default;
(c) compensates the holder of such claim or equity interest for damages
incurred as a result of reasonable reliance on such contractual
provision or applicable law; and
(d) does not otherwise alter the legal, equitable, or contractual rights
to which such claim or equity interest entitles the holder of such claim
or equity interest.
F. CLASSES IMPAIRED UNDER THE PLAN
Claims or Equity Interests in all Classes (except Classes 1A, 1B, 1C, 1D,
1E, 1F, 1G and 1H) are Impaired under the Plan. Except for holders of certain
Equity Interests who are not entitled to receive any Distributions under the
Plan (including Class 7.2A GP Interests, Class 7.3A Subordinated Units, and
Class 7.4A Additional Partnership Interests), holders of Claims and Equity
Interests that are Impaired are eligible, subject to the voting requirements
described above, to vote to accept or reject the Plan. The Debtors will not be
soliciting votes from holders of Equity Interests who are not receiving any
Distributions under the Plan (including Class 7.2A GP Interests, Class 7.3A
Subordinated Units, and Class 7.4A Additional Partnership Interests).
Claims in Classes 1A, 1B, 1C, 1D, 1E, 1F, 1G and 1H are unimpaired under
the Plan, and therefore holders of those Claims are conclusively presumed to
have accepted the Plan pursuant to Bankruptcy Code section 1126(f). The Debtors
will not be soliciting votes from Claimholders in those Classes.
G. VOTE REQUIRED FOR CLASS ACCEPTANCE
The Bankruptcy Code defines acceptance of a plan by a class of creditors as
acceptance by holders of at least two-thirds in dollar amount and more than
one-half in number of the claims of that class that actually cast ballots for
acceptance or rejection of the plan; that is, acceptance takes place only if
creditors holding claims constituting at least two-thirds in amount of the total
amount of claims and more than one-half in number of the creditors actually
voting cast their ballots in favor of acceptance.
The Bankruptcy Code defines acceptance of a plan by a class of equity
interests as acceptance by holders of at least two-thirds in amount of the
allowed equity interests of that class who actually cast ballots.
H. INFORMATION ON VOTING AND BALLOTS
1. TRANSMISSION OF BALLOTS TO CLAIMHOLDERS AND INTERESTHOLDERS
Ballots are being forwarded to all Claimholders and Interestholders in
accordance with the Bankruptcy Rules. Those Claimholders and Interestholders
whose Claims or Equity Interests are unimpaired under the Plan are conclusively
presumed to have accepted the Plan under Bankruptcy Code section 1126(f), and
therefore need not vote with regard to the Plan. Under Bankruptcy Code section
1126(g), Claimholders or Interestholders who do not either receive or retain any
property under the Plan are deemed to have rejected
7
the Plan. In the event a Claimholder or Interestholder does not vote, the
Bankruptcy Court may deem such Claimholder or Interestholder to have accepted
the Plan.
2. BALLOT TABULATION PROCEDURES
For purposes of voting on the Plan, the amount and classification of a
Claim or Equity Interest and the procedures that will be used to tabulate
acceptances and rejections of the Plan shall be exclusively as follows:
(a) If no proof of claim or proof of equity interest has been timely
filed, the voted amount of a Claim or Equity Interest shall be equal
to the amount listed for the particular Claim in the Schedules of
Assets and Liabilities, as and if amended, to the extent such Claim
or Equity Interest is not listed as contingent, unliquidated, or
disputed, and the Claim or Equity Interest shall be placed in the
appropriate Class, based on the Schedules of Assets and Liabilities,
and the respective registry of holders of Equity Interests;
(b) If a proof of claim or proof of equity interest has been timely filed
and has not been objected to before the expiration of the Voting
Deadline, the voted amount of that Claim or Equity Interest shall be
the amount specified in the proof of claim or proof of equity
interest filed with the Claims registry of the Clerk of the
Bankruptcy Court (the "CLERK");
(c) Subject to subparagraph (d) below, a Claim or Equity Interest that is
the subject of an objection filed before the Voting Deadline shall be
disallowed for voting purposes, except to the extent and in the
manner that the Debtors indicate in any objection or other pleading
that the Claim or Equity Interest should be allowed for voting or
other purposes;
(d) If a Claim or Equity Interest has been estimated or otherwise allowed
for voting purposes by order of the Bankruptcy Court, the voted
amount and classification shall be that set by the Bankruptcy Court;
(e) If a Claimholder or Interestholder (or its authorized representative)
did not use the Ballot form provided by the Debtors, or the official
ballot form authorized under the Federal Rules of Bankruptcy
Procedure (or, in the case of Nominal Holders for the Senior Notes or
Class 7.1A Common Units, an appropriate Affidavit of Voting Results)
such Ballot/votes will not be counted;
(f) If the Ballot is not received by the Tabulation Agent (or by a
Nominal Holder for Senior Notes or Class 7.1A Common Units) on or
before the Voting Deadline at the place indicated on the Ballot or
otherwise in the Solicitation Materials, the Ballot will not be
counted;
(g) If the Ballot is not signed by the Claimholder or Interestholder (or
its authorized representative), the Ballot will not be counted;
(h) If the individual or institution casting the Ballot (whether directly
or as a representative) was not the holder of a Claim or Equity
Interest on the Voting Record Date, the Ballot will not be counted;
(i) If the Claimholder or Interestholder (or its authorized
representative) did not check one of the boxes indicating acceptance
or rejection of the Plan, or checked both such boxes, the Ballot
will be counted as an acceptance;
(j) If no Ballots are received on or before the Voting Deadline with
respect to a particular class of Claims or Equity Interests, then
such class of Claims or Equity Interests shall be deemed to have
accepted the Plan;
(k) Whenever a Claimholder or Interestholder (or its authorized
representative) submits more than one Ballot voting the same Claim(s)
or Equity Interest(s) before the Voting Deadline, except as otherwise
directed by the Bankruptcy Court after notice and a hearing, the last
such Ballot shall be deemed to reflect the voter's intent and shall
supersede any prior Ballots; and
8
(l) Any votes by beneficial owners of the Senior Notes or Equity
Interests tabulated on an Affidavit of Voting Results or submitted
directly to the Tabulation Agent (and otherwise not reflected on an
Affidavit of Voting Results) will be counted as separate votes to
accept or reject the Plan, as applicable.
3. EXECUTION OF BALLOTS BY REPRESENTATIVES
Federal Rule of Bankruptcy Procedure 3018(c) requires that an acceptance or
rejection of a plan in a chapter 11 case shall be in writing, identify the plan
accepted or rejected, be signed by the creditor or equity security holder or an
authorized agent, and conform to the appropriate Official Form. The Official
Form requires the identification of persons signing in a fiduciary or
representative capacity. The Ballot you received has been designed to
incorporate these requirements. In order to be counted, however, completed
Ballots signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity must indicate their capacity when signing. At the
Debtors' request, Ballot signatories must submit proper evidence satisfactory to
the Debtors of their authority to so act. Failure to indicate the capacity of
the signatory to the Ballot may result in the Ballot being deemed invalid.
4. WAIVERS OF DEFECTS AND OTHER IRREGULARITIES REGARDING BALLOTS
Unless otherwise directed by the Bankruptcy Court, all questions concerning
the validity, form, eligibility (including time of receipt), acceptance, and
revocation or withdrawal of Ballots will be determined by the Debtors in their
sole discretion, whose determination will be final and binding. The Debtors
reserve the right to reject any and all Ballots not in proper form, the
acceptance of which would, in the opinion of the Debtors or their counsel, be
unlawful. The Debtors further reserve the right to waive any defects or
irregularities or conditions of delivery as to any particular Ballot. Unless
waived, any defects or irregularities in connection with deliveries of Ballots
must be cured within such time as the Debtors (or the Bankruptcy Court)
determine. Neither the Debtors, the Tabulation Agent, nor any other Person will
be under any duty to provide notification of defects or irregularities with
respect to deliveries of Ballots, nor will any of them incur any liability for
failure to provide such notification; provided, however, that Debtors and/or
Tabulation Agent will indicate on the Ballot summary the Ballots, if any, that
were not counted, and will provide the original of such Ballots with the
original of the Ballot summary to be submitted at the Confirmation Hearing.
Unless otherwise directed by the Bankruptcy Court, delivery of such Ballots will
not be deemed to have been made until any irregularities have been cured or
waived. Unless otherwise directed by the Bankruptcy Court, Ballots previously
furnished, and as to which any irregularities have not subsequently been cured
or waived, will be invalidated.
5. WITHDRAWAL OF BALLOTS AND REVOCATION
Except as otherwise directed by the Bankruptcy Court after notice and a
hearing, any holder of a Claim or Equity Interest (or its authorized
representative) in an Impaired Class who has delivered a valid Ballot for the
acceptance or rejection of the Plan may withdraw such acceptance or rejection by
delivering a written notice of withdrawal to the Tabulation Agent (with copy to
Debtor's counsel) at any time before the Voting Deadline.
To be valid, a notice of withdrawal must:
- contain the description of the Claims or Equity Interests to which it
relates and the aggregate principal amount or number of shares
represented by such Claims or Equity Interests;
- be signed by the Claimholder or Interestholder (or its authorized
representative) in the same manner as the Ballot; and
- be received by the Tabulation Agent in a timely manner at the address set
forth in this Disclosure Statement for the submission of Ballots (with a
copy to counsel for Debtors).
The Debtors expressly reserve the absolute right to contest the validity of any
such withdrawals of Ballots.
9
Unless otherwise directed by the Bankruptcy Court, a purported notice of
withdrawal of Ballots that is not received in a timely manner by the Tabulation
Agent and Debtors' counsel will not be effective to withdraw a previously
furnished Ballot.
Any Claimholder or Interestholder (or its authorized representative) who
has previously submitted a properly completed Ballot before the Voting Deadline
may revoke such Ballot and change its vote by submitting before the Voting
Deadline a subsequent, properly completed Ballot for acceptance or rejection of
the Plan.
I. CONFIRMATION OF PLAN
1. SOLICITATION OF ACCEPTANCES
The Debtors are soliciting your vote.
NO REPRESENTATIONS OR ASSURANCES, IF ANY, CONCERNING THE DEBTORS OR
THE PLAN ARE AUTHORIZED BY THE DEBTORS, OTHER THAN AS SET FORTH IN
THIS DISCLOSURE STATEMENT. ANY REPRESENTATIONS OR INDUCEMENTS MADE BY
ANY PERSON TO SECURE YOUR VOTE, OTHER THAN THOSE CONTAINED IN THIS
DISCLOSURE STATEMENT, SHOULD NOT BE RELIED ON BY YOU IN ARRIVING AT
YOUR DECISION, AND SUCH ADDITIONAL REPRESENTATIONS OR INDUCEMENTS
SHOULD BE REPORTED TO DEBTORS' COUNSEL FOR APPROPRIATE ACTION.
THIS IS A SOLICITATION SOLELY BY THE DEBTORS, AND IS NOT A
SOLICITATION BY ANY UNITHOLDER, ATTORNEY, ACCOUNTANT, OR OTHER
PROFESSIONAL FOR THE DEBTORS. THE REPRESENTATIONS, IF ANY, MADE IN
THIS DISCLOSURE STATEMENT ARE THOSE OF THE DEBTORS AND NOT OF SUCH
UNITHOLDERS, ATTORNEYS, ACCOUNTANTS, OR OTHER PROFESSIONALS, EXCEPT AS
MAY BE OTHERWISE SPECIFICALLY AND EXPRESSLY INDICATED.
Under the Bankruptcy Code, a vote for acceptance or rejection of a plan may
not be solicited unless the claimant has received a copy of a disclosure
statement approved by the Bankruptcy Court prior to, or concurrently with, such
solicitation. This solicitation of votes on the Plan is governed by Bankruptcy
Code section 1125(b). Violation of Bankruptcy Code section 1125(b) may result in
sanctions by the Bankruptcy Court, including disallowance of any improperly
solicited vote.
2. REQUIREMENTS FOR CONFIRMATION OF THE PLAN
At the Confirmation Hearing, the Bankruptcy Court shall determine whether
the requirements of Bankruptcy Code section 1129 have been satisfied, in which
event the Bankruptcy Court shall enter an order confirming the Plan. For the
Plan to be confirmed, Bankruptcy Code section 1129 requires that:
(a) The Plan complies with the applicable provisions of the Bankruptcy
Code;
(b) The Debtors have complied with the applicable provisions of the
Bankruptcy Code;
(c) The Plan has been proposed in good faith and not by any means
forbidden by law;
(d) Any payment or distribution made or promised by the Debtors or by a
Person issuing securities or acquiring property under the Plan for
services or for costs and expense in connection with the Plan has been
disclosed to the Bankruptcy Court, and any such payment made before
the confirmation of the Plan is reasonable, or if such payment is to
be fixed after confirmation of the Plan, such payment is subject to
the approval of the Bankruptcy Court as reasonable;
(e) The Debtors have disclosed the identity and affiliation of any
individual proposed to serve, after confirmation of the Plan, as a
director, officer or voting trustee of the Debtors, an affiliate of
the Debtors participating in a joint plan with the Debtors, or a
successor to the Debtors under the Plan; the appointment to, or
continuance in, such office of such individual is consistent with the
interests
10
of creditors and interestholders and with public policy; and the
Debtors have disclosed the identity of any Insider that will be
employed or retained by the reorganized Debtors and the nature of any
compensation for such Insider;
(f) Any government regulatory commission with jurisdiction (after
confirmation of the Plan) over the rates of the Debtors has approved
any rate change provided for in the Plan, or such rate change is
expressly conditioned on such approval;
(g) With respect to each Impaired Class of Claims or Equity Interests,
either each holder of a Claim or Equity Interest of the Class has
accepted the Plan, or will receive or retain under the Plan on account
of that Claim or Equity Interest, property of a value, as of the
Effective Date of the Plan, that is not less than the amount that such
holder would so receive or retain if the Debtors were liquidated on
such date under chapter 7 of the Bankruptcy Code. If Bankruptcy Code
section 1111(b)(2) applies to the Claims of a Class, each holder of a
Claim of that Class will receive or retain under the Plan on account
of that Claim property of a value, as of the Effective Date, that is
not less than the value of that holder's interest in the Debtors'
interest in the property that secures that Claim;
(h) Each Class of Claims or Equity Interests has either accepted the Plan
or is not Impaired under the Plan;
(i) Except to the extent that the holder of a particular Administrative
Claim or Priority Claim has agreed to a different treatment of its
Claim, the Plan provides that Administrative Claims and Allowed
Priority Unsecured Non-Tax Claims shall be paid in full on the
Effective Date or the Allowance Date;
(j) If a Class of Claims or Equity Interests is Impaired under the Plan,
at least one such Class of Claims or Equity Interests has accepted
the Plan, determined without including any acceptance of the Plan by
any Insider holding a Claim or Equity Interest of that Class; and
(k) Confirmation of the Plan is not likely to be followed by the
liquidation or the need for further financial reorganization of the
Debtors or any successor to the Debtors under the Plan, unless such
liquidation or reorganization is proposed in the Plan.
The Debtors believe that the Plan satisfies all of the statutory
requirements of the Bankruptcy Code for confirmation and that the Plan was
proposed in good faith. The Debtors believe they have complied, or will have
complied, with all the requirements of the Bankruptcy Code governing
confirmation of the Plan.
3. ACCEPTANCES NECESSARY TO CONFIRM THE PLAN
Voting on the Plan by each holder of a Claim or Equity Interest (or its
authorized representative) is important. Chapter 11 of the Bankruptcy Code does
not require that each holder of a Claim or Equity Interest vote in favor of the
Plan in order for the Court to confirm the Plan. Generally, to be confirmed
under the acceptance provisions of Bankruptcy Code section 1126(a), the Plan
must be accepted by each Class of Claims that is impaired under the Plan by
parties holding at least two-thirds in dollar amount and more than one-half in
number of the Allowed Claims of such Class actually voting in connection with
the Plan. With regard to a Class of Equity Interests, at least two-thirds of the
Equity Interests actually voted must accept to bind that Class. Even if all
Classes of Claims and Equity Interests accept the Plan, the Bankruptcy Court may
refuse to confirm the Plan.
4. CRAMDOWN
In the event that any impaired Class of Claims or Equity Interests does not
accept the Plan, the Bankruptcy Court may still confirm the Plan at the request
of the Debtors if, as to each impaired Class that has not accepted the Plan, the
Plan "does not discriminate unfairly" and is "fair and equitable." A plan of
reorganization does not discriminate unfairly within the meaning of the
Bankruptcy Code if no class receives
11
more than it is legally entitled to receive for its claims or equity interests.
"Fair and equitable" has different meanings for holders of secured and unsecured
claims and equity interests.
With respect to a secured claim, "fair and equitable" means either (i) the
impaired secured creditor retains its liens to the extent of its allowed claim
and receives deferred cash payments at least equal to the allowed amount of its
claims with a present value as of the effective date of the plan at least equal
to the value of such creditor's interest in the property securing its liens;
(ii) property subject to the lien of the impaired secured creditor is sold free
and clear of that lien, with that lien attaching to the proceeds of sale, and
such lien proceeds must be treated in accordance with clauses (i) and (iii)
hereof; or (iii) the impaired secured creditor realizes the "indubitable
equivalent" of its claim under the plan.
With respect to an unsecured claim, "fair and equitable" means either (i)
each impaired creditor receives or retains property of a value equal to the
amount of its allowed claim or (ii) the holders of claims and equity interests
that are junior to the claims of the dissenting class will not receive any
property under the plan.
With respect to equity interests, "fair and equitable" means either (i)
each impaired equity interest receives or retains, on account of that equity
interest, property of a value equal to the greater of the allowed amount of any
fixed liquidation preference to which the holder is entitled, any fixed
redemption price to which the holder is entitled, or the value of the equity
interest, or (ii) the holder of any equity interest that is junior to the equity
interest of that class will not receive or retain under the plan, on account of
that junior equity interest, any property.
ARTICLE IV
BACKGROUND OF THE DEBTORS
A. CORPORATE INFORMATION AND DEBTORS' RELATIONSHIP TO SUBSIDIARIES AND
AFFILIATES
The Debtors are:
- EOTT Energy Partners, L.P., a publicly-held Delaware limited partnership,
which is referred to as "EOTT" in this Disclosure Statement and in the
Plan;
- EOTT Energy Finance Corp., a Delaware corporation and wholly-owned
subsidiary of EOTT, which is referred to as "EOTT FINANCE" in this
Disclosure Statement and in the Plan;
- EOTT Energy General Partner, L.L.C., a Delaware limited liability company
and wholly-owned subsidiary of EOTT, which is referred to as "EOTT LLC"
in this Disclosure Statement and in the Plan;
- EOTT Energy Operating Limited Partnership, a Delaware limited partnership
and wholly-owned subsidiary of EOTT in which EOTT owns all of the limited
partnership interests and EOTT LLC owns all of the general partnership
interests, which is referred to as "EOTT OLP" in this Disclosure
Statement and the Plan;
- EOTT Energy Canada Limited Partnership, a Delaware limited partnership
and wholly-owned subsidiary of EOTT in which EOTT OLP owns all of the
limited partnership interests and EOTT LLC owns all of the general
partnership interests, which is referred to as "EOTT CANADA" in this
Disclosure Statement and in the Plan;
- EOTT Energy Pipeline Limited Partnership, a Delaware limited partnership
and wholly-owned subsidiary of EOTT in which EOTT OLP owns all of the
limited partnership interests and EOTT LLC owns all of the general
partnership interests, which is referred to as "EOTT PIPELINE" in this
Disclosure Statement and in the Plan;
- EOTT Energy Liquids, L.P., a Delaware limited partnership and
wholly-owned subsidiary of EOTT in which EOTT OLP owns all of the limited
partnership interests and EOTT LLC owns all of the general partnership
interests, which is referred to as "EOTT LIQUIDS" in this Disclosure
Statement and in the Plan; and
12
- EOTT Energy Corp., a Delaware corporation and a wholly-owned subsidiary
of Enron Corp. ("ENRON"), which is referred to as "EOTT GP" in this
Disclosure Statement and in the Plan. EOTT GP is the general partner of
EOTT.
An organizational chart depicting the Debtors' corporate structure is
attached to this Disclosure Statement as EXHIBIT C.
B. DESCRIPTION OF THE DEBTORS' BUSINESSES
EOTT gathers, markets, transports and stores crude oil, refined petroleum
products and natural gas liquids ("NGLS"). EOTT also owns and operates a
hydrocarbon processing plant that produces methyl tertiary butyl ether ("MTBE")
and owns and operates a natural gas liquids storage facility. EOTT conducts
these operations principally through four subsidiary operating limited
partnerships, EOTT OLP, EOTT Canada, EOTT Pipeline, and EOTT Liquids
(collectively, the "EOTT OPERATING SUBSIDIARIES"). In March 1994, EOTT made an
initial public offering of common units of limited partnership interest ("COMMON
UNITS"), and in September 1999 made a subsequent public offering of 3.5 million
Common Units. In September 1999, EOTT also issued $235 million of its 11% Senior
Notes due 2009 ("SENIOR NOTES").
EOTT GP is the sole general partner of EOTT. EOTT LLC is the sole general
partner of the EOTT Operating Subsidiaries.
EOTT is one of the largest independent crude oil gathering and marketing
companies in North America. EOTT currently gathers and markets from
approximately 30,000 field gathering points in 19 states and Canada, averaging
260,000 barrels per day at the end of September 2002. In addition, EOTT is
engaged in interstate and intrastate crude oil transportation and crude oil
terminalling and storage activities. EOTT purchases crude oil from various
producers and operators and markets the crude oil to refiners and other
customers nationwide. EOTT transports crude oil through pipelines, including
approximately 8,000 miles of active gathering and transmission pipelines that
EOTT owns, and through its trucking operation, which includes a fleet of 238
owned or leased trucks. EOTT has approximately 12.2 million barrels of active
storage capacity associated with field tanks. During 2001, EOTT purchased
liquids processing, storage and transportation assets, and through those assets,
EOTT is engaged in the production of MTBE and the transportation and storage of
natural gas liquids. EOTT engages in the following business activities:
GATHERING AND MARKETING. EOTT gathers, stores and transports crude oil in
the United States and Canada. EOTT also provides certain accounting and
administrative services to some producers and operators. In connection with the
acquisition of assets from Koch Oil Company and Koch Pipeline Company, L.P. in
December 1998, EOTT entered into a 15-year supply contract at market-based
prices with Koch Oil Company (now Koch Supply & Trading, L.P.). Most
transactions EOTT enters into are at market responsive prices, with a large
number of transactions on a 30-day automatically renewable basis. The purchases
are typically based on EOTT's monthly-average posted prices, or the price at
which EOTT is willing to pay producers in a particular region, plus a bonus. The
bonus is determined based on grade of oil, transportation costs and other
competitive factors. In response to market conditions, posted prices can change
daily, and bonuses, in general, can change every 30 days as contracts renew.
Principal competitors include: BP Amoco PLC, Equiva, Plains All American and Sun
Refining & Marketing.
PIPELINE OPERATIONS. Through its common carrier pipeline systems, EOTT
transports crude oil for its gathering and marketing operations and for third
parties pursuant to published tariff rates regulated by the Federal Energy
Regulatory Commission ("FERC") and state regulatory authorities. EOTT conducts
these operations in its Pipeline Operations business segment. Approximately 76%
of the revenues from EOTT's Pipeline Operations business segment for the nine
months ended September 30, 2002 were generated from tariffs charged to and sales
of crude oil inventory made to its other business segments.
LIQUIDS OPERATIONS. EOTT owns and operates liquids processing, storage and
transportation assets, which are located in the Texas Gulf Coast region and were
purchased from Enron in June 2001. EOTT has a hydrocarbon processing complex at
Morgan's Point, Texas (the "MTBE PLANT"), and a natural gas liquids storage
facility located in Mont Belvieu, Texas (the "STORAGE FACILITY"). EOTT paid $117
million to Enron
13
and State Street Bank and Trust Company of Connecticut, National Association, as
trustee, for the MTBE Plant and Storage Facility. The trustee held these assets
under a lease financing arrangement with Enron. The purchase price was financed
through borrowings from Standard Chartered Trade Services Corporation ("SCTSC")
under short-term inventory and receivables financing facilities. Principal
competitors to the Storage Facility include Enterprise and Dynegy. EOTT had
previously agreed to process feed stocks for a fee at the MTBE Plant and provide
storage capacity at the Storage Facility to Enron Gas Liquids, Inc. ("EGLI"), an
indirect wholly-owned subsidiary of Enron that was included in Enron's
bankruptcy filings. EGLI rejected the agreements with EOTT related to the MTBE
Plant and Storage Facility as part of its bankruptcy proceedings.
WEST COAST OPERATIONS. EOTT owns and operates a gas processing plant, a
fractionation plant, and refrigerated propane storage and related truck and rail
distribution facilities in Kern County, California. EOTT participated in the
refined petroleum products marketing business on the West Coast until these
operations were sold to Trammo Petroleum on May 31, 2002.
C. THE DEBTORS' RELATIONSHIP WITH ENRON AND AFFILIATES
Enron's ownership interest in EOTT and the material agreements between EOTT
and Enron and its affiliates are described below.
1. OWNERSHIP OF GENERAL AND LIMITED PARTNER INTERESTS IN EOTT
EOTT GP, a subsidiary of Enron, owns a 1.98% general partner interest in
EOTT. Based upon information provided by Enron, an entity indirectly controlled
by Enron is the holder of record of approximately 18% of the Common Units and
78% of the Subordinated Units, representing 37% of the total Common Units and
Subordinated Units outstanding. As a result, Enron may be deemed to be the
beneficial owner of approximately 3.2 million Common Units and 7.0 million
Subordinated Units.
Enron also owns $9.3 million of Additional Partnership Interests ("APIS").
Under the EOTT Partnership Agreement, Enron guaranteed that EOTT would make a
specified level of distributions to the holders of its Common Units. If EOTT was
unable to make the specified level of distributions, Enron was obligated to
provide distribution support (up to $29 million) in exchange for APIs in EOTT.
The APIs do not entitle the holder to any voting rights or rights to
distributions. In May 1999 and February 2000, Enron paid $2.5 million and $6.8
million, respectively, in support of first and fourth quarter distributions to
EOTT common unitholders and received APIs. The APIs are entitled to be redeemed
if, with respect to any fiscal quarter, the minimum quarterly distributions and
any common unit arrearages have been paid, but only to the extent that available
cash with respect to such quarter exceeds that amount necessary to pay the
minimum quarterly distribution on all common units.
2. MANAGEMENT AGREEMENTS
EOTT and the EOTT Operating Subsidiaries do not have any employees. EOTT GP
provides EOTT with the personnel necessary to conduct EOTT's day-to-day business
operations, or arranges for the services of the required personnel from third
parties or other affiliates of Enron. Pursuant to the EOTT Partnership
Agreement, EOTT reimburses EOTT GP for substantially all of its direct and
indirect costs and expenses, including compensation and benefit costs, incurred
in providing or arranging for such services to EOTT. As a result of this
reimbursement obligation, all of the expenses for which EOTT GP is generally
obligated under the following contracts are required to be reimbursed to EOTT GP
by EOTT. EOTT GP has entered into the following agreements with Enron or its
affiliates for purposes of providing the management and operation services it
provides to EOTT.
ENRON CORPORATE SERVICES AGREEMENT. Enron has provided many of the
services that EOTT GP in turn provides to EOTT pursuant to a Corporate Services
Agreement between Enron and EOTT GP dated March 25, 1994 (the "ENRON CORPORATE
SERVICES AGREEMENT"). Under the Enron Corporate Services Agreement, Enron has
provided certain benefit plans, information technology services, partnership
accounting and tax preparation services, transfer agent services, investor
relations services, and insurance under Enron's
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insurance policies. EOTT GP is required to reimburse Enron for all expenses
Enron incurs under the Enron Corporate Services Agreement at Enron's cost for
providing these services. EOTT GP may terminate the Enron Corporate Services
Agreement upon thirty days written notice to Enron. Termination of the Enron
Corporate Services Agreement is contemplated under the Enron Settlement
Agreement.
ADMINISTRATIVE SERVICES AGREEMENT. EOTT GP provides services to EOTT OLP,
EOTT Canada, EOTT Pipeline, and EOTT Liquids on behalf of EOTT LLC, the general
partner of such partnerships, pursuant to the Administrative Services Agreement
between EOTT GP and EOTT LLC dated July 1, 2001 ("ADMINISTRATIVE SERVICES
AGREEMENT"). Pursuant to the Administrative Services Agreement, EOTT GP provides
the services it provides to EOTT, either directly or pursuant to the contracts
discussed in this section, to all of EOTT's Operating Subsidiaries. EOTT LLC is
required to reimburse EOTT GP for all expenses EOTT GP incurs under the
Administrative Services Agreement at EOTT GP's cost for providing these
services.
OPERATION AND SERVICE AGREEMENT. EOTT GP has also entered into an
Operation and Service Agreement dated October 1, 2000, as amended ("OPERATION
AND SERVICE AGREEMENT") with Enron Pipeline Services Company ("EPSC"), an
indirect wholly-owned subsidiary of Enron. EPSC is not in bankruptcy. Pursuant
to the Operation and Service Agreement, EPSC operates EOTT's pipeline
facilities, provides administrative services related to the operation of such
facilities, provides emergency services, performs capital improvements, and
provides other services requested by EOTT GP. EOTT GP is required to reimburse
EPSC for all expenses it incurs under the Operation and Service Agreement at
EPSC's cost of providing these services. Either party may terminate the
Operation and Service Agreement upon 180 days written notice prior to December
31st in the year of termination. The Employee Transition Agreement (as defined
below) provides for termination of the Operation and Service Agreement.
EPSC CORPORATE SERVICES AGREEMENT. EOTT GP has entered into a Corporate
Services Agreement with EPSC dated December 1, 2000 ("EPSC CORPORATE SERVICES
AGREEMENT") pursuant to which EPSC will provide EOTT with corporate and
administrative services. Currently, EPSC provides only property tax services
pursuant to the EPSC Corporate Services Agreement. EOTT GP is required to
reimburse EPSC for all expenses it incurs under the EPSC Corporate Services
Agreement at EPSC's cost for providing these services. Either party may
terminate the EPSC Corporate Services Agreement upon 90 days prior written
notice. The Enron Settlement Agreement provides for termination of the EPSC
Corporate Services Agreement.
EGP TRANSITION AGREEMENT. In connection with the acquisition of the MTBE
Plant and Storage Facility, EOTT GP entered into a transition services agreement
("TRANSITION AGREEMENT") with EGP Fuels Company, an indirect subsidiary of Enron
("EGP FUELS") to provide transition services through December 31, 2001, and for
the processing of invoices and payments to third parties related to the MTBE
Plant and Storage Facility. Additionally, EOTT GP provided services to EGP Fuels
at its methanol plant through December 31, 2001. The Transition Agreement
provided that either party would reimburse the other party for the services
rendered, at the cost to the party providing the services. The Enron Settlement
Agreement contemplates termination of the Transition Agreement.
3. ADDITIONAL AGREEMENTS
In addition to the services agreements discussed above, EOTT has entered
into the following material agreements with Enron and its affiliates that were
adversely affected by Enron's bankruptcy filing.
PURCHASE AND SALE AGREEMENT. Effective June 30, 2001, EOTT Liquids
purchased the MTBE Plant and the Storage Facility from Enron for $117.0 million,
pursuant to a Purchase and Sale Agreement dated June 29, 2001 ("MTBE AND STORAGE
PURCHASE AGREEMENT") between EOTT and Enron. Under this Agreement, Enron
indemnified EOTT for certain ad valorem taxes and potential environmental and
title defect expenditures relating to the MTBE Plant and the Storage Facility.
TOLL CONVERSION AGREEMENT AND STORAGE AGREEMENT. In connection with the
purchase of the MTBE Plant and Storage Facility from Enron, EOTT Liquids entered
into agreements with EGLI, an indirect wholly-owned subsidiary of Enron that has
filed bankruptcy, to insure a minimum level of cash flow from
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ownership and operation of the MTBE Plant and Storage Facility (the "TOLL
CONVERSION AND STORAGE AGREEMENTS").
On April 2, 2002, the Enron bankruptcy court entered a stipulation and
agreed order (the "STIPULATION") in which EGLI rejected the Toll Conversion and
Storage Agreements effective April 12, 2002. As a result of EGLI's rejection of
these agreements, EOTT recorded a $29.1 million non-cash impairment at December
31, 2001. Additionally, EOTT has a monetary damage claim against EGLI and Enron
as a result of the rejection of the agreements under the Stipulation. EOTT filed
a claim against EGLI in its bankruptcy case for damages resulting from the
rejection of the Toll Conversion and Storage Agreements in the amount of $540.5
million. The amount of EOTT's claim has not been fully determined. The Enron
Settlement Agreement contemplates that this claim will be expunged.
Pursuant to a Limited Guaranty dated as of June 29, 2001 between Enron and
EOTT Liquids, Enron guaranteed EGLI's performance under the Toll Conversion and
Storage Agreements. Enron's guarantee was limited to $50 million under the Toll
Conversion Agreement and $25 million under the Storage Agreement. Accordingly,
the claim filed against Enron in its bankruptcy case resulting from EGLI's
rejection of the Toll Conversion and Storage Agreements was for $75 million. The
Enron Settlement Agreement contemplates that this claim will be expunged.
SUPPORT AGREEMENT. Pursuant to the Support Agreement dated September 21,
1998 between EOTT and Enron ("SUPPORT AGREEMENT"), Enron agreed to support
EOTT's minimum quarterly distributions of $0.475 per Common Unit until the
calendar quarter ending December 31, 2001. Under the Support Agreement, if EOTT
did not have sufficient available cash to make the minimum cash distribution to
holders of Common Units, Enron was obligated to provide distribution support (up
to $29 million) in exchange for APIs. Under the Support Agreement, Enron paid
$9.3 million to support EOTT's minimum distributions in May 1999 and February
2000, and received $9.3 million of APIs. EOTT's distribution for the fourth
quarter of 2001 was $0.25 per Common Unit. Pursuant to the Support Agreement,
Enron was obligated to provide cash distribution support through the fourth
quarter of 2001. Enron did not pay the fourth quarter cash distribution
shortfall of $0.225 per Common Unit. EOTT made a claim in Enron's bankruptcy
case for this distribution shortfall of $4.2 million. The Enron Settlement
Agreement contemplates that this claim will be expunged.
CREDIT FACILITY. Pursuant to the Amended and Restated Credit Agreement,
dated as of December 1, 1998, between EOTT OLP and Enron ("ENRON CREDIT
FACILITY"), Enron provided the Debtors with credit support in the form of
guarantees, letters of credit and working capital loans with sublimits of $100
million for working capital loans and $900 million for guarantees and letters of
credit. The Enron Credit Facility expired December 31, 2001.
4. ENRON PENSION PLAN PARTICIPATION
Pension Plan Underfunding Issues. EOTT GP is a participating employer in a
defined benefit pension plan known as the Enron Corp. Cash Balance Plan (the
"CASH BALANCE PLAN"). Based on information provided by Enron, the allocation
related to the funding of the Cash Balance Plan by Enron to EOTT GP each year is
based on a percentage of payroll costs. As discussed above, under the EOTT
Partnership Agreement, any costs allocated to EOTT GP are passed through to EOTT
and EOTT is responsible for reimbursing EOTT GP, subject to any claims for
indemnity, offset, recoupment or counterclaims EOTT may have against EOTT GP or
any of its affiliates. The funding percentage for each participating employer is
determined once a year. However, Enron will allocate additional costs, if
necessary, for any significant changes to the minimum funding. To date, Enron
has not changed EOTT GP's funding percentage for 2002 or allocated any
additional costs in 2002 to EOTT GP.
Based on information provided by Enron, the assets of the Cash Balance Plan
are currently less than the present value of all accrued benefits on both an
SFAS No. 87 (Employers' Accounting for Pensions) basis and a plan termination
basis by approximately $90 million, with approximately 48 percent of that amount
attributable to members of the Enron "controlled group" that are not in
bankruptcy.
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A federal government corporation known as the Pension Benefit Guaranty
Corporation (the "PBGC") has the power to terminate underfunded pension plans in
certain situations, after receiving the permission either of the employer or of
a court. The PBGC is currently investigating what liability it believes the
Debtors have with respect to the Cash Balance Plan and other defined benefit
plans sponsored by members of Enron's "controlled group," as defined in 29
U.S.C. sec. 1301(a)(14). The PBGC estimates that the Cash Balance Plan is
underfunded on a termination basis by at least $271 million. The Debtors and the
PBGC agree that because EOTT GP is in Enron's controlled group, EOTT GP would be
subject to joint and several liability for the Cash Balance Plan's underfunded
benefits liabilities if the Cash Balance Plan is terminated. The PBGC may allege
such liabilities against any members of Enron's controlled group, including EOTT
GP and other Debtors, if the PBGC determines the other Debtors to be in Enron's
controlled group. The PBGC may also pursue other liability theories against the
Debtors under ERISA and other applicable law. If the Cash Balance Plan
terminates, EOTT GP would be expected to exercise all its rights to defend
against such a claim and, in the event that the PBGC had not already pursued and
collected from solvent members of the "controlled group," it would assert its
rights to recover contribution from such members. Enron has informed the Debtors
that it intends to terminate the Cash Balance Plan sometime in the year 2003
provided that it receives approval to do so by its creditors and its bankruptcy
court. Any claim paid by EOTT GP might become EOTT's responsibility under the
EOTT Partnership Agreement subject to any claims of indemnity, offset,
recoupment or any counterclaims EOTT might have against EOTT GP or any of its
affiliates.
Each individual who at any time provided services for the benefit of EOTT
and who accrued a benefit under any employee benefit plan sponsored or
maintained by Enron or any entity treated as a single employer with Enron under
Internal Revenue Code Section 414(b), (c), (m), or (o) (collectively, the "GP
SERVICE EMPLOYEES") was hired by, and provided such services as an employee of,
either EOTT GP or Enron. This includes the employees covered by the Operating
and Service Agreement between EOTT GP and EPSC, an Enron subsidiary. EOTT never
played any role in hiring, retaining, supervising, training, counseling,
disciplining, or discharging any GP Service Employee. EOTT has never been an
employer of any GP Service Employee, and has never acted, directly or
indirectly, as an employer or in the interest of an employer of a GP Service
Employee, with respect to any employee benefit plan, and has never acted with or
within any group or association of employers acting for an employer of any GP
Service Employee in such capacity.
Enron negotiated and made all decisions with respect to all benefits
provided to any GP Service Employee, in his or her capacity as such, under the
Cash Balance Plan and the Enron Corp. Savings Plan. All obligations with respect
to the payment of any compensation and benefits, and with respect to any
contributions for the payment of any compensation or benefits, to or for the
benefit of any GP Service Employee in his or her capacity as such were the sole
obligations of EOTT GP or Enron, and were never the absolute obligations of
EOTT, whether or not EOTT reimbursed or was required to reimburse the EOTT GP or
Enron for such costs or expenses. Neither EOTT nor any entity that is treated as
a single employer with EOTT under Internal Revenue Code Section 414(b), (c),
(m), or (o) has or ever had any contractual obligation, directly or indirectly,
to make any contribution to the Enron Cash Balance Plan or any other employee
benefit plan established or maintained by Enron or any entity that is treated as
a single employer with Enron under Internal Revenue Code Section 414(b), (c),
(m), or (o).
The payment of any amounts relative to the Cash Balance Plan or any other
employee benefit plan or any other compensation arrangement by EOTT, and the
obligations of EOTT, to Enron or any other person or entity under the Enron
Settlement Agreement are reimbursements on behalf of EOTT GP and do not
constitute, nor do they give rise to any absolute obligation on the part of EOTT
with respect to the Cash Balance Plan or any other employee benefit plan or any
other compensation arrangement established or maintained by Enron or any entity
that is treated as a single employer with Enron under Internal Revenue Code
Section 414(b), (c), (m), or (o). As such, nothing in the Enron Settlement
Agreement causes EOTT to be or deemed to be a contributing sponsor of the Cash
Balance Plan or any other employee benefit plan maintained on behalf of the GP
Service Employees for any purpose under Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
The purposes of the transactions effected pursuant to the bankruptcy filing
and liquidation of EOTT GP are to sever the relationship of EOTT from Enron by
canceling EOTT GP's general partnership interest in
17
EOTT and are not to evade any liabilities under ERISA or other similar law.
Moreover, the purpose of the transactions effected pursuant to the bankruptcy
filing of EOTT and the Plan are to effect a debt and equity restructuring of
EOTT and are not to evade any liabilities under ERISA or other similar law.
EOTT Energy LLC, an entity to be formed on or before the effective date of
the Plan, will employ some or all of the GP Service Employees. A description of
EOTT Energy LLC is contained in Article VIII, section (C)(2) below. Accordingly,
EOTT Energy LLC will obtain and maintain from EOTT GP and Enron, as applicable,
its records and Forms I-9 regarding employees subject to this reorganization.
The reorganization shall not be deemed, for purposes of the Forms I-9, to
interrupt the employment of those GP Service Employees currently employed by
EOTT GP or Enron, as applicable, and who have executed Forms I-9. Such
continuity of employment is consistent with federal immigration regulations
governing reorganization in the context of Form I-9.
With respect to the GP Service Employees to be employed by EOTT Energy LLC,
EOTT Energy LLC will obtain and maintain from EOTT GP or Enron, as applicable,
its records of pre-employment drug and alcohol testing required by DOT
regulations. For those employees employed on pipelines, EOTT Energy LLC will
obtain and maintain from EOTT GP or Enron, as applicable, its written
qualification program, including evaluations, relating to the operator
qualifications, required by DOT regulations. The reorganization shall not be
deemed, for purposes of the DOT regulations, to interrupt the employment of
those GP Service Employees currently employed by EOTT GP or Enron. Such
continuity of employment is consistent with the purpose of such DOT regulations.
D. CAPITALIZATION OF DEBTORS
1. DESCRIPTION OF EQUITY INTERESTS
EOTT has 18,476,011 Common Units, 9,000,000 Subordinated Units and
$9,318,213 of APIs outstanding, and 195,000 Common Units are reserved for
issuance upon exercise of outstanding options. Common Units are limited partner
interests in EOTT that entitle the holders to participate in EOTT's cash
distributions and to exercise the rights and privileges available to limited
partners under the EOTT Partnership Agreement.
Under the EOTT Partnership Agreement, EOTT is required to distribute on a
quarterly basis 100% of its available cash from operations to its partners.
Because of its deteriorating financial condition, EOTT has suspended payment of
distributions indefinitely. In addition, the forbearance agreements entered into
with Standard Chartered Bank and SCTSC provide that no such distributions will
be made without the consent of Standard Chartered Bank.
Under the EOTT Partnership Agreement, during the "subordination period,"
holders of EOTT's Common Units are entitled to receive a minimum quarterly
distribution of $0.475 per unit ($1.90 annualized) prior to any distribution of
available cash to holders of Subordinated Units. Under the EOTT Partnership
Agreement, the subordination period terminates when a specified amount of
distributions are made to holders of Common Units and Subordinated Units.
Because of EOTT's deteriorating financial condition, the distributions required
to end the subordination period will not be made prior to the Confirmation Date.
Under the EOTT Partnership Agreement, Enron guaranteed that EOTT would make
a specified level of distributions to holders of EOTT's Common Units. If EOTT
was unable to make the specified level of distributions, Enron was required to
provide distribution support (up to $29 million) in exchange for the APIs. The
APIs do not entitle the holder to any voting rights or rights to distributions.
The APIs are entitled to be redeemed if, with respect to any fiscal quarter, the
minimum quarterly distributions and any Common Unit arrearages have been paid,
but only to the extent that available cash with respect to such quarter exceeds
the amount necessary to pay the minimum quarterly distributions on all units.
Because of EOTT's deteriorating financial conditions, no amounts will be
available to pay the APIs prior to the Confirmation Date.
2. PRE-PETITION CREDIT FACILITY WITH STANDARD CHARTERED BANK
EOTT OLP, EOTT Canada, EOTT Pipeline and EOTT Liquids (the "PRE-PETITION
BORROWERS") were borrowers under the Second Amended and Restated Reimbursement,
Loan and Security Agreement dated
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April 23, 2002 (the "PRE-PETITION CREDIT FACILITY") with Standard Chartered
Bank. EOTT and EOTT LLC were guarantors of all obligations under the
Pre-Petition Credit Facility. The Pre-Petition Credit Facility provided up to
$300,000,000 in total availability. Under the Pre-Petition Credit Facility, the
Pre-Petition Borrowers could request Standard Chartered Bank to issue letters of
credit to their customers and up to $40,000,000 of the availability under the
Pre-Petition Credit Facility could have been borrowed as revolving credit loans,
provided that the letter of credit exposure plus the outstanding principal
amount of the revolving credit loans did not exceed the lesser of the total
availability or the borrowing base at such time.
Fees for outstanding letters of credit were 2% of the face amount of
letters of credit outstanding. There was also a commitment fee under the
Pre-Petition Credit Facility of 0.5% per annum on the unused portion of the
Pre-Petition Credit Facility. Loans under the Pre-Petition Credit Facility had a
per annum interest rate equal to the Alternative Base Rate (as defined in the
Pre-Petition Credit Facility) or LIBOR plus 3%. The Alternative Base Rate was 3%
per annum plus the higher of (a) the annual rate of interest announced from time
to time by Standard Chartered Bank as its base rate or (b) 0.5 of 1% above the
overnight Federal Funds rate, as published by the Federal Reserve Bank of New
York.
The Pre-Petition Credit Facility was secured by liens on substantially all
of the Debtors' property and assets, including their accounts receivable,
inventory of crude oil and fixed assets.
All outstanding prepetition loans, plus accrued and unpaid interest and
letter of credit fees under the Prepetition Credit Agreement were paid in full
from the DIP Term Loan Agreement (as defined below) and all prepetition letters
of credit were replaced by letters of credit under the Post-Petition Credit
Facility with Standard Chartered Bank.
3. COMMODITY REPURCHASE AGREEMENT WITH STANDARD CHARTERED TRADE SERVICES
CORPORATION
EOTT OLP is a party to a $75 Million Commodities Repurchase Agreement dated
October 18, 2002 with Standard Chartered Trade Services Corporation ("SCTSC")
(the "COMMODITY REPURCHASE AGREEMENT"). The Commodity Repurchase Agreement
provides for the financing of crude oil inventory purchase utilizing a forward
commodity repurchase agreement. Under the Commodity Repurchase Agreement, EOTT
OLP sells the commodity to SCTSC and is obligated to buy the commodity back from
SCTSC upon the earlier to occur of (i) March 31, 2002 and (ii) the effective
date of a reorganization plan of EOTT OLP that has been confirmed by an order of
the Bankruptcy Court, at a price equal to the original sales price. EOTT OLP is
obligated to pay to SCTSC interest equal to monthly LIBOR plus 3%, payable
monthly in arrears. EOTT OLP's obligations under the Commodity Repurchase
Agreement are secured by a lien on the commodities purchased by SCTSC
thereunder, all title documents delivered to SCTSC pursuant thereto, and all
proceeds thereof. The Commodity Repurchase Agreement was assumed as part of the
Post-Petition Credit Facility, which is more fully described in Article VI,
section D, below.
4. RECEIVABLE PURCHASE AGREEMENT WITH STANDARD CHARTERED TRADE SERVICES
CORPORATION
EOTT OLP is party to a $100 Million Amended and Restated Receivables
Purchase Agreement dated October 18, 2002 with SCTSC (the "RECEIVABLE PURCHASE
AGREEMENT"). The Receivable Repurchase Agreement provides for the transfer of up
to an aggregate amount of $100 million of trade receivables from Koch Supply &
Trading L.P. ("KOCH") on a monthly basis. The purchase by SCTSC of each months
receivables under the Receivable Purchase Agreement at a discounted price that
gives SCTSC an effective per annum yield equal to monthly LIBOR plus 3%. EOTT
OLP is obligated to reimburse SCTSC to the extent that the amounts collected
from Koch under the Receivable Purchase Agreement are not sufficient to repay
SCTSC for its investments and associated interest, yield, fees and other costs
under the Receivable Purchase Agreement. EOTT OLP's obligations under the
Receivable Purchase Agreement are secured by a lien on all receivables and
contract rights purchased by SCTSC under the Receivable Purchase Agreement and
all proceeds thereof. The Receivable Purchase Agreement was assumed as part of
the Post-Petition Credit Facility, which is more fully discussed in Article VI,
section D, below.
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5. FORBEARANCE AGREEMENT
As of June 30, 2002, EOTT was in default under certain covenants under the
Pre-Petition Credit Facility. These defaults were also defaults under the
Commodity Repurchase Agreement and the Receivable Purchase Agreement. Standard
Chartered Bank, SCTSC and EOTT have entered into forbearance agreements
("FORBEARANCE AGREEMENTS") pursuant to which Standard Chartered Bank and SCTSC
agreed not to take any actions to enforce its rights under the defaults, and
agreed to continue to extend credit under the Pre-Petition Credit Agreement and
purchase commodities or receivables, as applicable, under the Commodity
Repurchase Agreement and the Receivable Repurchase Agreement until October 30,
2002.
6. SENIOR NOTES
On October 1, 1999, EOTT and EOTT Finance issued to the public $235 million
of 11% Senior Notes due 2009 pursuant to the Indenture dated October 1, 1999, as
supplemented by the First Supplemental Indenture dated October 1, 1999 between
EOTT, EOTT Finance and The Bank of New York. Interest is payable semiannually on
April 1 and October 1. The Senior Notes are fully and unconditionally guaranteed
by EOTT LLC, EOTT Liquids, EOTT OLP, EOTT Canada, EOTT LLC, EOTT Liquids and
EOTT Pipeline. Provisions of the Senior Notes limit additional borrowings, sale
and lease back transactions, affiliate transactions, distributions to
unitholders or mergers, consolidations or sales of assets if certain financial
performance ratios are not met. The net proceeds from the issuance of the Senior
Notes were used to repay loans and short-term borrowings from Enron.
EOTT did not make the interest payment on the Senior Notes due October 1,
2002.
E. SETTLEMENT AGREEMENT WITH ENRON
The Debtors have entered into a Settlement Agreement dated October 8, 2002
(the "ENRON SETTLEMENT AGREEMENT") with Enron, Enron North America Corp., Enron
Energy Services, Inc., EPSC, EGP Fuels, and EGLI (collectively, the "ENRON
PARTIES"), which resolves such claims between the parties as described in the
Enron Settlement Agreement. The Enron Settlement Agreement was approved by the
Bankruptcy Court on November 22, 2002, and is subject to the approval of the
United States Bankruptcy Court for the Southern District of New York, the court
in which the Enron chapter 11 case is pending. The practical effect of the
Settlement Agreement and the consummation of the Plan will be the severance of
the business relationships between the Debtors and the Enron Parties. The
following is a summary of the relevant terms and conditions of the Enron
Settlement Agreement:
- EOTT GP, EOTT LLC, EOTT Pipeline and EOTT OLP, and EPSC entered into an
Employee Transition Agreement (the "EMPLOYEE TRANSITION AGREEMENT"),
which provides for the transfer to EOTT of the employees of EPSC which
perform services for EOTT. Until their transition to an EOTT entity that
is not a participating employer in Enron's retirement and welfare
benefits plan, the employees and their covered spouses and dependents of
EOTT GP will continue to participate in those Enron plans. The Debtors
shall take all such actions necessary to withdraw from all such Enron
retirement and welfare benefit plans as set forth in the Enron Settlement
Agreement. As consideration for continuation of the employees in the
Enron plans, EOTT shall pay all Undisputed Monthly Employee Benefit
Payments (as defined in the Enron Settlement Agreement) within ten (10)
business days of receipt of an invoice and shall pay the Fixed Employee
Benefits Amount (as defined in the Enron Settlement Agreement) in 12
equal installments on the first business day of each month beginning
January 2, 2003. Based on historical information, the Debtors estimate
that the aggregate amount of Undisputed Monthly Employee Benefit Payments
and Fixed Employee Benefits Amount will be approximately $120,000 per
month. On the effective date of the Employee Transition Agreement, the
Operation and Service Agreement will terminate.
- Enron consented to the filing of bankruptcy by the Debtors in the
Southern District of Texas.
- EOTT agrees to execute, on the Closing Date (as defined in the Enron
Settlement Agreement), a promissory note payable to Enron in the initial
principal amount of $6,211,673.13 that is guaranteed by
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EOTT Canada Ltd. (a non-Debtor entity) together with any existing and
future subsidiaries of EOTT (the "EOTT NOTE"). The EOTT Note will be
secured by an irrevocable letter of credit.
- EOTT shall pay $1,250,000 to Enron as a condition precedent to the
effectiveness of the Plan.
- Enron waived its right of first refusal with respect to the sale of the
MTBE Plant, Storage Facility and other assets purchased by EOTT pursuant
to the MTBE and Storage Purchase Agreement.
- The Debtors shall indemnify Enron and certain other persons from and
against certain losses, claims, damages, liabilities, and other amounts.
Such indemnification does not extend to losses, claims damages,
liabilities (joint or several), expenses, judgments, fines, penalties,
interest, settlements and other amounts directly resulting from acts of
fraud or the indemnitee's willful misconduct.
- Pursuant to the Operation and Service Agreement, EPSC operates the
Debtors' pipeline facilities, provides administrative services related to
the operation of such facilities, provides emergency services, performs
capital improvements, and provides other services requested by EOTT GP.
The Debtors shall assume the Operation and Service Agreement and cure
certain outstanding obligations arising thereunder until the effective
date of the Employee Transition Agreement. The Debtors will pay the
obligations as they become due under the Operation and Service Agreement;
however, the Debtors have not performed a thorough analysis of the
aggregate amount of such obligations. The Debtors shall assume the Enron
Settlement Agreement, the Agreed Payments, the Employee Benefits
Payments, the Final Invoice, the Transition Expenses, the EOTT Indemnity
and the O&S Indemnity (as those terms are defined in the Enron Settlement
Agreement), and such obligations shall constitute chapter 11
administrative claims against the Debtors. Further, such obligations
shall not be discharged and, instead, shall constitute ongoing
obligations of the reorganized entities or their successor(s). Similarly,
the amounts arising under the Cash Payment, the Note, the Guaranty, the
Letter of Credit, and the Employee Benefits Payments shall constitute
chapter 11 administrative expense claims against the Debtors. Further,
such obligations shall not be discharged and, instead, shall constitute
ongoing obligations of the reorganized entities or their successor(s).
Pursuant to the Enron Settlement Agreement, the Enron Parties and the
Debtors mutually released each other for any and all claims except as follows:
- All of the parties to the Enron Settlement Agreement retained any rights
to payments pursuant to the Stipulation.
- The Enron Parties did not release the Debtors for claims with respect to
the EOTT Note and the Liens, or any payments due to EPSC under the
Operation and Service Agreement for the period beginning August 1, 2002.
EOTT GP and the other Debtors mutually released each other from any and all
claims except those expressly reserved in the Enron Settlement Agreement.
The Enron Settlement Agreement also contemplates the termination of various
contracts between the parties, including the Enron Corporate Services Agreement,
the EPSC Corporate Services Agreement, and the Transition Agreement.
F. RESTRUCTURING AGREEMENT
The Consolidated Debtors have entered into a Restructuring Agreement dated
October 7, 2002 (the "RESTRUCTURING AGREEMENT") with the Enron Parties, Standard
Chartered Bank, SCTSC, Lehman Commercial Paper Inc. ("LEHMAN"), and holders of
approximately 66% of the outstanding principal amount of Senior Notes whereby
Enron, Standard Chartered Bank, SCTSC, Lehman, and such Noteholders agree to
vote in favor of the Plan and take (or refrain from taking) other actions
intended to support the confirmation of the Plan.
21
G. HISTORICAL FINANCIAL INFORMATION
EOTT files annual, quarterly and special reports, proxy statements and
other information with the SEC. Any reports, statements or other information
filed by EOTT with the SEC may be read or copied at the SEC's public reference
room located at 450 Fifth Street, N.W., Washington, D.C., 20549, or its public
reference rooms located in New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for information on the operation of the public
reference rooms. EOTT's SEC filings are also available to the public from the
SEC's web site at http://www.sec.gov. EOTT's SEC filings are located in the
EDGAR database on that web site.
In connection with a proxy filing submitted to the SEC in the fall of 2001
concerning EOTT's planned recapitalization, which was subsequently terminated
due to Enron's bankruptcy, the SEC reviewed EOTT's previous 1934 Act filings and
EOTT received comments from the SEC to which it has responded or is in the
process of responding. In response to certain SEC comments regarding
unauthorized trading activities disclosed in EOTT's previous SEC filings, EOTT
restated prior year financial results to reflect the fair value impact of these
transactions over the periods during which the contracts were outstanding. The
restatement related to losses incurred in connection with the theft of NGL
product, concealment of commercial activities and other unauthorized activities
by a former employee. As a result of the restatement, reported net income for
the year 1998 was decreased by $1.0 million and reported net income for the year
1999 was increased by $1.0 million.
On February 5, 2002, Arthur Andersen LLP ("ANDERSEN") withdrew as EOTT's
independent accountants. EOTT was informed that Andersen's withdrawal related to
Andersen's professional standards concerns, including auditor independence
issues, related to events involving Enron. The restatement of EOTT's financial
statements for the years 1998 and 1999, and the quarterly periods in 1999 and
2000, required the issuance of an updated audit opinion covering the years 1999
and 2000 from Andersen or the issuance of a new audit opinion covering those
years by a new independent accountant. Because Andersen advised EOTT they would
not issue an updated opinion due to the independence issues related to their
resignation, and EOTT's current independent accountants' engagement for purposes
of EOTT's Annual Report on Form 10-K for the year ended December 31, 2001 was
limited to an audit of 2001, EOTT filed unaudited financial statements for the
years 1999 and 2000 with its 2001 Annual Report. EOTT asked
PricewaterhouseCoopers LLP ("PWC"), its current independent accountants, to
consider auditing the affected periods and they are reviewing EOTT's request.
EOTT will consider alternatives for obtaining an audit of the affected periods,
as necessary.
H. ASSETS AND LIABILITIES
1. ASSETS
In the Schedules of Assets and Liabilities filed in the Bankruptcy Case (as
may be amended), the Debtors identified their property and assets existing on
the Petition Date as of September 30, 2002, the closest practical date to the
Petition Date. The values reported in the Schedules of Assets for EOTT, EOTT
LLC, EOTT Canada, EOTT Liquids and EOTT GP are based on book value for these
entities. The information reported in the Schedule of Assets for EOTT OLP and
EOTT Pipeline is based on replacement cost for certain assets because it
provided the most detailed information available for preparing the Schedules.
Regardless of whether the values are reported based on book value or
replacement cost, value assessment for reorganization purposes will ultimately
be based on an enterprise valuation of the reorganized Debtors if the Plan is
approved. If the Plan is not approved, and the Bankruptcy Case is converted to
chapter 7 liquidation, value would be more appropriately accessed based the
liquidation values. Book values and replacement values carried by the Debtor
have no material impact on the determination of enterprise value or liquidation
values.
22
To provide a more consistent method to evaluate asset values relative to
liabilities, the following table presents the book value (in millions) of total
assets as of September 30, 2002 for each Debtor. The table also reports an
approximate allocation of estimated liquidation values (in millions) as of
January 31, 2003.
----------------------------------------------------------------------------------------- ---------
EOTT
EOTT EOTT EOTT EOTT ENERGY EOTT
ENERGY ENERGY ENERGY ENERGY EOTT GENERAL ENERGY EOTT
OPERATING PIPELINE PARTNERS, LIQUIDS, ENERGY PARTNERS, FINANCE ENERGY
L.P. L.P. L.P. L.P. CANADA L.P. CORP. TOTAL CORP.
----------------------------------------------------------------------------------------- ---------
Book Value of Total
Assets(1) $490 $287 $ 6 $106 $31 -- -- $921 $ 1
----------------------------------------------------------------------------------------- --------
Estimated Liquidation
Value(2) $332 $220 -- $ 85 $41 -- -- $679 --
----------------------------------------------------------------------------------------- --------
(1) Book value of total assets is as of September 30, 2002 and excludes
intercompany receivables and investment in affiliates.
(2) The total value agrees to the consolidated liquidation analysis. Certain
assumptions have been made to allocate the liquidation value to the various
Debtors. Estimated liquidation values are as of January 31, 2003.
A description of certain of the Debtors' assets (namely, their pipeline and
transportation assets and liquid assets) is set forth in the following sections:
2. PIPELINE AND TRANSPORTATION ASSETS AND PROPERTIES
EOTT's interstate common carrier pipeline operations include its:
- Hobbs Pipeline in New Mexico and Texas;
- crude oil systems acquired from Amerada Hess in Mississippi and Alabama;
- crude oil systems acquired from CITGO Pipeline Company in Texas,
Louisiana, and Arkansas;
- crude oil systems in Texas, Oklahoma, Kansas, and the Rockies acquired
from Koch Oil Company and Koch Pipeline Company, L.P.; and
- crude oil systems in west Texas and eastern New Mexico acquired from
Texas-New Mexico Pipe Line Company.
23
At year end 2001, EOTT owned and operated approximately 8,000 miles of
active crude oil gathering and transmission pipelines. There are approximately
12.2 million barrels of active storage capacity associated with field tanks. By
state, the pipeline assets are as follows:
COMMON CARRIER PIPELINES PROPRIETARY PIPELINES
------------------------ ---------------------
MILES BY MILES BY
STATE STATE STATE
----- -------- --------
Alabama...................... 43 Alabama...................... 38
Arkansas..................... -- Arkansas..................... 2
Colorado..................... 91 Colorado..................... --
Kansas....................... 1,025 Kansas....................... --
Louisiana.................... 348 Louisiana.................... 131
Mississippi.................. 306 Mississippi.................. 267
Montana...................... 146 Montana...................... --
Nebraska..................... 63 Nebraska..................... --
New Mexico................... 1,158 New Mexico................... 157
North Dakota................. 435 North Dakota................. --
Oklahoma..................... 1,422 Oklahoma..................... --
South Dakota................. 38 South Dakota................. --
Texas........................ 2,347 Texas........................ 4
TOTAL................... 7,422 TOTAL.................... 599
In addition, EOTT owns a gas processing plant in California, with 20
million cubic feet per day of gas processing capacity; a fractionation plant
with 8,000 barrels per day of fractionation capacity; five million gallons of
refrigerated propane storage; and related truck and rail distribution
facilities. EOTT operates two active barge facilities in Louisiana, and one in
Alabama. Approximately 2.2 million barrels of storage capacity are associated
with these barge facilities. EOTT currently owns one terminal in Alabama with
approximately 125,000 barrels of storage capacity.
3. LIQUIDS ASSETS
EOTT's MTBE Plant used in its Liquids Operations for the production of MTBE
is located in southeast Harris County within the city limits of Morgan's Point,
Texas, approximately 30 miles from Houston. The MTBE Plant consists of three
processing units and extensive product handling facilities. The MTBE Plant has a
design capacity of 15,300 barrels per day and a rated capacity of 16,500 barrels
per day of equivalent MTBE production. The product handling facilities include
on-site tank storage, a barge dock and railcar and truck loading/unloading
facilities as well as various interconnections to a number of pipelines. The
dock is located at the entrance of the Houston Ship Channel. The dock has the
necessary facilities to load MTBE, natural gasoline, normal butane, isobutane,
isobutane (low sulfur) and to unload methanol and normal butane.
The natural gas liquids storage and transportation facilities used in
EOTT's Liquids Operations include an underground storage facility and a liquids
pipeline grid system and related loading, unloading and transportation
facilities. The Storage Facility is located at Mont Belvieu, Texas,
approximately 30 miles east of Houston, Texas. The Storage Facility consists of
ten active storage wells with a total capacity of 10 million barrels, a surface
brine pit with a total capacity of 1.1 million barrels and a brine disposal well
capable of disposing of up to 40,000 barrels of product per day. The pipeline
grid system and related facilities include an extensive transportation and
distribution system that allows EOTT to transport natural gas liquids and other
products to and from the Storage Facility and the MTBE Plant by pipeline, ship
or barge to the various refineries, petrochemical plants and other buyers and
suppliers of natural gas liquids that are located in and throughout the area.
For a complete listing and explanation of the Debtors' property and assets
as of the Petition Date, see the Schedules of Assets and Liabilities filed in
the Bankruptcy Case.
24
4. LIABILITIES
In the Schedules of Assets and Liabilities filed in the Bankruptcy Case (as
may be amended), the Debtors identified their liabilities existing on the
Petition Date.
-- REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK --
25
EOTT EOTT Total
EOTT EOTT EOTT EOTT Energy Energy EOTT
Energy Energy Energy Energy Canada General Energy
Operating Pipeline Partners, Liquids, Partners, Finance
L.P. L.P. L.P. L.P. L.L.C. Corp.
Secured Claims
Senior Secured Debt -- Direct 3 $471.5 $471.5 $471.5 $471.5 $471.5
Senior Secured Debt -- Guarantor 3 $471.5 $471.5 $0.0
Other 4 $5.6 $9.8 $8.8 $0.2 $24.4
Total $477.1 $481.3 $471.5 $480.3 $471.7 $471.5 $0.0 $495.9
Unsecured Priority Claims $5.3 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $5.3
General Unsecured Claims
Senior Unsecured -- Direct 5 $247.9 $247.9 $247.9
Senior Unsecured -- Guarantor 5 $247.9 $247.9 $247.9 $247.9 $247.9 $0.0
Crude Suppliers/Critical 6 $126.6 $1.4 $7.0 $7.0 $142.00
Vendors/Foreign Suppliers
Other 7 $29.9 $2.5 $17.2 $1.0 $50.6
Total $404.4 $251.8 $265.1 $255.9 $254.9 $247.9 $247.9 $440.5
Total Secured and Unsecured $886.8 $733.1 $736.6 $736.2 $726.6 $719.4 $247.9 $941.7
EOTT
Energy
Corp.
Secured Claims
Senior Secured Debt -- Direct
Senior Secured Debt -- Guarantor
Other
Total $0.0
Unsecured Priority Claims $2.1
General Unsecured Claims
Senior Unsecured -- Direct
Senior Unsecured -- Guarantor
Crude Suppliers/Critical
Vendors/Foreign Suppliers
Other $23.0
Total $23.0
Total Secured and Unsecured $25.1
3 EOTT Energy Partners, L.P. and EOTT Energy General Partners, LLC are
guarantors and EOTT Energy Operating, L.P., EOTT Energy Pipeline, L.P., EOTT
Energy Canada, L.P. and EOTT Energy Liquids, L.P. are direct debtors (meaning
that the debtor is the debtor or co-debtor) on the credit facilities provided
by Standard Chartered Bank and SCTSC. The total amount of the prepetition
obligations due under those secured credit facilities as of the petition date
is approximately $471.5 million. That total amount is included in each of the
Secured Claims amounts indicated for each debtor; however, such amount is
payable in the aggregate of all debtors of $471.5.
4 Comprised of M&M liens.
5 EOTT Energy Partners, L.P. and EOTT Energy Finance Corp are direct debtors and
EOTT Energy Operating L.P., EOTT Energy Pipeline, L.P. and EOTT Energy Canada,
L.P. are guarantors on the public bond debt due under the Senior Note
Indenture. The total amount of the prepetition obligations due under the
senior note debt (including accrued and unpaid interest) is approximately
$247.9 million. That total amount is included in each of the General Unsecured
Claims amounts indicated for each guarantor or co-debtor; however, such amount
is payable in the aggregate of all debtors of $247.9 million.
6 These amounts have been paid or are expected to be paid post petition pursuant
to first day orders.
7 Excludes intercompany amounts among the Debtors. The remaining is primarily
comprised of the following:
- Approximately $21 million of EOTT Energy Operating, L.P. accounts
payable -- suspense. These payables are for amounts that should have been
remitted to a person with an interest in crude oil EOTT Energy Operating, L.P.
purchased. These amounts have not been remitted primarily due to legal and
title disputes and missing or incorrect contact information.
- Approximately $16 million of EOTT Energy Partners, L.P. and $23 million of
EOTT Energy Corp. payables to Enron Corp. which will be eliminated by the
Enron Settlement Agreement.
26
Those total amounts may change based on the proofs of claim filed in the
Bankruptcy Case, as well as the outcome of any objections to those proofs
of claim. For a complete listing and explanation of the Debtors'
liabilities as of the Petition Date, parties should refer to the Schedules
of Assets and Liabilities filed in the Bankruptcy Case.
I. EXISTING LITIGATION AND PROCEEDINGS
The following paragraphs in this section describe the material pending
administrative and legal proceedings in which the Debtors are involved. Due to
the early stages of some of the proceedings and the general uncertainty
surrounding the outcome of any litigation, it is not possible at this time for
EOTT to provide a meaningful analysis of the outcome of the proceedings
discussed below. Generally, as a result of the bankruptcy filing, all pending
litigation against the Debtors is stayed in accordance with the automatic stay
under Bankruptcy Code section 362 while the Debtors continue their business
operations as debtors in possession.
1. ADMINISTRATIVE PROCEEDINGS
Enron received a request for information from the EPA under Section 308 of
the Clean Water Act requesting information regarding certain discharges and
releases from oil pipelines owned or operated by Enron and its affiliated
companies for the time period July 1, 1998 to July 11, 2001. The only domestic
crude oil pipelines owned or operated by Enron at the time of the request were
EOTT's pipelines. EOTT's pipelines have been operated by either EOTT GP, a
wholly owned subsidiary of Enron, or EPSC, also a wholly-owned indirect Enron
subsidiary, for the time period in question. At the time the EPA issued the
Section 308 request to Enron, EPSC operated EOTT's pipelines on EOTT's behalf.
EOTT GP and EPSC retain operator liability for the time period at issue. In
addition to the retention of ownership liability, EOTT may also be required to
indemnify EOTT GP and its affiliates with regard to any environmental damages.
Under the terms of the EOTT Partnership Agreement, EOTT is obligated to
indemnify EOTT GP and its affiliates (including Enron) for all losses associated
with activities undertaken on behalf of EOTT. This indemnification obligation is
limited to actions undertaken in good faith, and may only be satisfied from
EOTT's assets. Neither EOTT's nor Enron's bankruptcies affect EOTT's liability
as owner of the pipelines, nor does it terminate EOTT's indemnification
obligations under the EOTT Partnership Agreement. Enron currently has control of
all of the documents related to this investigation. On January 29, 2002, Enron
responded to the EPA's Section 308 request in its capacity as the operator of
the pipelines actually owned by EOTT and on behalf of EOTT. No further written
communication has been received from the EPA since Enron submitted its response.
The FERC requires annual reporting from oil pipelines through the
submission of FERC Form 6, "Annual Report of Oil Pipeline Companies." The FERC
Form 6 is designed to provide the FERC with the financial, operational and
ratemaking information it needs to regulate and monitor the oil pipeline
industry. FERC advised EOTT, in a letter dated January 9, 2002, that FERC began
an industry-wide audit with respect to the annual reporting requirements of FERC
Form 6 in December 2001, and that EOTT had been selected for the audit. The
audit covers the period from January 1, 2000 through December 31, 2001. FERC
staff has subsequently visited EOTT's Houston office to review relevant
documentation and has made numerous data requests to which EOTT has provided
various data and responses. The audit remains ongoing, and it is uncertain at
this point what, if any, actions FERC may propose upon completion of the audit.
EOTT timely filed its FERC Form 6 for the year 2001 on March 29, 2002.
EOTT has applied for and maintained Export Licenses through the U.S.
Department of Commerce ("DOC") since 1994. These licenses authorized EOTT to
export crude oil to Canada. Each license provided an applicable license quantity
and value of merchandise to be exported as authorized by the DOC. The licenses
generally covered either a one or two-year period. In early 1999, as EOTT was
preparing a new license application, it discovered it had exported more barrels
and value than had been authorized by the DOC under its then current (and prior)
license. Pursuant to Section 764.5 of the Export Administration Regulations,
EOTT filed a Voluntary Disclosure with the DOC on February 5, 1999, giving the
DOC notice of these license overruns. EOTT negotiated a monetary settlement with
the DOC of $508,000 and has accrued the settlement amount. The settlement was
signed on July 15, 2002, and requires the monetary settlement to be paid in five
27
installments. The first installment was paid on August 1, 2002, and the final
installment is due on October 15, 2003.
EOTT received a letter from the State of Texas Comptroller's Office dated
October 9, 1998, assessing it for severance taxes the Comptroller's Office
alleges are due on a difference the Comptroller's Office believes to exist
between the market value of crude oil and the value reported on EOTT's crude oil
tax report for the period of September 1, 1994 through December 31, 1997. The
letter states that the action, based on a desk audit of EOTT's crude oil
production reports, is partly to preserve the statute of limitations where crude
oil severance tax may not have been paid on the true market price of the crude
oil. The letter further states that the Comptroller's position is similar to
claims made in several lawsuits, including the Texas Federal Anti-Trust Suit
(discussed below), in which EOTT is a defendant. The amount of the assessment,
including penalty and interest, is approximately $1.1 million. While the claim
is still being reviewed, EOTT believes it should be without liability in this
matter. There has been no activity on this matter since early 1999.
EOTT has been included in, and responded to, requests for documents related
to Congressional and regulatory investigations as a result of Enron's
bankruptcy.
2. SIGNIFICANT LEGAL PROCEEDINGS
TEXAS-NEW MEXICO PIPE LINE CASES
John H. Roam, et al. vs. Texas-New Mexico Pipe Line Company and EOTT Energy
Pipeline Limited Partnership; Cause No. CV43296, District Court of Midland
County, Texas, 238th Judicial District ("KNIFFEN ESTATES SUIT"). The Kniffen
Estates Suit was filed on March 2, 2001 by certain residents of the Kniffen
Estates, a residential subdivision located outside of Midland, Texas. The
allegations in the petition state that free crude oil products were discovered
in water wells in the Kniffen Estates area, on or about October 3, 2000. The
plaintiffs claim the crude oil products are from a 1992 release from a pipeline
then owned by the Texas-New Mexico Pipe Line Company ("TEX-NEW MEX"). EOTT
Pipeline purchased that pipeline from Tex-New Mex in 1999. The plaintiffs have
alleged Tex-New Mex was negligent, grossly negligent and malicious in failing to
accurately report and remediate the spill. With respect to EOTT Pipeline, the
plaintiffs are seeking damages arising from any contamination of the soil or
groundwater since it acquired the pipeline in question. No specific amount of
money damages was claimed, and it is not possible to determine any potential
exposure to EOTT Pipeline at this stage of the matter. In response to the
Kniffen Estates Suit, EOTT Pipeline filed a cross-claim against Tex-New Mex. In
the cross-claim, EOTT Pipeline claims that, in relation to the matters alleged
by the plaintiffs, Tex-New Mex breached the purchase and sale agreement between
the parties dated May 1, 1999 ("SALE AGREEMENT"), by failing to disclose the
1992 release and by failing to undertake the defense and handling of the toxic
tort claims, fair market value claims, and remediation claims arising from the
release. Additionally, EOTT Pipeline is asserting claims of gross negligence,
fraud and specific performance. On April 5, 2002, EOTT Pipeline filed an amended
cross-claim, which alleges that Tex-New Mex defrauded it in Tex-New Mex's sale
of pipeline systems to EOTT Pipeline in 1999. The amended cross-claim also
alleges that various practices employed by Tex-New Mex in the operation of its
pipelines constitute gross negligence and willful misconduct and void EOTT
Pipeline's obligation to indemnify Tex-New Mex for remediation of releases that
occurred prior to May 1, 1999. The trial of this matter is currently scheduled
for February 17, 2003. The Bankruptcy Court has entered an order permitting this
litigation to proceed in state court uninterrupted by the automatic stay imposed
under Bankruptcy Code section 362.
Tex-New Mex has requested that the Debtors include in this Disclosure
Statement the information set forth below in this section. The allegations in
this section are included solely at Tex-New Mex's request, and do not constitute
any admission by the Debtors regarding any fact alleged in this section. The
Debtors' position regarding the relevant facts is described below:
Tex-New Mex's Position on the Litigation: By way of the Sale
Agreement and the related Environmental Agreement, EOTT Pipeline agreed to
indemnify Tex-New Mex from any and all environmental clean up costs related
to the pipeline, whether related to pre- or post-sale releases from the
pipeline. EOTT Pipeline also indemnified Tex-New Mex for all bodily injury
and property damages
28
claimed by the parties "occurring" after the sale date of May 1, 1999 (even
if partially caused by Tex-New Mex's actions or inactions prior to the sale
date). These two indemnities apply unless the occurrence was caused by the
gross negligence or willful misconduct of Tex-New Mex. In turn, Tex-New Mex
agreed to indemnify EOTT Pipeline for all bodily injury and property
damages claimed by parties "occurring" before the sale date of May 1, 1999.
For EOTT Pipeline to avoid its indemnity obligations to Tex-New Mex,
EOTT Pipeline must show that Tex-New Mex was "grossly negligent" or
committed "willful misconduct." This is a very high legal standard.
For Tex-New Mex to avoid its indemnity obligations to EOTT Pipeline,
Tex-New Mex must show that the damages claimed by the landowner plaintiffs
"occurred" after the sale date. EOTT Pipeline asserts that the damages
"occurred" prior to the sale, when the alleged releases occurred. Tex-New
Mex claims that the damages "occurred" when the alleged contamination
occurred on the landowner plaintiffs' property and water supply, and that
such was post-sale.
If EOTT Pipeline fails to win in the litigation as against Tex-New
Mex, EOTT Pipeline may owe damages to the landowner plaintiffs in the tens
of millions of dollars. Additionally, it may owe indemnity damages to
Tex-New Mex in the tens of millions of dollars. If EOTT Pipeline fails to
win the litigation, the recovery by the general unsecured creditors will
fall to pennies on the dollar. The Debtors' plan does not make provision
for the claims of Tex-New Mex or of the landowner plaintiffs. The Debtors'
plan purports to allow the equity holders to retain an interest. This
provision violates the "absolute priority rule," which does not allow
equity holders of a debtor to retain any interest so long as unsecured
creditors are not paid in full. Since the Debtors' plan does not attempt to
pay the unsecured creditors in full, if such class votes against the plan,
the plan will fail.
The Debtors' Position on the Litigation (which factual and legal
allegations are disputed by Tex-New Mex): In the Sale Agreement, EOTT
Pipeline agreed to indemnify Tex-New Mex from claims for property damage
and toxic tort exposure when such damages or exposure arise out of the
ownership, possession, operation, use or maintenance of the pipeline on and
after the sale date of May 1, 1999, unless the damages or exposure are
caused by the gross negligence or willful misconduct of Tex-New Mex prior
to May 1, 1999. The claims of the landowner plaintiffs against Tex-New Mex
assert that Tex-New Mex caused such damages and exposure to them by its
actions and inactions on or about November 12, 1992. These claims do not
arise out of EOTT Pipeline's ownership, possession, operation, use or
maintenance of the pipeline on and after May 1, 1999, and Tex-New Mex is
not entitled to indemnification for such claims.
Also in the Sale Agreement, Tex-New Mex agreed to indemnify EOTT
Pipeline from claims for property damage and toxic tort exposure when such
damages or exposure occur prior to May 1, 1999 and arise out of the
ownership, possession, operation, use or maintenance of the pipeline prior
to May 1, 1999, or occur after May 1, 1999 and arise out of Tex-New Mex's
gross negligence or willful misconduct prior to May 1, 1999. The claims of
the landowner plaintiffs against EOTT Pipeline as the current owner of the
pipeline assert that the damages and exposure suffered by the plaintiffs
arise from Tex-New Mex's actions and inactions on or about November 12,
1992, which actions and inactions the plaintiffs allege were grossly
negligent or malicious. The damages and exposure are alleged to have
occurred at various times from 1992 to the present. Because the claims as
alleged fall within the scope of the indemnity, Tex-New Mex owes an
obligation of defense to EOTT Pipeline -- an obligation it has refused to
fulfill. Further, the designated corporate representative of Tex-New Mex
has admitted on deposition that the alleged conduct, if it occurred,
constitutes gross negligence; therefore, in order to avoid its indemnity
obligations, Tex-New Mex must not only show that the damages and exposures
occurred only after May 1, 1999, but must also rebut the sworn testimony of
its own designated corporate representative.
In the related Environmental Agreement, EOTT Pipeline agreed to
indemnify Tex-New Mex for remediation responsibilities arising from
releases occurring both before and after May 1, 1999, unless such
responsibilities were caused by the gross negligence or willful misconduct
of Tex-New Mex prior to May 1, 1999. However, neither the landowner
plaintiffs nor the Texas Railroad Commission has
29
demanded that Tex-New Mex undertake any such remediation responsibilities.
Therefore, there exist no claims for EOTT Pipeline to indemnify Tex-New Mex
against under the Environmental Agreement. Although EOTT Pipeline is indeed
undertaking remediation responsibilities, it is doing so pursuant to its
capacity as the current owner and operator of the pipeline, not under the
Environmental Agreement.
Also in the Environmental Agreement, Tex-New Mex agreed to indemnify
EOTT Pipeline for remediation responsibilities caused by the gross
negligence or willful misconduct of Tex-New Mex prior to May 1, 1999. On
and after October 3, 2000, the Texas Railroad Commission has required EOTT
Pipeline to undertake remediation responsibilities at Kniffen Estates. EOTT
Pipeline has identified conduct of Tex-New Mex that, if it occurred, the
designated corporate representative of Tex-New Mex has admitted would
constitute gross negligence; therefore, to be entitled to indemnification,
EOTT Pipeline need only show that the alleged conduct did indeed occur.
Jerry W. Holmes and Barbara I. Holmes v. EOTT Energy Pipeline Limited
Partnership and Texas-New Mexico Pipe Line Company; Cause No. CV43800, District
Court of Midland County, Texas, 385th Judicial District. This lawsuit was filed
on June 21, 2002. The plaintiffs in this suit are the owners of a home in the
Kniffen Estates who allege that their water well was contaminated by crude oil.
The plaintiffs claim that the alleged crude oil contamination of their water
well resulted from the 1992 crude oil release that is the subject of the Kniffen
Estates Suit. EOTT has filed a motion to consolidate this lawsuit with the
Kniffen Estates Suit. The plaintiffs have not claimed any specific amount of
money damages.
Jimmie B. Cooper and Shryl S. Cooper v. Texas-New Mexico Pipe Line Company,
Inc., EOTT Energy Pipeline Limited Partnership and Amerada Hess
Corporation; Case No. CIV 01-1321 M/JHG, United States District Court for the
District of New Mexico. Plaintiffs in this lawsuit, filed on October 5, 2001,
are surface interest owners of certain property located in Lea County, New
Mexico. The plaintiffs allege that aquifers underlying their property and water
wells located on their property have been contaminated as a result of spills and
leaks from a pipeline running across their property that is or was owned by
Tex-New Mex and EOTT Pipeline. The plaintiffs also allege that oil and gas
operations conducted by Amerada Hess Corporation resulted in leaks or spills of
pollutants that ultimately contaminated the plaintiffs' aquifers and water
wells. EOTT's initial investigation of this matter indicated that the alleged
contamination of the aquifers underlying the plaintiffs' property was not caused
by leaks from the pipeline now owned by EOTT Pipeline that traverses the
plaintiffs' property.
Bernard Lankford and Bette Lankford vs. Texas-New Mexico Pipe Line Company
TX/NMX and EOTT Energy Pipeline Limited Partnership; Cause No. CC11176, County
Court at Law of Midland County, Texas. This lawsuit was filed on January 15,
2002. The plaintiffs in this lawsuit own property that is located to the north
of the Kniffen Estates subdivision. The allegations in the Plaintiffs' Original
Petition are virtually identical to the allegations of the plaintiffs in the
Kniffen Estates Suit. The plaintiffs have asserted strict liability, nuisance,
negligence, gross negligence, trespass, and intentional infliction of emotional
distress causes of action. The plaintiffs are seeking unspecified actual damages
and punitive damages. EOTT Pipeline has filed a motion to consolidate this
lawsuit with the Kniffen Estates Suit. The plaintiffs support EOTT Pipeline's
motion for consolidation.
Richard D. Warden and Nancy J. Warden v. EOTT Energy Pipeline Limited
Partnership and EOTT Energy Corp.; Case No. CIV-02-370 L, United States
District Court for the Western District of Oklahoma. The plaintiffs filed this
lawsuit on February 28, 2002, in the District Court of Grady County, Oklahoma.
EOTT Pipeline removed this lawsuit to the United States District Court for the
Western District of Oklahoma on March 22, 2002. The plaintiffs in this lawsuit
are landowners who are seeking damages arising from a release of crude oil from
a pipeline owned by EOTT Pipeline. EOTT Pipeline undertook extensive remediation
efforts with respect to the crude oil release that is the subject of this
lawsuit. The plaintiffs allege that EOTT Pipeline did not properly remediate the
crude oil release. The plaintiffs are alleging causes of action for negligence,
gross negligence, unjust enrichment, and nuisance.
Jimmie T. Cooper and Betty P. Cooper vs. Texas-New Mexico Pipeline Company,
Inc., EOTT Energy Pipeline Limited Partnership, and EOTT Energy Corp.; Case No.
D-0101-CV-2002-02122, 1st Judicial District Court, Santa Fe County, New Mexico.
The plaintiffs in this lawsuit are surface interest owners of
30
certain property located in Lea County, New Mexico. This lawsuit was filed on
October 1, 2002. The plaintiffs are alleging that aquifers underlying their
property and water wells located on their property have been contaminated as a
result of spills and leaks from a pipeline running across their property that is
or was owned by Texas-New Mex and EOTT Pipeline. The plaintiffs do not specify
when the alleged spills and leaks occurred. The plaintiffs are seeking payment
of costs that would be incurred in investigating and remediating the alleged
crude oil releases and replacing water supplies from aquifers that have
allegedly been contaminated. The plaintiffs are also seeking damages in an
unspecified amount arising from the plaintiffs' alleged fear of exposure to
carcinogens and the alleged interference with the plaintiffs' quiet enjoyment of
their property. The plaintiffs are also seeking an unspecified amount of
punitive damages.
STATE OF TEXAS ROYALTY SUIT
EOTT was served on November 9, 1995 with a petition styled The State of
Texas, et al. vs. Amerada Hess Corporation, et al. The matter was filed in the
District Court of Lee County, Texas, Case No. 10,652, 21st Judicial District,
and involves several major and independent oil companies and marketers as
defendants. The plaintiffs are attempting to certify a class action lawsuit
alleging that the defendants acted in concert to buy oil owned by members of the
plaintiff class in Lee County, Texas, and elsewhere in Texas, at "posted"
prices, which the plaintiffs allege were lower than true market prices. There is
not sufficient information in the petition to fully quantify the allegations set
forth in the petition, but EOTT OLP believes any such claims against it will
prove to be without merit. There has been no activity on this matter in several
years.
The State of Texas, et al. vs. Amerada Hess Corporation, et al.; Cause No.
97-12040, 53rd Judicial District Court of Travis County, Texas. This case was
filed on October 23, 1997 in Austin by the Texas Attorney General's office and
involves several major and independent oil companies and marketers as
defendants. EOTT OLP was served on November 18, 1997. The petition states that
the State of Texas brought this action in its sovereign capacity to collect
statutory penalties recoverable under the Texas Common Purchaser Act, arising
from defendants' alleged willful breach of statutory duties owed to royalty,
overriding royalty and working interest owners of crude oil sold to defendants,
as well as alleged breach of defendants' common law and contractual duties. The
plaintiffs also allege the defendants have engaged in discriminatory pricing of
crude oil. The parties are considering options to have the case fully dismissed.
This settlement disposed of any claims the State of Texas may have in the State
of Texas Royalty Suit, discussed above, but did not dismiss this case. Also, any
severance tax claims the State of Texas may have were specifically excluded from
this settlement. However, no severance tax claims were asserted in the petition
filed by the plaintiffs.
ANTI-TRUST SUITS
McMahon Foundation and J. Tom Poyner vs. Amerada Hess Corporation, et al.
(Including EOTT Energy Operating Limited Partnership); Civil Action No.
H-96-1155, United States District Court, Southern District of Texas, Houston
Division ("TEXAS FEDERAL ANTI-TRUST SUIT"). This suit was filed on April 10,
1996 as a class action complaint for violation of the federal antitrust laws and
involves several major and independent oil companies and marketers as
defendants. The relevant area is the entire continental United States, except
for Alaska, New York, Ohio, Pennsylvania, West Virginia and the Wilmington Field
at Long Beach, California. The plaintiffs claim that there is a combination and
conspiracy among the defendant oil companies to fix, depress, stabilize and
maintain at artificially low levels the price paid for the first purchase of
lease production oil sold from leases in which the class members own interests.
This was allegedly accomplished by agreement of the defendants to routinely pay
for first purchases at posted prices rather than competitive market prices and
maintain them in a range below competitive market prices through an undisclosed
scheme of using posted prices in buy/sell transactions among themselves to
create the illusion that posted prices are genuine market prices. The plaintiffs
allege violations from October of 1986 forward. No money amounts were claimed.
Cameron Parish School Board, et al. vs. Texaco, Inc., et al.; Civil Action
No. C-98-111, United States District Court for the Western District of
Louisiana, Lake Charles Division ("LOUISIANA FEDERAL ANTI-TRUST SUIT"). This
case was originally filed as a state law claim in Louisiana. When the case was
removed to federal
31
court, the anti-trust claims were added, similar to the claims made in the Texas
Federal Anti-Trust Suit. The plaintiffs claim that this litigation arises out of
a combination and conspiracy of the defendant oil companies to fix, depress,
stabilize and maintain at artificially low levels the prices paid for the first
purchase of lease production oil sold from leases in which the class members own
interests. The issues appear to be a duplication of the issues in the Texas
Federal Anti-Trust Suit, discussed above. On October 22, 1998, the judge granted
the plaintiffs' motion to amend the petition and add additional defendants. EOTT
OLP, along with EOTT GP, was added to the case as defendants at that time. No
money amounts were claimed.
The Texas Federal Anti-Trust Suit, the Louisiana Federal Anti-Trust Suit
and several other suits to which EOTT OLP is not a party, were consolidated and
transferred to the Southern District of Texas by a transfer order, dated January
14, 1998. The Judicial Panel on Multidistrict Litigation made this
recommendation due to the similarity of issues in the cases. EOTT OLP recorded a
$1.0 million litigation reserve related to these suits in 1998. EOTT OLP, along
with EOTT GP and a number of other defendants, entered into a class-wide
settlement, which was approved by the court on April 7, 1999, with a final
judgment entered on August 11, 1999. Several appeals were subsequently filed and
have now all been resolved. The settlement was funded on November 27, 2001. The
various lawsuits are in the process of being dismissed.
UNITHOLDER LITIGATION
David A. Huettner, et al. v. EOTT Energy Partners, L.P., et al.; Case No.
1:02 CV-917, United States District Court, Northern District of Ohio, Eastern
Division. This lawsuit was filed on May 15, 2002 for alleged violations of the
Securities Exchange Act of 1934 and common law fraud. The suit was brought by
three of EOTT's former unitholders who claim that EOTT, EOTT GP, certain of the
officers and directors of Enron and EOTT GP, and EOTT's independent accountants
were aware of material misstatements or omissions of information within various
press releases, SEC filings and other public statements, and failed to correct
the alleged material misstatements or omissions. Plaintiffs maintain that they
were misled by EOTT's press releases, SEC filings and other public statements
when purchasing EOTT's common units and were financially damaged thereby.
The plaintiffs further allege that Arthur Andersen, LLP falsely represented
that (a) Enron Corp.'s and EOTT's financial statements complied with generally
accepted accounting principles and (b) Arthur Andersen's audits of Enron Corp.
and EOTT had been performed in accordance with generally accepted auditing
standards. The plaintiffs also assert a claim against Arthur Andersen, LLP for
destruction of evidence.
On June 28, 2002, the Judicial Panel on Multidistrict Litigation issued a
Conditional Transfer Order that provides for the transfer of this case to the
Southern District of Texas for consolidated pretrial proceedings with other
lawsuits asserting securities claims against Enron and Arthur Andersen. On
September 20, 2002, EOTT filed a motion to dismiss on the basis of the
plaintiff's failure to state a claim upon which relief can be granted. EOTT GP
later joined in that motion.
Due to the recent filing of this lawsuit, EOTT has been unable to
thoroughly investigate the validity of the Plaintiff's allegations, but based on
management's current knowledge, EOTT believes the allegations are without merit.
EOTT's assessment does not indicate that it is probable that a liability has
been incurred and therefore, EOTT has not recorded a contingent liability.
OTHER LITIGATION AND LIENS
Big Warrior Corporation vs. EOTT Energy Corp., Rem Services, Inc., Enron
Pipeline Services Company, Enron Transportation Services, Inc. et al; Case No.:
2:02CV749PG, United States District Court for the Southern District of
Mississippi, Hattiesburg Division. In October 2001, EPSC awarded a contract to
Big Warrior Corporation ("BIG WARRIOR") for the construction of EOTT Pipeline's
new ten-inch crude oil pipeline that runs from Lumberton, Mississippi to
Eucutta, Mississippi. Big Warrior alleges that EOTT GP ratified and accepted the
contract and other alleged agreements associated therewith. In this lawsuit, Big
Warrior is seeking payment (under various theories) of unanticipated additional
costs that allegedly resulted from adjustments to the project work schedule and
ESPC's alleged failure to timely procure necessary rights of way
32
and rights of ingress and egress. Big Warrior has asserted claims for breach of
contract, quantum meruit, fraud and misrepresentation, tortious interference
with contractual relations, civil conspiracy, and negligence. Big Warrior is
claiming actual and punitive damages of up to $30 million. Big Warrior also
seeks the enforcement of mechanics' and materialmen's liens it has filed against
EOTT Pipeline.
Big Warrior filed this lawsuit in the Circuit Court of Jones County,
Mississippi on August 5, 2002. Big Warrior's complaint was served upon EOTT on
August 12, 2002, and EOTT removed this case to federal court on September 11,
2002. On September 18, 2002, EOTT filed its answer and affirmative defenses as
well as a motion to dismiss for failure to state a claim upon which relief can
be granted. EOTT will file a suggestion of bankruptcy asserting that further
proceedings as to EOTT in this lawsuit are stayed by EOTT's bankruptcy filing.
EPSC has filed liens on EOTT's Mississippi pipeline for $6.2 million for
amounts owed to EPSC. EGP Fuels has also filed liens against the assets of EOTT
Liquids for $10.5 million for amounts owed to EGP Fuels. The Enron Settlement
Agreement contemplates that these liens will be released.
INSURANCE COVERAGE
In May 1999, EOTT Pipeline acquired certain pipeline assets from Tex-New
Mex. In connection with this acquisition, EOTT OLP, on behalf of its subsidiary
EOTT Pipeline, secured a claims made environmental insurance policy from
American International Specialty Lines Insurance Company, a member of American
International Group, Inc. ("AIG"), in the single aggregate amount of $20 million
for all coverages under the insurance policy (the "AIG Policy"). The AIG Policy
covers, for a period of ten years, certain known environmental releases and any
environmental releases that were not previously identified at the date of
acquisition or that occur in the future. Under the AIG Policy, any release of
crude oil related to the assets in this acquisition are reimburseable by AIG,
subject to a deductible of $50,000 per new environmental release up to a maximum
of $150,000 per year, and a maintenance deductible of $10,000 per incident. Less
than four years into the term of the AIG Policy, EOTT Pipeline has completely
exhausted the amount of insurance coverage. The Debtors have inquired and have
been informed that Enron and EPSC may have additional insurance coverage for
incidents in the future under certain limited circumstances. However, in the
event that such an incident were to occur, EPSC has informed the Debtors that it
anticipates it would first look to EOTT to make good on its indemnification
before it would look to insurance coverage. The Debtors have not propounded
discovery on any of the Enron Parties to verify insurance coverage. The
insurance coverage under the AIG Policy is outlined more specifically in the
chart below:
-- REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK --
33
-------------------------------------------------------------------------------------------------------------------------------
RISK COVERAGE
COVERAGE CHARACTERISTIC STATUS COVERAGE A COVERAGE B COVERAGE C COVERAGE D
-------------------------------------------------------------------------------------------------------------------------------
ON-SITE ON-SITE THIRD PARTY THIRD PARTY
CLEANUP OF CLEANUP OF CLAIMS FOR CLAIMS FOR
PRE-EXISTING NEW ON-SITE OFF-SITE
CONDITIONS CONDITIONS BODILY CLEANUP
INJURY & RESULTING
PROPERTY FROM
DAMAGE PREEXISTING
-------------------------------------------------------------------------------------------------------------------------------
Known Sites (31 KEI Deductible/Incident Coverage No deductible; N/A N/A
Properties) Exhausted self-insured
retention
Incident Limit $5 million N/A N/A $5 million
Self-Insured $3 million N/A N/A $3 million
Retention
Coverage Section $5 million N/A N/A $5 million
Aggregate Limit with
Kennann
-------------------------------------------------------------------------------------------------------------------------------
Kennan properties Deductible/Incident Resolved by No deductible; N/A N/A
settlement, self-insured
remaining retention
available to
cover
unasserted
administrative
claims, if any
Incident Limit $5 million N/A N/A $5 million
Self-Insured $1 million N/A N/A $1 million
Retention
Coverage Section $5 million N/A N/A $5 million
Aggregate Limit with
Known Sites
-------------------------------------------------------------------------------------------------------------------------------
Unknown Sites Deductible/Incident Coverage $10,000 $10,000 $10,000 $10,000
Exhausted
(TNM pipeline & Annual Aggregate $150,000 $150,000 $150,000 $150,000
associated Deductible
equipment)
Incident Limit $20 million $20 million $20 million $20 million
-------------------------------------------------------------------------------------------------------------------------------
Coverage Section $20 million $20 million $20 million $20 million
Aggregate Limit
inclusive of Known
Sites, Kennann Sites
and Unknown Sites
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RISK
COVERAGE COVERAGE E COVERAGE F
-------------------------------------------------------------------------------------------------------------------------------
THIRD PARTY THIRD PARTY
CLAIMS FOR CLAIMS FOR
OFF-SITE OFF-SITE
CLEANUP BODILY
RESULTING INJURY AND
FROM NEW PROPERTY
CONDITIONS DAMAGE
-------------------------------------------------------------------------------------------------------------------------------
Known Sites (31 KEI N/A N/A
Properties)
N/A N/A
N/A N/A
N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
Kennan properties N/A N/A
N/A N/A
N/A N/A
N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
Unknown Sites $10,000 $10,000
(TNM pipeline & $150,000 $150,000
associated
equipment)
$20 million $20 million
-------------------------------------------------------------------------------------------------------------------------------
$20 million $20 million
-------------------------------------------------------------------------------------------------------------------------------
34
In the event of any payment under the AIG Policy, AIG would be subrogated
to all the Insured's (as defined in the AIG Policy) rights of recovery therefore
against any person or organization and the Insured shall execute and deliver
instruments and papers and do whatever else is necessary to secure such rights
including without limitation, assignment of the Insured's rights against any
person or organization who caused Pollution Conditions or a Pollution Release on
account of which AIG made any payment under the AIG Policy. The Insured shall do
nothing to prejudice AIG's rights. Any recovery as a result of subrogation
proceedings arising out of the payment of Clean-Up Costs or Loss (as those terms
are defined in the AIG Policy) covered under the AIG Policy shall accrue first
to the Insured to the extent of any payments in excess of the limit of coverage;
then to AIG to the extent of its payment under the AIG Policy; and then to the
Insured to the extent of its Deductible (as defined in the AIG Policy). Expenses
incurred in such subrogation proceedings shall be apportioned among the
interested parties in the recovery in the proportion that each interested
party's share in the recovery bears to the total recovery.
To date, the claims made against the AIG Policy are generally set forth in
the chart below. The chart was prepared as of November 18, 2002 from a real-time
information tracking system for environmental remediation projects. This system
is used to accumulate information on environmental sites, such as costs incurred
to date, invoices processed for insurance coverage, and reimbursements under the
AIG Policy. Due to timing differences, the information in this chart may not
conform to amounts recorded in the applicable Debtors' accounting records:
-- REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK --
35
TNM INSURANCE CLAIMS SUMMARY
COST TO DATE
KNOWN SITES COUNTY/STATE (INCLUDING DEDUCTIBLE)
TNM -- Fort Stockton Pecos, TX $2,443,562
McCasland Lea, NM $644,367
TNM 17 Lea, NM $261,859
Others -- Known Various $1,508,410
COST TO DATE
KENNANN SITES COUNTY/STATE (INCLUDING DEDUCTIBLE)
Kennann Lea, NM $270,240
In addition to the above-described litigation and the potential litigation
listed above, the Debtors may be potential plaintiffs or defendants in other
lawsuits, claims, and administrative proceedings. While the outcome of those
proceedings cannot be predicted with certainty, the Debtors cannot reasonably
estimate whether any of the recoveries generated from, and/or the costs
associated with pursuing, those claims will materially affect the financial
condition of the Debtors or the Distributions to be made under the Plan.
K. PREFERENCE AND OTHER AVOIDANCE LITIGATION
During the 90-day period immediately preceding the Petition Date, while
insolvent, the Debtors made various payments and other transfers to creditors on
account of antecedent debts. In addition, during the one-year period before the
Petition Date, the Debtors made certain transfers to, or for the benefit of,
certain "insider" creditors. Some of those payments may be subject to avoidance
and recovery by the Debtors' bankruptcy estates as preferential and/or
fraudulent transfers pursuant to Bankruptcy Code sections 329, 544, 547, 548 and
550. The Debtors will hold all claims, causes of action, and other legal and
equitable rights that the Debtors had (or had power to assert) immediately prior
to confirmation of the Plan, including actions for the avoidance and recovery of
estate property under Bankruptcy Code sections 329 and 550, or transfers
36
avoidable under Bankruptcy Code sections 544, 545, 547, 548, 549 or 553(b), and
the Debtors may commence or continue, in any appropriate court or tribunal, any
suit or other proceeding for the enforcement of such actions. These types of
actions are referred to in the Plan as the "AVOIDANCE ACTIONS."
The Debtors' Schedules of Assets and Liabilities identify creditors whose
Claims are disputed, and the Debtors' Statement of Financial Affairs identifies
the parties who received payments and transfers from the Debtors, which payments
and transfers may be avoidable under the Bankruptcy Code. Moreover, the Debtors
continue to investigate Avoidance Actions and Rights of Action they may have
against third parties. The Debtors have not completed their investigation of
potential objections to Claims, Avoidance Actions and Rights of Action;
therefore, the Debtors are unable to provide any meaningful estimate of amounts
that could be recovered. THE PLAN DOES NOT, AND IS NOT INTENDED TO, RELEASE ANY
SUCH RIGHTS OF ACTION, AVOIDANCE ACTIONS, OR OBJECTIONS TO PROOFS OF CLAIM. ALL
SUCH RIGHTS ARE SPECIFICALLY RESERVED IN FAVOR OF THE DEBTORS. Notwithstanding
the preservation of such rights, the Debtors currently do not intend to pursue
Avoidance Actions.
Creditors should understand that legal rights, Claims and Rights of Action
the Debtors may have against them, if any exist, are retained under the Plan for
prosecution unless a specific order of the Court authorizes the Debtors to
release such Claims. As such, creditors are cautioned not to rely on (i) the
absence of the listing of any legal right, Claim or Right of Action against a
particular creditor in the Disclosure Statement, Plan, Schedules of Assets and
Liabilities or Statement of Financial Affairs or (ii) the absence of litigation
or demand prior to the Effective Date of the Plan as any indication that the
Debtors do not possess or do not intend to prosecute a particular right, claim
or cause of action if a particular creditor votes to accept the Plan. It is the
expressed intention of the Plan to preserve rights, Claims, and Rights of Action
of the Debtors, whether now known or unknown, for the benefit of the Debtors'
Estates and their creditors.
ARTICLE V
EVENTS LEADING TO BANKRUPTCY
EOTT GP, EOTT's general partner, is a wholly-owned subsidiary of Enron.
Based on information provided by Enron, an entity indirectly controlled by Enron
may be deemed to be the beneficial owner of approximately 18% of EOTT's
outstanding Common Units and 78% of EOTT's outstanding Subordinated Units,
representing 37% of EOTT's total outstanding units.
Beginning on December 2, 2001, Enron, along with certain of its
subsidiaries, filed to initiate bankruptcy proceedings under chapter 11 of the
Bankruptcy Code. Neither EOTT GP nor EOTT are included in Enron's bankruptcy
filings. Because of EOTT's contractual relationships with Enron and certain of
its subsidiaries, Enron's ownership interest in EOTT and Enron's control of
EOTT's general partner, Enron's bankruptcy filing has significantly impacted
EOTT's business. EOTT's most significant contractual relationships with Enron
and its subsidiaries at the time of the bankruptcy filing included the Toll
Conversion and Storage Agreements, the Support Agreement, and the Enron Credit
Facility. For a description of these agreements, and other material agreements
with Enron, see "Article IV, Section C. The Debtors' Relationship with Enron and
Affiliates."
In June 2001, EOTT Liquids purchased the MTBE Plant and the Storage
Facility from Enron and its affiliates for $117 million. As part of this
purchase, EGLI, an indirect wholly-owned subsidiary of Enron that has filed
bankruptcy, entered into the Toll Conversion and Storage Agreements. These
agreements were designed to ensure a minimum level of cash flow from ownership
and operation of the MTBE Plant and the Storage Facility. Enron guaranteed
EGLI's performance under the Toll Conversion and Storage Agreements. Enron's
guarantee was limited to $50 million under the Toll Conversion Agreement and $25
million under the Storage Agreement.
EOTT financed the acquisition of the MTBE Plant and the Storage Facility
using borrowings from SCTSC under the Commodity Repurchase Agreement and the
Receivable Purchase Agreement. EOTT planned to refinance these borrowings on a
long-term basis in the capital markets. In September 2001, EOTT announced a
recapitalization plan to convert the outstanding Subordinated Units and APIs
into Common
37
Units and the implementation of a refinancing plan. The bankruptcy of Enron
materially affected EOTT's business and required EOTT to abandon the
transactions contemplated by the recapitalization plan.
As a result of EGLI's non-performance of the Toll Conversion and Storage
Agreements, EOTT recorded a $29.1 million impairment in the fourth quarter of
2001 representing EOTT's total remaining investment in the agreements. In
addition, EOTT has assumed significant commodity price risk, conversion risk and
volatility related to the MTBE Plant and the Storage Facility. The loss of
revenues and increased exposure to market risks caused by the non-performance of
these two agreements, and the inability of the Debtors to refinance the
borrowings from SCTSC has severely impacted the Debtors' financial condition.
As a result of Enron's bankruptcy and the loss of credit support pursuant
to the Enron Credit Facility, EOTT has incurred higher costs in obtaining credit
than EOTT had in the past. Subsequent to the Enron bankruptcy filing, EOTT's
trade creditors have been less willing to extend credit to EOTT on an unsecured
basis. As a result, the amount of letters of credit EOTT has been required to
post for its marketing activities has increased significantly, adversely
impacting EOTT's business. Letters of credit increased from approximately $150
million in September 2001 to $196 million in December 2001, and to approximately
$236 million in September 2002 (which also reflects an increase in crude oil
prices during this period).
EOTT's ability to obtain letters of credit to support its purchases of
crude oil has been fundamental to its gathering and marketing activities. EOTT
was only able to obtain a level of letter of credit support provided by the
Pre-Petition Credit Facility. EOTT therefore had to significantly reduce its
marketing activities.
In addition to the effects on the Debtors' financial conditions discussed
above, Enron's financial deterioration and related bankruptcy filings had the
following material effects on the Debtors' business and management:
- Andersen resigned as EOTT's auditor on February 5, 2002, citing
professional standards concerns, including auditor independence issues,
relating to the events involving Enron.
- The three independent directors of EOTT GP, constituting all of the
members of EOTT GP's audit committee, as well as an Enron affiliated
director, resigned as directors citing personal reasons.
- The credit rating of EOTT's Senior Notes was downgraded, and the value of
EOTT's Common Units declined significantly, which has restricted EOTT's
access to the capital markets.
EOTT has acted to address the numerous significant effects of the Enron
bankruptcy and related developments and, among other actions has taken the
following significant steps:
- On April 10, 2002, three independent directors were elected to EOTT GP's
Board of Directors. These three directors comprise EOTT GP's current
Audit Committee, Compensation Committee and EOTT GP's new Restructuring
Committee. In addition, one of these independent directors was named
Chairman of the Board of Directors.
- EOTT engaged Pricewaterhouse Coopers LLC to replace Andersen on March 25,
2002.
- Enron was obligated under a Support Agreement to provide cash
distribution support through the fourth quarter of 2001. As a result of
Enron's financial deterioration and bankruptcy, however, Enron did not
pay the fourth quarter cash distribution shortfall of $0.225 per Common
Unit. In addition, on April 3, 2002, EOTT announced that it would not
make a distribution to its Common Unit holders for the first quarter of
2002 or the foreseeable future, and did not make a distribution to its
Common Unit holders for the second or third quarter of 2002.
- EOTT's primary lender, Standard Chartered Bank, provided EOTT with an
interim credit facility in November 2001 that provided for up to $150
million of letters of credit to replace the Enron Credit Facility. On
December 21, 2001, EOTT increased this interim credit facility to $300
million, which included up to a $40 million sub-limit for working capital
loans. Standard Chartered Bank, SCTSC and EOTT entered into Forbearance
Agreements pursuant to which Standard Chartered Bank and SCTSC agreed not
to take any actions to enforce their rights as a result of defaults under
the Pre-
38
Petition Credit Facility that may have existed on June 30, 2002, and
agreed to continue to loan amounts under the facilities until October 30,
2002.
- The Debtors entered into the Enron Settlement Agreement with the Enron
Parties described above under Article IV.E "Settlement Agreement with
Enron."
As noted elsewhere in this Disclosure Statement, the Debtors commenced this
Bankruptcy Case with agreements (including the Enron Settlement Agreement, the
Restructuring Agreement, and the Post-Petition Credit Facility) among key
parties in interests that will, the Debtors believe, facilitate a prompt
emergence of the Debtors from the reorganization process under chapter 11. Those
key parties include certain Enron entities, holders of approximately 66% of the
principal amount of the Senior Notes, Standard Chartered Bank, SCTSC, and Lehman
(collectively with Standard Chartered Bank and SCTSC, the "LENDERS"). Prior to
the filing of the Bankruptcy Case, the Debtors conducted extensive negotiations
with each of these groups for a plan of reorganization and a capital structure
that each of the constituents could support. Separate agreements were reached
with (i) Enron (see Article IV.E) regarding the terms upon which these
bankruptcy cases would be filed with the concurrence of Enron and its creditors
committee that would lead to a complete separation of the Debtors from any
control or influence by Enron or any of its affiliates and (ii) the Lenders for
commitments for both postpetition financing and for financing of the Debtors
upon conclusion of the Bankruptcy Case. Moreover, the Lenders, persons holding
approximately two thirds of the principal amount of outstanding Senior Notes,
certain Enron entities and the Debtors entered into a multiparty Restructuring
Agreement (see Article IV.F) that provides in substance that each would support
a reorganization of the Debtors on terms set forth in the Plan and that each
would not support any other chapter 11 plan so long as certain deadlines were
met and no signatory to the Restructuring Agreement validly terminated the
Restructuring Agreement.
The Debtors believe the agreements entered into prepetition will permit
them to retain a competitive position with customers and will provide assurance
of business as usual with key suppliers and vendors, such that the results of
operations on which the Plan is predicated can be realized. Preliminary results
of operations for the period since the Bankruptcy Case was filed indicate that
the Debtors are meeting their targeted results of operations. Of greatest
importance to the Debtors and the other parties in interest, the Debtors believe
the prefiling agreements have positioned the Debtors to meet their stated goal
of emerging from Bankruptcy Court supervision during the first quarter of 2003.
ARTICLE VI
POST-BANKRUPTCY OPERATIONS AND SIGNIFICANT EVENTS
A. POST-BANKRUPTCY OPERATIONS
Since the Petition Date, the Debtors have continued to operate their
businesses and manage their properties in the normal course as
debtors-in-possession.
B. FIRST DAY MOTIONS
On or shortly after the Petition Date, the Debtors filed a number of
motions generally designed to allow them to continue operating their businesses
in the ordinary course without unnecessary disruption as a result of the
bankruptcy filings. Pursuant to those motions, the Bankruptcy Court entered
orders that: (i) established a bar date for filing proofs of claims; (ii)
established procedures for payment of certain bankruptcy professionals; (iii)
granted the Debtors authority to employ professionals in the ordinary course of
business; (iv) extended the period during which utility companies may not alter,
refuse, or discontinue services to the Debtors; (v) granted the Debtors
authority pay prepetition accrued wages, salaries, medical benefits,
reimbursable employee expenses, and honor prepetition benefits, retention and
insurance policies; (vi) allowed the Debtors to maintain existing bank accounts
and business forms; (vii) continued use of the cash management system; (viii)
extended the time within which the Debtors must assume or reject unexpired
leases of nonresidential real property; (ix) established procedures for the
treatment of reclamation claims filed against the Debtors, which included the
granting of administrative expense priority status to valid reclamation
39
claims in lieu of physical reclamation; (x) granted the Debtors authority to pay
the prepetition claims of crude suppliers, certain critical vendors and foreign
vendors; and (xi) granted authority to pay any prepetition trust fund taxes in
the ordinary course of business.
The Debtors also filed motions seeking the establishment of an official
service list for the service of notice of miscellaneous matters as well as an
order directing that the chapter 11 cases would be jointly administered. The
Bankruptcy Court has approved that relief.
Finally, the Debtors sought a court order authorizing certain prepetition
litigation initiated by third parties against the Debtors to proceed
uninterrupted by the automatic stay imposed under Bankruptcy Code section 362.
The Bankruptcy Court has approved that relief.
C. THE EMERGENCY MOTION FOR AUTHORITY TO PAY OR HONOR PREPETITION OBLIGATIONS
TO CRITICAL CUSTOMERS AND VENDORS
Texas-New Mexico Pipe Line Company, Shell Pipeline Company, and Equilon
Enterprises, LLC (collectively, the "SHELL ENTITIES") have requested that the
Debtors include in this Disclosure Statement the information set forth below in
this section. The allegations in this section are included solely at the Shell
Entities' request, and do not constitute any admission by the Debtors regarding
any fact alleged in this section:
On the Petition Date, the Debtors filed an Emergency Motion for Authority
to Pay or Honor Prepetition Obligations to Critical Customers and Vendors
Including Crude Oil Suppliers, Raw Materials Suppliers and Trade Partners (the
"PREPETITION CLAIMS PAYMENT MOTION"). An attached exhibit to the Prepetition
Claims Payment Motion listed over 450 prepetition creditors that the Debtors
requested authority to pay. The Prepetition Claims Payment Motion also requested
that the Debtors be provided authority, under the Debtors' discretion, to pay
not only those prepetition creditors listed, but other unspecified prepetition
claims.
Relying on Bankruptcy Code section 105, the Debtors asserted that such
payments were to be made out of necessity to numerous suppliers and critical
vendors who would cease to do business with the Debtors, which would in turn
harm the Debtors' ability to reorganize. The Bankruptcy Court approved the
Prepetition Claims Payment Motion by order dated October 9, 2002 (the
"PREPETITION CLAIMS ORDER").
After entry of the Prepetition Claims Order, the Debtors have paid
approximately $4 million in prepetition critical customer and vendor claims
pursuant to the Prepetition Claims Order. Payment of such amounts has eliminated
any prepetition claim held by such entities up to the amount of such payments.
Therefore, any entity whose prepetition claims have been completely paid will
not be solicited to vote on the Plan.
D. POSTPETITION FINANCING WITH STANDARD CHARTERED BANK, SCTSC, AND LEHMAN
THE POST-PETITION CREDIT FACILITY
On October 8, 2002, the Debtors filed their Emergency Motion for Interim
and Final Orders (I) Authorizing Use of Cash Collateral Pursuant to 11 U.S.C.
sec. 363, (II) Authorizing Secured Postpetition Financing on a Superpriority
Basis Pursuant to 11 U.S.C. sec.sec. 364 and 507(b), (III) Granting Limited
Relief From The Automatic Stay Pursuant to 11 U.S.C. sec. 362, (IV) Authorizing
Assumption of Related Amended Executory Contracts Pursuant to 11 U.S.C.
sec. 365, and (V) Scheduling Interim and Final Hearings Pursuant To Bankruptcy
Rule 4001(c) (the "DIP MOTION"). The financing sought by the Debtors in the DIP
Motion was necessary to enable the Debtors to purchase inventory, continue their
business operations, and administer and preserve the value of their Estates. In
the absence of such post petition financing, the Debtors would not have had the
ability to maintain business relationships with their vendors, suppliers and
customers, to pay their employees and otherwise finance their operations.
On October 9, 2002, the Bankruptcy Court conducted its first interim
hearing to consider the immediate interim relief requested in the DIP Motion
and, on October 11, 2002, entered its first interim order authorizing the
Debtors to (i) use Standard Chartered Bank's cash collateral up to an amount not
to exceed $58,255,847.00 for the period from the Petition Date through the
earlier of entry of the second interim order or
40
October 22, 2002; (ii) grant security interests in and replacement liens on all
of the Debtors' currently owned or after-acquired property and the proceeds
thereof, other than Avoidance Actions, in favor of Standard Chartered Bank for
the use of its cash collateral; (iii) grant SCTSC security interests in and
liens on the commodities purchased by SCTSC pursuant to the Commodity Repurchase
Agreement and the receivables and contracts rights purchased by SCTSC pursuant
to the Receivable Purchase Agreement; and (iv) grant administrative
superpriority claims in favor of Standard Chartered Bank and SCTSC.
On October 17, 2002, the Bankruptcy Court conducted its second interim
hearing on the DIP Motion and entered its second interim order authorizing the
Debtors to (i) obtain secured postpetition financing pursuant to the terms and
conditions of the Post-Petition Credit Facility with Standard Chartered Bank
authorizing Debtors to cause replacement and new letters of credit to be issued
for the Debtors' account up to an amount not to exceed $325,000,000; (ii) obtain
secured postpetition financing pursuant to the DIP Term Loan Agreement with
Lehman (the "DIP TERM LOAN AGREEMENT") in an amount not to exceed
$75,000,000.00; (iii) assume the Commodity Repurchase Agreement and Receivable
Purchase Agreement with SCTSC; (iv) grant security interests in and liens on all
of the Debtors' currently owned or after-acquired property and the proceeds
thereof, other than Avoidance Actions, to Standard Chartered Bank, SCTSC and
Lehman; and (v) grant administrative superpriority Claims in favor of Standard
Chartered Bank, SCTSC and Lehman. The Debtors closed the postpetition financing
transactions approved by the Bankruptcy Court in the second interim order with
Standard Chartered Bank, SCTSC and Lehman on October 18, 2002.
On October 24, 2002, the Bankruptcy Court conducted its final hearing on
the DIP Motion and entered its final order approving the relief granted in the
first interim order and second interim order.
The maturity date for the Post-Petition Credit Facility and DIP Term Loan
Agreement is the earlier to occur of (i) March 31, 2003 and (ii) the Effective
Date of a Plan of the Debtors. In addition, events of default detailed in the
Post-Petition Credit Facility and DIP Term Loan Agreement include the failure of
the Debtors to complete the following actions within the following time periods:
(i) conduct the hearing on the adequacy of the Disclosure Statement by the week
of December 3, 2002; (ii) mail Plan solicitation materials by January 3, 2003;
(iii) obtain a Ballot deadline date of February 4, 2003 for the Reorganization
Plan; (iv) conduct the confirmation hearing for the Plan by February 11, 2003;
and (v) the Effective Date of the Plan must occur by March 1, 2003.
THE EXIT CREDIT FACILITY
On the Effective Date of the Plan, so long as it is not later than March 1,
2003, the Debtors retain the option to extend the Post-Petition Credit Facility
with Standard Chartered Bank and the DIP Term Loan Agreement with Lehman through
the Exit Credit Facility. The Exit Credit Facility will provide the Debtors with
exit financing to a date no later than September 30, 2004, subject to the
payment of extension fees and on terms and conditions substantially similar to
the $325,000,000 Post-Petition Credit Facility with Standard Chartered Bank and
the $75,000,000 DIP Term Loan Agreement with Lehman, with such specific terms
and conditions to be negotiated. Also, on the Effective Date (so long as it is
not later than March 1, 2003), the Debtors retain the option to extend the
Commodity Repurchase Agreement and Receivable Purchase Agreement with SCTSC to a
date no later than September 30, 2003, subject to the payment of extension fees
and based on terms and conditions substantially similar to the current
agreements, with such specific terms and conditions to be negotiated. If the
Debtors exercise their extension option, they must exercise the option with
respect to each of the Post-Petition Credit Facility with Standard Chartered
Bank, the DIP Term Loan Agreement with Lehman, and the Commodity Repurchase
Agreement and Receivable Repurchase Agreement with SCTSC.
41
E. CREDITORS COMMITTEE
On October 24, 2002, the U.S. Trustee filed a 1st Amended Notice of
Appointment of Committee of Unsecured Creditors. Pursuant to this notice, the
following members of the Committee were appointed:
The Northwestern Mutual Life Insurance Company The Dreyfus Corporation
Timothy S. Collins Keith Chan
720 E. Wisconsin Avenue 200 Park Avenue
Milwaukee, Wisconsin 53202 New York, New York 10166
Lehman Energy Fund Farallon Capital Management, LLC
John Robert Chambers Derek Schrier
600 Travis, Suite 7330 One Maritime Plaza, Suite 1325
Houston, Texas 77002 San Francisco, California 94111
The Bank of New York
Max Volmar
101 Barclay Street 8W
New York, New York 10286
F. EMPLOYMENT OF PROFESSIONALS
Pursuant to first-day motions, the Debtors sought authority to retain
certain professionals to represent their interests in the Bankruptcy Case.
Pursuant to those motions, the Bankruptcy Court granted the Debtors authority to
retain (i) Haynes and Boone, L.L.P. as their general bankruptcy counsel; (ii)
Glass & Associates, Inc. as their financial advisors; (iii) Andrews & Kurth LLP
as their special counsel concerning certain pipeline litigation; (iv) Alvarez &
Marsal, Inc. as their financial advisors; and (v) Patton Boggs LLP as special
counsel for the Board of Directors. The Debtors have also obtained authority to
retain certain ordinary course professionals to handle and address a variety of
issues.
In addition to the Debtors, the Committee may seek authority to retain
professionals to represent its interests in the Bankruptcy Case. The Committee
has retained Fulbright & Jaworski L.L.P. as its bankruptcy counsel in this
Bankruptcy Case. The Committee has also hired Petrie Parkman & Co., Inc. as its
financial advisors in this Bankruptcy Case. The Committee may seek to hire other
professionals. To the extent approved by the Bankruptcy Court, the Debtors may
be responsible for paying the fees and expenses of these professionals as well.
The following chart sets forth an estimate of the professional fees and
expenses that may be incurred during the first four months of the Bankruptcy
Case (it is believed that these amounts may be underestimated):
The Debtors have filed their Schedules of Assets and Liabilities and
Statement of Financial Affairs in the Bankruptcy Case. The Debtors' Schedules of
Assets and Liabilities and Statement of Financial Affairs are subject to
amendment.
H. SETTLEMENT WITH ENRON
On November 25, 2002, the Bankruptcy Court entered an order approving the
Enron Settlement Agreement and authorizing the Debtors to consummate the
transaction contemplated in the Enron Settlement
42
Agreement. On December 5, 2002, the bankruptcy court with jurisdiction over the
Enron chapter 11 cases entered an order approving the Enron Settlement Agreement
and authorizing the Enron Parties to consummate the transaction contemplated
therein.
ARTICLE VII
DESCRIPTION OF THE PLAN
A. INTRODUCTION
A summary of the principal provisions of the Plan and the treatment of
Classes of Allowed Claims and Allowed Equity Interests is set out below. The
summary is entirely qualified by the Plan. This Disclosure Statement is only a
summary of the terms of the Plan; it is the Plan and not the Disclosure
Statement that governs the rights and obligations of the parties.
B. DESIGNATION OF CLAIMS AND EQUITY INTERESTS
The following is a designation of the classes of Claims and Equity
Interests under the Plan. In accordance with Bankruptcy Code section 1123(a)(1),
Administrative Claims, Professional Fee Claims, and Priority Unsecured Tax
Claims have not been classified and are excluded from the following Classes. A
Claim or Equity Interest is classified in a particular Class only to the extent
that the Claim or Equity Interest qualifies within the description of that
Class, and is classified in another Class or Classes to the extent that any
remainder of the Claim or Equity Interest qualifies within the description of
such other Class or Classes. A Claim or Equity Interest is classified in a
particular Class only to the extent that the Claim or Equity Interest is an
Allowed Claim or Allowed Equity Interest in that Class and has not been paid,
released or otherwise satisfied before the Effective Date; a Claim or Equity
Interest that is not an Allowed Claim or Equity Interest is not in any Class.
Notwithstanding anything to the contrary contained in the Plan, no Distribution
shall be made on account of any Claim or Equity Interest that is not an Allowed
Claim or Allowed Equity Interest.
1. IDENTIFICATION OF CLASSES
Classes of Claims against and Equity Interests in the various Debtors are
designated as follows:
a. EOTT LLC, EOTT OLP, EOTT PIPELINE, EOTT CANADA, EOTT FINANCE, AND
EOTT LIQUIDS:
Class 1 Allowed Priority Unsecured Non-Tax Claims
Class 2 Allowed Secured Tax Claims
Class 3.1 Allowed Enron Secured Claim
Class 3.2 Allowed Trade Partner Secured Claims
Class 3.3 Allowed M&M Lienholder Secured Claims
Class 3.4 Allowed Other Secured Claims
Class 4 Allowed Convenience Claims
Class 5 Allowed General Unsecured Claims
Class 6 Allowed Subordinated Claims
Class 7 Allowed Equity Interests
The classification scheme outlined above applies only to EOTT LLC, EOTT
OLP, EOTT Pipeline, EOTT Canada, EOTT Finance, and EOTT Liquids. The Claims and
Equity Interests in EOTT Finance are designated with a B; the Claims against and
Equity Interests in EOTT LLC are designated with a C; the Claims against and
Equity Interests in EOTT OLP are designated with a D; the Claims against and
Equity Interests in EOTT Pipeline are designated with an E; the Claims against
and Equity Interests in EOTT Canada are designated with an F; and the Claims
against and Equity Interests in EOTT Liquids are designated with a G.
43
b. EOTT
Class 1A Allowed Priority Unsecured Non-Tax Claims
Class 2A Allowed Secured Tax Claims
Class 3.1A Allowed Enron Secured Claim
Class 3.2A Allowed Trade Partner Secured Claims
Class 3.3A Allowed M&M Lienholder Secured Claims
Class 3.4A Allowed Other Secured Claims
Class 4A Allowed Convenience Claims
Class 5A Allowed General Unsecured Claims
Class 6A Allowed Subordinated Claims
Class 7.1A Allowed Common Units
Class 7.2A Allowed GP Interests
Class 7.3A Allowed Subordinated Units
Class 7.4A Allowed Additional Partnership Interests
c. EOTT GP
Class 1H Allowed Priority Unsecured Non-Tax Claims
Class 2.1H Allowed Indemnifiable Secured Tax Claims
Class 2.2H Allowed Non-Indemnifiable Secured Tax Claims
Class 3.1H Allowed Enron Secured Claim
Class 3.2H Allowed Indemnifiable Other Secured Claims
Class 3.3H Allowed Non-Indemnifiable Other Secured Claims
Class 4H Allowed Convenience Claims
Class 5.1H Allowed Indemnifiable General Unsecured Claims
Class 5.2H Allowed Non-Indemnifiable General Unsecured Claims
Class 6H Allowed Subordinated Claims
Class 7H Allowed Equity Interests
Claims in Classes 1A, 1B, 1C, 1D, 1E, 1F, 1G and 1H are not Impaired under
the Plan. Pursuant to Bankruptcy Code section 1126(f), holders of Claims within
those Classes are conclusively presumed to have accepted the Plan, and therefore
are not entitled to vote to accept or reject the Plan. All Claims and Equity
Interests other than those in Classes 1A, 1B, 1C, 1D, 1E, 1F, 1G and 1H are
Impaired under the Plan. Except as otherwise specified in the Disclosure
Statement Approval Order, holders of Claims and Equity Interests in those
Classes are entitled to vote to accept or reject the Plan.
C. TREATMENT OF CLAIMS AND EQUITY INTERESTS
1. TREATMENT OF UNCLASSIFIED CLAIMS
a. PAYMENT OF ADMINISTRATIVE CLAIMS, PROFESSIONAL FEE CLAIMS, AND
ALLOWED PRIORITY UNSECURED TAX CLAIMS
Administrative Claims are Claims for any cost or expense of the Bankruptcy
Case allowable under Bankruptcy Code sections 503(b) and 507(a)(1). Those
expenses include all actual and necessary costs and expenses related to the
preservation of the Estates or the operation of the Debtors' businesses, all
claims for Cure arising from the assumption of Executory Contracts and unexpired
leases under Bankruptcy Code section 365, and all United States Trustee
quarterly fees. Under the Plan, Allowed Administrative Claims (except
Professional Fee Claims) arising through the Confirmation Date shall be paid
from the Administrative Claims Reserve within ten (10) days after the Allowance
Date. Any Administrative Claims arising under the Enron Settlement Agreement
shall constitute ongoing obligations of the Debtors as reorganized and will be
paid as such Administrative Claims become due and payable pursuant to any
document or agreement governing the payment of such amounts.
44
Professional Fee Claims are Claims for compensation and reimbursement of
expenses by Professionals to the extent allowed under the Bankruptcy Code and
Bankruptcy Rules. Allowed Professional Fee Claims arising through the conclusion
of the Closing shall be paid within ten (10) days after the Allowance Date (i)
first from the balance of any retainers held by Professionals until fully
exhausted, (ii) second from the balance of any reserve accounts established
under any order of the Bankruptcy Court governing the payment of Professional
Fee Claims until fully exhausted, and (iii) third from the Administrative Claims
Reserve.
Priority Unsecured Tax Claims are Unsecured Claims of Governmental Units
that are entitled to priority status under Bankruptcy Code section 507(a)(8).
Allowed Priority Unsecured Tax Claims shall be paid in full from the Priority
Claims Reserve on the later of (i) the Effective Date or (ii) ten (10) days
after the Allowance Date.
Ordinary Course Liabilities are defined generally as Administrative Claims
(other than a Professional Fee Claim or an Administrative Tax Claim) based on
liabilities incurred in the ordinary course of the Debtors' businesses. Ordinary
Course Liabilities shall be paid by the Debtors pursuant to the existing payment
terms and conditions (whether arising under an agreement, applicable law, or
otherwise) governing any particular Ordinary Course Liability.
b. BAR DATES FOR UNCLASSIFIED CLAIMS
All applications or other requests for payment of Administrative Claims
(except Professional Fee Claims, Administrative Tax Claims, and any
Administrative Claims arising under the Enron Settlement Agreement) arising on
or before the Confirmation Date must be filed with the Bankruptcy Court and
served on the Debtors, the U.S. Trustee, and any Committee within 30 days after
the Effective Date, or by such earlier deadline governing a particular
Administrative Claim contained in an order of the Bankruptcy Court entered
before the Confirmation Date. Any Administrative Claim (except Professional Fee
Claims, Administrative Tax Claims, and any Administrative Claims arising under
the Enron Settlement Agreement) for which an application or request for payment
is not filed by the deadline specified in this section shall be discharged and
forever barred.
All applications or other requests for payment of Professional Fee Claims
arising on or before the conclusion of the Closing must be filed with the
Bankruptcy Court and served on the Debtors, the U.S. Trustee, and any Committee
within 60 days after the Effective Date. Any such Professional Fee Claims for
which an application or other request for payment is not filed by the deadline
specified in this section shall be discharged and forever barred.
Any application or other request for payment of an Administrative Tax Claim
must be filed with the Bankruptcy Court and served on the Debtors, the U.S.
Trustee, and any Committee within 45 days after the Effective Date. Any
Administrative Tax Claim for which an application or other request for payment
is not filed by the deadline specified in this section shall be discharged and
forever barred.
c. U.S. TRUSTEE FEES
After the Effective Date and until the Bankruptcy Case is closed, all fees
incurred under 28 U.S.C. sec. 1930(a)(6) shall be paid from the Administrative
Claims Reserve.
2. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS
a. GENERAL
It is not possible to predict accurately the total amount of Claims in a
particular Class or the Distributions that will be ultimately paid to holders of
Claims or Equity Interests in the different Classes because of the variables
involved in the calculations (including the results of the claims objection
process). Notwithstanding, the estimates set forth for each Class are based on
information known to the Debtors on the date of this Disclosure Statement.
45
b. TREATMENT OF ALLOWED PRIORITY UNSECURED NON-TAX CLAIMS (CLASSES
1A, 1B, 1C, 1D, 1E, 1F, 1G AND 1H)
Certain Claims are entitled to priority under Bankruptcy Code section
507(a)(3) (Claims for wages, salaries, or commissions), section 507(a)(4)
(Claims for contributions to employee pension plans), and section 507(a)(6)
(Claims by individuals for refunds of deposits). The Debtors currently estimate
that there are no valid Priority Unsecured Non-Tax Claims. Allowed Priority
Unsecured Non-Tax Claims shall be paid from the Priority Claims Reserve on the
later of (i) the Effective Date or (ii) ten (10) days after the Allowance Date.
c. TREATMENT OF ALLOWED SECURED TAX CLAIMS AND ALLOWED INDEMNIFIABLE
SECURED TAX CLAIMS (CLASSES 2A, 2B, 2C, 2D, 2E, 2F, 2G AND 2.1H)
(i) DETERMINATION OF ALLOWED SECURED TAX CLAIM. These Classes are
comprised of Secured Tax Claims against the Debtors for unpaid taxes for which a
particular Governmental Unit taxing authority has a valid Lien against Estate
Property. The Debtors currently estimate the total amount of Secured Tax Claims
or Indemnifiable Secured Tax Claims is approximately $9.8 million. If there is
more than one Allowed Secured Tax Claim in a particular Class, then each Allowed
Secured Tax Claim in that Class shall be classified in a separate subclass.
Likewise, if there is more than one Class 2.1H Allowed Indemnifiable Secured Tax
Claim, then each Class 2.1H Allowed Indemnifiable Secured Tax Claim will be
classified in a separate subclass. The Debtors may (i) seek a determination
under the Bankruptcy Code and the Bankruptcy Rules regarding the allowability of
any Secured Tax Claim or Indemnifiable Secured Tax Claim and (ii) initiate
litigation to determine the amount, extent, validity, and priority of any Liens
securing any such Claim.
(ii) TREATMENT OF ALLOWED SECURED TAX CLAIMS AND ALLOWED INDEMNIFIABLE
SECURED TAX CLAIMS. Allowed Secured Tax Claims and Class 2.1H Allowed
Indemnifiable Secured Tax Claims shall be satisfied in full at the election of
the Consolidated Debtors, which shall be made on or before the Effective Date,
by (i) the execution and issuance of a Plan Note in favor of a holder of an
Allowed Secured Tax Claim or Allowed Indemnifiable Secured Tax Claim, (ii) the
conveyance of any Estate Property constituting the collateral of the holder of
the Allowed Secured Tax Claim or Allowed Indemnifiable Secured Tax Claim to the
extent of the amount of such Allowed Claim, or (iii) an agreement between the
Debtors and the holder of an Allowed Secured Tax Claim or Allowed Indemnifiable
Secured Tax Claim. Any Estate Property securing an Allowed Secured Tax Claim or
Allowed Indemnifiable Secured Tax Claim remaining after full satisfaction of
that Claim shall remain Estate Property free and clear of all Liens. Any Plan
Note issued in satisfaction of an Allowed Secured Tax Claim or Allowed
Indemnifiable Secured Tax Claim shall contain the following general terms and
conditions:
- Principal: The amount of the Allowed Secured Tax Claim or Allowed
Indemnifiable Secured Tax Claim;
- Interest: Six percent (6%) per annum;
- Maturity: Six (6) years from the date the Allowed Secured Tax Claim or
Allowed Indemnifiable Secured Tax Claim was originally assessed;
- Payment Terms: Consecutive equal quarterly installments of principal and
interest in the amount necessary to amortize the principal over the term
of the Plan Note, together with interest. Payments shall commence on the
90th day after the Effective Date and shall continue quarterly thereafter
until the maturity date. The Plan Note may be prepaid in whole or in part
at any time without penalty.
Each holder of an Allowed Secured Tax Claim or Allowed Indemnifiable
Secured Tax Claim shall retain any Liens securing such Claim until it is
satisfied in accordance with the Plan (which may include the transfer of
collateral provided for in the Plan), or until an earlier date agreed to by the
holder of the such Claim and the Consolidated Debtor.
Subject to the limitations contained in Bankruptcy Code section 502(b)(3),
if the holder of an Allowed Secured Tax Claim or Class 2.1H Allowed
Indemnifiable Secured Tax Claim has a deficiency claim, such
46
Claim shall be treated (as determined by the Bankruptcy Court) under the Plan as
either (i) a Class 5 General Unsecured Claim or Class 5.1H Indemnifiable General
Unsecured Claim or (ii) a Priority Unsecured Tax Claim.
d. TREATMENT OF CLASS 2.2H ALLOWED NON-INDEMNIFIABLE SECURED TAX
CLAIMS
(i) DETERMINATION OF CLASS 2.2H ALLOWED NON-INDEMNIFIABLE SECURED TAX
CLAIM. This Class is comprised of Non-Indemnifiable Secured Tax Claims against
the EOTT GP for unpaid taxes for which a particular Governmental Unit taxing
authority has a valid Lien against Estate Property. Because of the nature of
Class 2.2H Non-Indemnifiable Secured Tax Claims, the Debtors are unable to
reasonably estimate the total amount of such Claims. If there is more than one
Class 2.2H Allowed Non-Indemnifiable Secured Tax Claim, then each Class 2.2H
Allowed Non-Indemnifiable Secured Tax Claim shall be classified in a separate
subclass. EOTT GP may (i) seek a determination under the Bankruptcy Code and the
Bankruptcy Rules regarding the allowability of any Class 2.2H Non-Indemnifiable
Secured Tax Claim and (ii) initiate litigation to determine the amount, extent,
validity, and priority of any Liens securing any such Claim.
(ii) TREATMENT OF CLASS 2.2H ALLOWED NON-INDEMNIFIABLE SECURED TAX
CLAIMS. Class 2.2H Allowed Non-Indemnifiable Secured Tax Claims shall be
satisfied in full at the election of EOTT GP, which shall be made on or before
the Effective Date, by (i) the conveyance of any Estate Property constituting
the collateral of the holder of the Allowed Non-Indemnifiable Secured Tax Claim
to the extent of the amount of such Allowed Claim or (ii) an agreement between
EOTT GP and the holder of an Allowed Non-Indemnifiable Secured Tax Claim. Any
Estate Property securing an Allowed Non-Indemnifiable Secured Tax Claim
remaining after full satisfaction of that Claim shall remain Estate Property
free and clear of all Liens.
Each holder of a Class 2.2H Allowed Non-Indemnifiable Secured Tax Claim
shall retain any Liens securing the Class 2.2H Allowed Non-Indemnifiable Secured
Tax Claim until such Claim is satisfied in accordance with the Plan (which may
include the transfer of collateral provided for in the Plan), or until an
earlier date agreed to by the holder of such Allowed Non-Indemnifiable Secured
Tax Claim and EOTT GP.
Subject to the limitations contained in Bankruptcy Code section 502(b)(3),
if the holder of a Class 2.2H Allowed Non-Indemnifiable Secured Tax Claim has a
deficiency claim, such Claim shall be treated (as determined by the Bankruptcy
Court) under the Plan as either (i) a Class 5.2H Non-Indemnifiable General
Unsecured Claim or (ii) a Priority Unsecured Tax Claim.
e. TREATMENT OF ALLOWED ENRON SECURED CLAIM (CLASSES 3.1A, 3.1B,
3.1C, 3.1D, 3.1E, 3.1F, 3.1G AND 3.1H)
These Classes are comprised of the Allowed Secured Claim of the Enron
Parties against the Debtors, which was granted to the Enron Parties as part of
the overall compromise between Enron and the Debtors set forth in the Enron
Settlement Agreement. The total principal amount of the Enron Secured Claim is
$6,211,673.13. The Enron Secured Claim shall be fully satisfied pursuant to the
terms and conditions of the Enron Settlement Agreement as approved by the
Bankruptcy Court. On and after the Effective Date, the Enron Settlement
Agreement (including the release and indemnity described therein) and the
documents and instruments to be executed in connection therewith shall continue
to represent the binding obligations of the applicable Debtors as reorganized
and shall be enforceable in accordance with their respective terms and
conditions.
f. TREATMENT OF ALLOWED TRADE PARTNER SECURED CLAIMS (CLASSES 3.2A,
3.2B, 3.2C, 3.2D, 3.2E, 3.2F, AND 3.2G)
These Classes represent the Allowed Secured Claims of Trade Partners
against the Debtors. The Debtors currently estimate that there are no valid
Allowed Trade Partners Secured Claims. If there is more than one Allowed Trade
Partner Secured Claim in a particular Class, then each such Claim in that Class
shall be classified in a separate subclass. Allowed Trade Partner Secured Claims
shall be paid in full by the Consolidated Debtors pursuant to the existing
payment terms and conditions governing any particular Allowed Trade Partner
Secured Claim. Each holder of an Allowed Trade Partner Secured Claim shall
retain any Liens
47
securing the Allowed Trade Partner Secured Claim until such Claim is satisfied
in accordance with the Plan, or until an earlier date agreed to by the holder of
the Allowed Trade Partner Secured Claim and the Consolidated Debtors.
g. TREATMENT OF ALLOWED M&M LIENHOLDER SECURED CLAIMS (CLASSES 3.3A,
3.3B, 3.3C, 3.3D, 3.3E, 3.3F, AND 3.3G)
(i) DETERMINATION OF ALLOWED M&M LIENHOLDER SECURED CLAIMS. These Classes
are comprised of Secured Claims against the Consolidated Debtors held by
mechanics or materialmen that are secured by a Lien arising under applicable
state law to the extent such Lien is properly and timely perfected in accordance
with the applicable state law and the Bankruptcy Code. The Consolidated Debtors
currently estimate that there are no valid Allowed M&M Lienholder Secured
Claims.(2) If there is more than one Allowed M&M Lienholder Secured Claim in a
particular class, then each such Claim in that Class will be classified in a
separate subclass. The Consolidated Debtors may (i) seek a determination under
the Bankruptcy Code and Bankruptcy Rules regarding the allowability of any M&M
Lienholder Secured Claim and (ii) initiate litigation to determine the amount,
extent, validity, and priority of any Lien securing any M&M Lienholder Secured
Claim.
(ii) TREATMENT OF ALLOWED M&M LIENHOLDER SECURED CLAIMS. Allowed M&M
Lienholder Secured Claims shall be satisfied by the Consolidated Debtors
executing and issuing a Plan Note on the Closing Date to the holder of any
Allowed M&M Lienholder Secured Claim. The Plan Note shall contain the following
general terms:
- Principal: The amount of the Allowed M&M Lienholder Secured Claim;
- Interest: Six percent (6%) per annum;
- Maturity: Six (6) years from the date the note executed;
- Payment Terms: Consecutive equal quarterly installments of principal and
interest in the amount necessary to amortize the principal over the term
of the Plan Note, together with interest. Payments shall commence on the
90th day after the Effective Date and shall continue quarterly thereafter
until the maturity date. The Plan Note may be prepaid in whole or in part
at any time without penalty.
Each holder of an Allowed M&M Lienholder Secured Claim shall retain any
Liens securing such Allowed Secured Claim until such Claim is satisfied in
accordance with the Plan, or until an earlier date agreed to by the holder of
the Allowed M&M Lienholder Secured Claim and the Consolidated Debtors.
h. TREATMENT OF ALLOWED OTHER SECURED CLAIMS AND ALLOWED
INDEMNIFIABLE OTHER SECURED CLAIMS (CLASSES 3.4A, 3.4B, 3.4C,
3.4D, 3.4E, 3.4F, 3.4G AND 3.2H)
(i) DETERMINATION OF ALLOWED OTHER SECURED CLAIMS AND ALLOWED INDEMNIFIABLE
OTHER SECURED CLAIMS. These Classes are comprised of Other Secured Claims and
Indemnifiable Other Secured Claims that are not treated within another Class
under the Plan. The Debtors currently estimate that there are no valid Other
Secured Claims and Indemnifiable Other Secured Claims. If there is more than one
Allowed Other Secured Claim in a particular Class, then each Allowed Other
Secured Claim in that Class shall be classified in a separate subclass.
Likewise, if there is more than one Class 3.1H Allowed Indemnifiable Other
Secured Claim, then each Class 3.1H Allowed Indemnifiable Other Secured Claim
shall be classified in a separate subclass. The Debtors may (i) seek a
determination under the Bankruptcy Code and the Bankruptcy Rules
2 In the litigation initiated by Big Warrior, Big Warrior seeks the enforcement
of a mechanics' and materialmen's lien in the approximate amount of $4.25
million it filed against EOTT's crude oil pipeline in Mississippi. See
discussion in Article IV, section (I)(2), above. The Debtors believe that Big
Warrior does not have a valid mechanics' and materialmen's lien, and therefore
estimate that there will be no valid M&M Lienholder Secured Claims in these
Classes.
48
regarding the allowability of any Other Secured Claim or Indemnifiable Other
Secured Claim and (ii) initiate litigation to determine the amount, extent,
validity, and priority of any Liens securing any such Claim.
(ii) TREATMENT OF ALLOWED OTHER SECURED CLAIMS. Allowed Other Secured
Claims and Allowed Indemnifiable Other Secured Claims shall be satisfied in full
at the election of the Consolidated Debtors by (i) the execution and issuance of
a Plan Note in favor of a holder of an Allowed Other Secured Claim or Allowed
Indemnifiable Other Secured Claims, (ii) the conveyance of any Estate Property
constituting the collateral of the holder of the Allowed Other Secured Claim or
Allowed Indemnifiable Other Secured Claims to the extent of the amount of such
Allowed Claim, or (iii) an agreement between the Consolidated Debtors and the
holder of an Allowed Other Secured Claim or Allowed Indemnifiable Other Secured
Claims. Any Estate Property securing an Allowed Other Secured Claim or Allowed
Indemnifiable Other Secured Claims remaining after full satisfaction of that
Claim shall remain Estate Property free and clear of all Liens. Any Plan Note
issued in satisfaction of an Allowed Other Secured Claim or Allowed
Indemnifiable Other Secured Claims shall contain the following general terms and
conditions:
- Principal: The amount of the Allowed Other Secured Claim or Allowed
Indemnifiable Other Secured Claims;
- Interest: Six percent (6%) per annum;
- Maturity: Six (6) years from the date the note is executed;
- Payment Terms: Consecutive equal quarterly installments of principal and
interest in the amount necessary to amortize the principal over the term
of the Plan Note, together with interest. Payments shall commence on the
90th day after the Effective Date and shall continue quarterly thereafter
until the maturity date. The Plan Note may be prepaid in whole or in part
at any time without penalty.
Each holder of an Allowed Other Secured Claim or Allowed Indemnifiable
Other Secured Claim shall retain any Liens securing such Claim until it is
satisfied in accordance with the Plan (which may include the transfer of
collateral provided for in the Plan), or until an earlier date agreed to by the
holder of the Allowed Other Secured Claim or Allowed Indemnifiable Other Secured
Claims and the Consolidated Debtors.
If the holder of an Allowed Other Secured Claim or Allowed Indemnifiable
Other Secured Claim has a deficiency claim, such Claim shall be treated under
the Plan as a Class 5 General Unsecured Claim or Class 5.1H Indemnifiable
General Unsecured Claim, as applicable.
i. TREATMENT OF CLASS 3.3H ALLOWED NON-INDEMNIFIABLE OTHER SECURED
CLAIMS
(i) DETERMINATION OF CLASS 3.3H ALLOWED NON-INDEMNIFIABLE OTHER SECURED
CLAIMS. These Classes are comprised of Non-Indemnifiable Other Secured Claims
against EOTT GP that are not treated within another Class under the Plan.
Because of the nature of Class 3.3H Non-Indemnifiable Other Secured Claims, EOTT
GP is unable to reasonably estimate the total amount of such Claims. If there is
more than one Class 3.3H Allowed Non-Indemnifiable Other Secured Claim, then
each Class 3.3H Allowed Non-Indemnifiable Other Secured Claim shall be
classified in a separate subclass. EOTT GP may (i) seek a determination under
the Bankruptcy Code and the Bankruptcy Rules regarding the allowability of any
Class 3.3H Non-Indemnifiable Other Secured Claim and (ii) initiate litigation to
determine the amount, extent, validity, and priority of any Liens securing any
such Claim.
(ii) TREATMENT OF CLASS 3.3H ALLOWED NON-INDEMNIFIABLE OTHER SECURED
CLAIMS.
Class 3.3H Allowed Non-Indemnifiable Other Secured Claims shall be
satisfied in full at the election of EOTT GP, which shall be made on or before
the Effective Date, by (i) the conveyance of any Estate Property constituting
the collateral of the holder of the Allowed Non-Indemnifiable Other Secured
Claim to the extent of the amount of such Allowed Claim or (ii) an agreement
between EOTT GP and the holder of an Allowed Non-Indemnifiable Other Secured
Claim. Any collateral remaining after satisfaction of such Allowed Non-
Indemnifiable Other Secured Claim shall remain Estate Property, free and clear
of any Liens.
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Each holder of a Class 3.3H Allowed Non-Indemnifiable Other Secured Claim
shall retain any Liens securing the Class 3.3H Allowed Non-Indemnifiable Other
Secured Claim until such Claim is satisfied in accordance with the Plan (which
may include the transfer of collateral provided for in the Plan), or until an
earlier date agreed to by the holder of such Claim and EOTT GP.
If the holder of a Class 3.3H Allowed Non-Indemnifiable Other Secured Claim
has a deficiency claim, such Claim shall be treated as a Class 5.2H
Non-Indemnifiable General Unsecured Claim.
j. TREATMENT OF ALLOWED CONVENIENCE CLAIMS (CLASSES 4A, 4B, 4C, 4D,
4E, 4F, 4G AND 4H)
As defined in the Glossary, these Claims consist of the General Unsecured
Claim (otherwise classified in Class 5) and Indemnifiable General Unsecured
Claims (otherwise classified in Class 5.1H) in an amount (a) equal to or less
than $10,000 or (b) greater than $10,000, but which is reduced to $10,000 by
written election of the holder thereof made on a validly executed and timely
delivered Ballot. All Allowed General Unsecured Claims or Indemnifiable General
Unsecured Claims (other than Intercompany Claims) held by a single Creditor will
be aggregated and treated as a single Allowed General Unsecured Claim or
Indemnifiable General Unsecured Claims for purposes of determining the amount of
the Convenience Claim. The postpetition assignment of Allowed General Unsecured
Claims or Indemnifiable General Unsecured Claims shall not consolidate such
Claims owed to separate Creditors on the Petition Date for purposes of
determining the amount of a Convenience Claim.
Each holder of an Allowed Convenience Claim shall be paid, on the Effective
Date or as soon thereafter as practicable, Cash in an amount equal to the lesser
of (i) ten thousand dollars ($10,000) or (ii) the Allowed amount of each
Convenience Claim; provided, however, that if the total amount of Convenience
Claims exceeds $2 million, each holder of a Convenience Claim shall receive a
Pro Rata Share of $2 million. Creditors with a Claim or Claims in a total amount
greater than $10,000 who elect to have their Claim(s) treated as a Convenience
Claim waive the remainder of their Claim(s), and shall not be entitled to any
other Distribution under the Plan.
The total amount of Allowed Convenience Claims to be paid by the Debtors
shall not exceed $2 million. The Debtors estimate that the aggregate amount of
General Unsecured Claims and Indemnifiable General Unsecured Claims that are
equal to or less than $10,000 is approximately $1.7 million. The Debtors cannot
accurately estimate the total number of holders of General Unsecured Claims and
Indemnifiable General Unsecured Claims exceeding $10,000 that will elect to have
their Claims treated as Convenience Claims. To the extent the total amount of
Convenience Claims exceeds $2 million, the recoveries to holders of Convenience
Claims would be diluted. Specifically, where the total amount of Convenience
Claims exceeds $2 million (whether through the addition of electing Claims or
otherwise), each holder of a Convenience Claim, regardless of whether the
Convenience Claim is less than, equal to, or greater than $10,000, will receive
a Pro Rata Share of $2 million.
k. TREATMENT OF ALLOWED GENERAL UNSECURED CLAIMS AND ALLOWED
INDEMNIFIABLE GENERAL UNSECURED CLAIMS (CLASSES 5A, 5B, 5C, 5D,
5E, 5F, 5G AND 5.1H)
These Claims consist of Allowed General Unsecured Claims and Allowed
Indemnifiable General Unsecured Claims that are not treated within another Class
under the Plan, and include the Senior Note Claims. The Debtors currently
estimate that the aggregate amount of General Unsecured Claims and Indemnifiable
General Unsecured Claims (excluding Intercompany Claims) is between $258 million
to $280 million. Each holder of a Class 5 Allowed General Unsecured Claims or
Class 5.1H Allowed Indemnifiable General Unsecured Claims will receive:
- a Pro Rata Share of the New Notes and
- a Pro Rata Share of the Class 5 LLC Distribution.
The aggregate principal amount of the New Notes issued under the Plan shall not
exceed $104 million.
50
l. TREATMENT OF CLASS 5.2H ALLOWED NON-INDEMNIFIABLE GENERAL
UNSECURED CLAIMS.
These Claims consist of Allowed Non-Indemnifiable General Unsecured Claims
against EOTT GP that are not treated within another Class under the Plan.
Because of the nature of Class 5.2H Non-Indemnifiable General Unsecured Claims,
EOTT GP is unable to reasonably estimate the total amount of such Claims. Each
holder of a Class 5.2H Allowed Non-Indemnifiable General Unsecured Claim shall
receive a Pro Rata Share of the EOTT GP Cash.
m. TREATMENT OF ALLOWED SUBORDINATED CLAIMS (CLASSES 6A, 6B, 6C, 6D,
6E, 6F, 6G AND 6H).
These Classes are comprised of Claims (including Claims for punitive
damages under applicable law) that are subject to subordination under any
contract or agreement with any Debtor, any final order of the Bankruptcy Court,
or any provision of the Bankruptcy Code or applicable non-bankruptcy law. The
Debtors currently estimate that there are no Subordinated Claims. The holders of
Allowed Subordinated Claims shall not receive any Distributions on account of
such Claims.
n. TREATMENT OF ALLOWED EQUITY INTERESTS OF EOTT (CLASS 7.1A)
This Class is comprised of Equity Interests in EOTT. Class 7.1A Common
Units in EOTT shall be canceled and extinguished effective on the Effective
Date; however, notwithstanding such cancellation and consistent with section 4.7
of the Plan, each holder (on the Effective Date) of a Class 7.1A Allowed Common
Unit shall receive from the Debtors:
- the Class 7 LLC Distribution and
- the LLC Warrant Distribution.
o. TREATMENT OF ALLOWED GP INTERESTS (CLASS 7.2A), ALLOWED
SUBORDINATED UNITS (CLASS 7.3A), AND ALLOWED ADDITIONAL
PARTNERSHIP INTERESTS (CLASS 7.4A)
These Classes are comprised of Allowed GP Interests, Allowed Subordinated
Units, and Allowed Additional Partnership Interests. Class 7.2A GP Interests,
Class 7.3A Subordinated Units, and Class 7.4A Additional Partnership Interests
shall be canceled and extinguished effective on the Effective Date, and holders
of such Equity Interests shall not receive or retain anything on account of such
Equity Interests.
p. TREATMENT OF EQUITY INTERESTS (CLASSES 7B, 7C, 7D, 7E, 7F, AND 7G)
These Classes are comprised of Allowed Equity Interests in EOTT Finance,
EOTT LLC, EOTT OLP, EOTT Pipeline, EOTT Canada, and EOTT Liquids. Each holder of
an Allowed Equity Interest in Classes 7B, 7C, 7D, 7E, 7F, and 7G shall retain
its Equity Interest under the Plan, but shall not be entitled to receive any
Distribution under the Plan.
ARTICLE VIII
MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN
A. INTRODUCTION
The Plan will be implemented through a reorganization of the Debtors'
corporate structure and a restructuring of the Debtors' debt obligations. Except
with respect to EOTT GP, the Debtors will be substantively consolidated for
purposes of satisfying the Claims asserted against them. Distributions to
creditors will be funded through an Exit Credit Facility from the Debtors'
secured lenders and from the revenues generated from the Debtors' ongoing
business operations. The following discussion outlines the general terms of the
contemplated reorganization of the Debtors' corporate structure and certain
actions that will be taken to close the transactions contemplated by the Plan.
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B. SUBSTANTIVE CONSOLIDATION
On the Effective Date, the Debtors (except EOTT GP) and their respective
Estates will be substantively consolidated, except as described below. EOTT GP
and its Estate will not be substantively consolidated and will remain distinct
from the Consolidated Debtors. As a result of such substantive consolidation,
(i) all Intercompany Claims by and among the Consolidated Debtors will be
eliminated, (ii) any obligation of any of the Consolidated Debtors and all
guarantees thereof executed by any of the Consolidated Debtors will be deemed to
be an obligation of each of the Consolidated Debtors, (iii) any Claim filed or
asserted against any of the Consolidated Debtors will be deemed a Claim against
each of the Consolidated Debtors, (iv) for purposes of determining the
availability of any right of setoff under Bankruptcy Code section 553, the
Consolidated Debtors will be treated as one entity so that (subject to the other
provisions of Bankruptcy Code section 553) debts due to any of the Consolidated
Debtors may be offset against the debts owed by any of the Consolidated Debtors.
On the Effective Date, and in accordance with the terms of the Plan, all Claims
based on guarantees of collection, payment, or performance made by any
Consolidated Debtor concerning the obligations of another Consolidated Debtor
shall be discharged, released, and without further force or effect. The
Consolidated Debtors shall not be responsible for the satisfaction of any
Allowed Non-Indemnifiable Claims against EOTT GP, and the holders of such claims
shall not be entitled to any Distributions from the Consolidated Debtors or
their respective Estates. Except as otherwise expressly provided for in the
Plan, Allowed Non-Indemnifiable Claims shall be satisfied solely by EOTT GP
and/or its Estate.
The substantive consolidation of the Consolidated Debtors shall not
constitute or effectuate a merger of the corporate or other legal identities of
the Consolidated Debtors, and the Consolidated Debtors' respective corporate and
other legal identities shall remain intact, except as otherwise specified in the
Plan. To the extent applicable, all Claims by and between each of the
Consolidated Debtors (on the one hand) and EOTT GP (on the other hand) will be
treated pursuant to the Enron Settlement Agreement, which is described in
Article IV(E) of this Disclosure Statement.
In making the determination to consolidate distributions to the Debtors'
creditors, the Debtors evaluated the nature of their business and the way in
which they conducted relations with their creditors primarily through EOTT and
certain of the operating subsidiaries prebankruptcy. The Debtors in relying on
prevailing authorities and various factors regarding consolidation such as
balancing the equitable treatment of all unsecured creditors with maintaining
corporate formalities of separateness, concluded that such consolidation
outweighed any potential prejudice to the creditors.
C. THE CLOSING
A Closing of the transactions required and contemplated under the Plan will
take place on the Effective Date at the offices of the Debtors' counsel. At the
Closing, the transactions required or contemplated under the Plan will be
consummated. Specifically, the following transaction will take place at or
before the Closing:
1. CANCELLATION OF THE INDENTURE AND SENIOR NOTES, AUTHORIZATION AND
EXECUTION OF THE NEW INDENTURE AND ISSUANCE OF THE NEW NOTES
On the Effective Date, the Senior Note Indenture shall be terminated and
canceled and rendered of no further force and effect; provided, however, that
the cancellation of the Senior Note Indenture shall not (i) impair the rights of
the beneficial holders of Senior Notes under the Plan nor (ii) impair the rights
of the Indenture Trustee under the Plan and the lien and priority rights of the
Indenture Trustee under the Senior Note Indenture. The Senior Note Indenture
shall continue in effect to the extent necessary (a) for the Indenture Trustee
to receive and make Distributions under the Plan of the New Notes and New LLC
Units and (b) to maintain the validity of the charging lien granted to the
Indenture Trustee under section 7.06 of the Senior Note Indenture. Any actions
taken by the Indenture Trustee that are not authorized by (or are otherwise
inconsistent with) the Plan shall be null and void. On the Effective Date, the
Senior Notes shall be canceled and shall be null and void, and the Senior Notes
shall evidence no rights, except the right to receive Distributions under the
Plan. All canceled Senior Notes held by the Indenture Trustee shall be disposed
of in
52
accordance with the customary procedures under the Senior Note Indenture, unless
the Debtors request the Indenture Trustee to return the canceled Senior Notes to
the Debtors.
EOTT Energy LLC will take all necessary action to (i) authorize and execute
the New Indenture and (ii) issue, distribute, and transfer the New Notes to the
Indenture Trustee for subsequent distribution to the holders of Allowed Senior
Note Claims in accordance with the terms of the Plan.
2. REORGANIZATION OF THE DEBTORS' CORPORATE STRUCTURE
The Plan was filed pursuant to a Restructuring Agreement dated October 8,
2002, by and among the Consolidated Debtors, the Enron Parties, Standard (the
Debtors' principal bank lender), SCTSC, Lehman (the lender pursuant to the DIP
Term Loan Agreement), and the Noteholders signatory thereto who own
approximately 66% of the Senior Notes (the "CONSENTING NOTEHOLDERS"). In the
Restructuring Agreement as originally drafted, the parties agreed to support a
plan of reorganization providing for, among other things:
- The cancellation of $235 million principal amount of Senior Notes and the
issuance to holders of such Allowed Senior Note Claims of $100 million
principal amount of New Notes and a number of New LLC Units of membership
interest in EOTT Energy LLC equal to 97% of the New LLC Units outstanding
immediately following the consummation of the Plan; and
- The cancellation of all outstanding general and limited partnership
interests in EOTT (including the Common Units), and the issuance to
holders of Allowed Common Units of a number of New LLC Units equal to 3%
of the New LLC Units outstanding immediately following the consummation
of the Plan plus LLC Warrants to purchase an additional approximately 7%
of the New LLC Units such that, if all LLC Warrants were immediately
exercised, the holders of Allowed Common Units would own 10% of the
outstanding New LLC Units.
The LLC Warrants expire five years following the date of issuance, and may
not be exercised until the later of one year following the date of issuance and
the date that the SEC declares effective a registration statement covering the
New LLC Units to be issued upon exercise of the LLC Warrants.
The exercise price of the LLC Warrants is $12.50 per New LLC Unit. The
exercise price of the LLC Warrants was based on an exercise price of $0.25 per
Common Unit of EOTT prior to the reorganization. Because the Plan has the effect
of converting fifty Common Units in EOTT into one New LLC Unit in EOTT Energy
LLC, the exercise price of the LLC Warrants was set at $12.50 (which is the
product of 50 times $0.25).
The Debtors' existing corporate structure will be reorganized at or before
the Closing. On or before the Effective Date, all necessary action shall be
taken to form EOTT Energy LLC as a wholly-owned Delaware limited liability
company subsidiary of EOTT. After confirmation of the Plan, the board of
directors of EOTT Energy LLC will consist of seven individuals, who will be
selected before the Confirmation Hearing. The Consenting Holders are entitled to
select six members of the initial post confirmation board of directors. The
remaining member of the initial post-confirmation board of directors will be the
chief executive officer of EOTT Energy LLC. The officers of EOTT Energy LLC will
be selected pursuant to and in the manner provided for in the EOTT Energy LLC
Agreement.
EOTT will transfer all of its equity interests in EOTT LLC to EOTT Energy
LLC. EOTT will then authorize and issue the New GP Interest to EOTT LLC and the
New LP Interest to EOTT Energy LLC. Additionally, the EOTT Partnership Agreement
will be amended to consummate the Plan.
On or before the Effective Date, EOTT Energy LLC and EOTT LLC shall enter
into the Administrative Services Agreement (in a form similar to the current
service agreement between EOTT GP and EOTT LLC). Under the Administrative
Services Agreement, EOTT Energy LLC shall provide all of the employees and
services needed by EOTT LLC in its capacity as the general partner of EOTT and
the EOTT Operating Subsidiaries.
Following the closing of the Plan, the new board of directors of EOTT
Energy LLC may (but is not required to) implement a management incentive plan
for certain key employees and directors of EOTT
53
Energy LLC. Under the management incentive plan as currently contemplated, up to
10% of New LLC Units would be reserved for issuance on the exercise of options
or restricted New LLC Unit grants. The management incentive plan would be
administered by the compensation committee of the board of directors of EOTT
Energy LLC.
As a result of the foregoing transactions, the Debtors' corporate structure
will be reorganized around EOTT Energy LLC, which will essentially take the
place of EOTT LLC in the Debtors' business operations. The shares of EOTT GP
will be extinguished and EOTT GP will be liquidated. Additionally, EOTT will be
merged with EOTT OLP. Neither Enron nor any of the other Enron Parties will have
any affiliation with the Debtors postconfirmation, except that subsidiaries of
those parties may own some of the New LLC Units either directly or indirectly.
Following the restructuring, the ownership of EOTT Energy LLC will be as
follows:
Percentage Ownership
AFTER
AFTER LLC ISSUANCE OF
NUMBER OF AFTER WARRANT MANAGEMENT
HOLDER NEW LLC UNITS RESTRUCTURING EXERCISE UNITS(1)
-------------------------------------------------------------------------------------------------
Holders of Common Units 369,520(2) 3.0% 10.0%(3) 9.17%(3)
Class 5 and Class 5.1H General
Unsecured Creditors 11,947,820 97.0% 90.0% 82.5%
Management of EOTT Energy LLC 1,200,000 -- -- 8.29%
-------------------------------------------------------------------------------------------------
(1) Assumes a management incentive plan with 1,200,000 New LLC Units is approved
by the board of directors of EOTT Energy LLC. No decision has currently been
made regarding the size of, or awards under, the incentive plan, if any.
(2) Does not include up to 957,981 LLC Units to be issued if LLC Warrants are
exercised
(3) Includes 957,981 LLC Units that may be issued upon exercise of the LLC
Warrants
3. EXECUTION AND ISSUANCE OF PLAN NOTES
The Claims held by certain Classes of Creditors will be evidenced by and
paid pursuant to various Plan Notes. The Debtors will execute any and all Plan
Notes contemplated and required under the Plan at the Closing. Any and all Plan
Notes shall be issued and delivered to the applicable Creditor(s) in accordance
with the terms of the Plan.
4. CONSUMMATION OF THE EXIT CREDIT FACILITY
The Debtors' postconfirmation business operations will be funded through
advances under the Exit Credit Facility, which shall be executed between the
Debtors and Standard Chartered Bank, the Debtors' postpetition lender. At the
Closing, the Debtors will take all actions (including the execution of any
documents) necessary to consummate the Exit Credit Facility.
5. CONSUMMATION OF THE ENRON SETTLEMENT AGREEMENT
At the Closing and to the extent not already performed during the
Bankruptcy Case, the Debtors and the Enron Parties will take all actions
(including the execution of the EOTT Note, and any other documents and the
issuance of the EOTT Letter of Credit) necessary to consummate and effectuate
the Enron Settlement Agreement.
6. ESTABLISHMENT OF RESERVES
The Debtors will establish and fund separate segregated reserves for
Administrative Claims, Priority Claims, and Disputed Claims. Those reserves are
referred to in the Plan as the Administrative Claims Reserve, the Priority
Claims Reserve, and the Disputed Claims Reserve, respectively.
54
7. LIQUIDATION OF EOTT GP
Following the Effective Date, EOTT GP will conduct an orderly liquidation
of its Estate consistent with the terms and conditions of the Plan. Any Cash
realized from the liquidation of EOTT GP's Estate shall constitute EOTT GP Cash,
and shall be distributed in accordance with the Plan. Following the completion
of the liquidation process, EOTT GP will be dissolved in accordance with
applicable law.
ARTICLE IX
PRO FORMA FINANCIAL PROJECTIONS, FEASIBILITY, REORGANIZATION VALUE AND RISKS
A. FINANCIAL PROJECTIONS AND FEASIBILITY
The Debtors have analyzed their ability to meet their obligations under the
Plan, and as part of that analysis have prepared their preliminary projected
financial projections (the "FINANCIAL PROJECTIONS") from February 2003 through
December 2007 (the "FORECAST PERIOD"). The Financial Projections are attached to
the Disclosure Statement as EXHIBIT D. Based on the Financial Projections, the
Debtors believe that they will be able to make all payments required under the
Plan, and therefore confirmation of the Plan is not likely to be followed by a
liquidation or need for further restructuring. The Financial Projections may be
subject to further modifications.
The Financial Projections are based on the general assumptions that the
Plan will be confirmed by the Bankruptcy Court and that the Effective Date of
the Plan will occur on January 31, 2003. While the forecasts and information are
based on an Effective Date in January 2003, the Debtors reasonably believe that
an actual Effective Date later in the first quarter of 2003 would not have any
material effect on the Financial Projections.
The Debtors have prepared the Financial Projections based on certain
assumptions that they believe are reasonable under the circumstances. Those
assumptions that the Debtors consider significant are described in the Financial
Projections. The Financial Projections have not been compiled or examined by
independent accountants. The Debtors make no representations regarding the
accuracy of the Financial Projections or their ability to achieve the forecasted
results. Many of the assumption underlying the Financial Projections are subject
to significant uncertainties. Inevitably, some assumptions will not materialize,
and unanticipated events and circumstances may affect the ultimate financial
results. Therefore, the actual results achieved during the Forecast Period may
vary from the forecasts, and the variations may be material. In evaluating the
Plan, Claimholders and Interestholders are urged to examine carefully all of the
assumptions underlying the Financial Projections.
B. REORGANIZATION VALUE
The Debtors estimate that the total amount of Allowed Unsecured Claims
(other than Convenience Claims) will be in an amount between $258 Million and
$280 Million. Based upon the Liquidation Analysis attached to this Disclosure
Statement, in a Chapter 7 liquidation the Debtors estimate that unsecured
creditors would recover approximately 7.2% to 7.8% of the Allowed Amount of
their Claims.
Petrie Parkman & Co., the financial advisor to the Unsecured Creditors'
Committee, has performed an analysis of the reorganization value of the Debtor
as of the Effective Date of the Plan. Petrie Parkman & Co. has estimated that
the value of the reorganized Debtor will be between $365 Million and $395
Million. After deducting funded secured debt of $200 Million, (rounded to the
nearest $1 Million) and the $104 Million of New Notes to be issued in the Plan,
the Enron Claims of $7.5 Million and ad valorem taxes of approximately $10
Million the value of the reorganized Debtor would be between $44 Million and $74
Million.
Under the Plan, Unsecured Creditors will share prorata in the $104 Million
of New Notes and will receive 97 % of the equity in the reorganized Debtor. If
the New Notes are valued at their face value of $104 Million and 97% of the
equity in the reorganized Debtor has an estimated value in a range between $43
Million and $72 Million, then the total recovery to the unsecured creditors will
be between $147 Million and $176 Million. The estimated percentage recovery to
unsecured creditors will be between 52% and 68%.
55
Significant tort and environmental claims have been asserted against the
Debtors that are currently unliquidated. If these claims are allowed as
asserted, the percent recovery to Unsecured Creditors will be significantly less
than forecasted.
Since the recovery to unsecured creditors under the Plan is substantially
greater than the recovery under a Chapter 7 liquidation, the Debtors urge
unsecured creditors to vote to accept the Plan.
C. RISKS ASSOCIATED WITH THE PLAN
Both the confirmation and consummation of the Plan are subject to a number
of risks. Specifically, there are certain risks inherent in the reorganization
process under the Bankruptcy Code. If certain standards set forth in the
Bankruptcy Code are not met, the Bankruptcy Court will not confirm the Plan even
if Claimholders and Interestholders accept the Plan. Although the Debtors
believe that the Plan meets such standards, there can be no assurance that the
Bankruptcy Court will reach the same conclusion. If the Bankruptcy Court were to
determine that such requirements were not met, it could require the Debtors to
re-solicit acceptances, which could delay and/or jeopardize confirmation of the
Plan. The Debtors believe that the solicitation of votes on the Plan will comply
with Bankruptcy Code section 1126(b) and that the Bankruptcy Court will confirm
the Plan. The Debtors, however, can provide no assurance that modifications of
the Plan will not be required to obtain confirmation of the Plan, or that such
modifications will not require a re-solicitation of acceptances.
ARTICLE X
ALTERNATIVES TO PLAN AND LIQUIDATION ANALYSIS
There are three possible consequences if the Plan is rejected or if the
Bankruptcy Court refuses to confirm the Plan: (a) the Bankruptcy Court could
dismiss the Bankruptcy Case, (b) the Bankruptcy Case could be converted to a
liquidation case under chapter 7 of the Bankruptcy Code, or (c) the Bankruptcy
Court could consider an alternative plan of reorganization proposed by some
other party.
A. DISMISSAL
The most remote possibility is dismissal. If the Bankruptcy Case were to be
dismissed, the Debtors would no longer have the protection of the Bankruptcy
Court and the applicable provisions of the Bankruptcy Code. Dismissal would
force a race among creditors to take over and dispose of the Debtors' available
assets. Even the most diligent unsecured creditors would likely fail to realize
any significant recovery on their claims.
B. CHAPTER 7 LIQUIDATION
A straight liquidation bankruptcy, or chapter 7 case, requires liquidation
of the bankruptcy debtor's assets by an impartial trustee. In a chapter 7 case,
the amount unsecured creditors receive depends on the net estate available after
all assets of the debtor have been reduced to cash. The cash realized from
liquidation of the debtor's assets would be in accordance with the order of
distribution prescribed in Bankruptcy Code section 507.
If the Plan is not confirmed, it is likely that the Debtors' chapter 11
case will be converted to a case under chapter 7 of the Bankruptcy Code, in
which case a trustee would be appointed to liquidate the Debtors' assets for
distribution to creditors in accordance with the priorities established by the
Bankruptcy Code. Whether a bankruptcy case is one under chapter 7 or chapter 11,
Secured Claims, Administrative Claims, Priority Unsecured Non-Tax Claims, and
Priority Unsecured Tax Claims are entitled to be paid in full before unsecured
creditors receive any funds.
If the Debtors' chapter 11 case is converted to chapter 7, the present
Administrative Claims may have a priority lower than priority claims generated
by the chapter 7 case, such as the chapter 7 trustee's fees or the fees of
attorneys, accountants and other professionals engaged by the trustee.
56
If the bankruptcy case is converted, the Bankruptcy Court would appoint a
trustee to liquidate the Debtors' property and assets and distribute the
proceeds to creditors in accordance with the Bankruptcy Code's priority scheme.
It is likely that the chapter 7 trustee would have little or no experience or
knowledge of the Debtors' businesses or their records or assets. A substantial
period of education would be required in order for any chapter 7 trustee to wind
the case up effectively.
The chapter 7 trustee would be entitled to receive the compensation allowed
under Bankruptcy Code section 326. The trustee's compensation is based on 25% of
the first $5,000 or less; 10% of any amount in excess of $5,000 but not in
excess of $50,000; 5% of any amount in excess of $50,000 but not in excess of $1
million; and reasonable compensation not to exceed 3% of any amount in excess of
$1 million, on all funds disbursed or turned over in the bankruptcy case by the
trustee to parties in interest (excluding the Debtors, but including the holders
of Secured Claims). The trustee's compensation would be paid as a cost of
administration of the chapter 7 estate, and may have priority over the costs and
expenses incurred in the chapter 11 case and any payment to unsecured creditors.
It is also likely that the chapter 7 trustee would retain his own
professionals (including attorneys and financial advisors) whose fees would also
constitute priority claims in the chapter 7 case, with a priority that may be
higher than those claims arising as part of the administration of the chapter 11
case.
The Debtors believe that liquidation under chapter 7 would result in
smaller distributions being made to Claimholders than those provided for in the
Plan. As previously noted, conversion to chapter 7 would give rise to (a)
additional administrative expenses involved in the appointment of a trustee and
attorneys and other professionals to assist such trustee and (b) additional
expenses and Claims, some of which would be entitled to priority, that would be
generated during the liquidation and from the rejection of leases and other
executory contracts in connection with a cessation of the Debtors' operations.
In a chapter 7 liquidation, it is very possible that general unsecured creditors
would receive greatly diminished recovery on their claims.
Attached to this Disclosure Statement as EXHIBIT E is a chart setting forth
a liquidation analysis of the Debtors' bankruptcy estates, which may be subject
to further revision. The Debtors believe that the liquidation analysis is
reasonable and conservative. Parties are urged to review the notes and
assumptions accompanying the liquidation analysis contained in EXHIBIT E.
C. ALTERNATIVE PLAN
Because the Debtors have filed the Plan and seek its confirmation during
the respective exclusive periods established under the Bankruptcy Code, no other
alternative plans can be proposed at this time. Nonetheless, even if an
alternative plan were proposed, it would likely propose a sale of assets and a
liquidation of the Debtors and the distribution of resulting Cash to
Claimholders, or an internal restructuring similar to that contemplated in the
Plan. In comparison to the Debtors' Plan, such an alternative plan would likely
not provide any greater return to Creditors and any return could be even less,
due to the additional time and expense necessary to obtain approval of an
alternative plan.
ARTICLE XI
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE PLAN
The following discussion summarizes certain material U.S. federal income
tax consequences of the implementation of the Plan to the Debtors, Claimholders,
and Interestholders. This discussion is based on the current provisions of the
Internal Revenue Code of 1986, as amended (the "IRC"), existing and proposed
Treasury Regulations promulgated thereunder, judicial decisions, and published
rulings and pronouncements of the IRS in effect on the date of this Disclosure
Statement. Subsequent changes in these rules could significantly affect the
federal income tax consequences described below.
The material U.S. federal income tax consequences of the Plan are complex
and subject to uncertainties. This summary does not address state, local, or
foreign tax consequences of the Plan, and it does not purport to address the
federal income tax consequences of the Plan to special classes of taxpayers
(such as foreign
57
taxpayers, broker-dealers, banks, insurance companies, financial institutions,
small business investment corporations, regulated investment companies,
tax-exempt organizations, or investors in pass through entities). This summary
also does not address any tax consequences related to the Enron Settlement
Agreement. The Debtors have not requested a ruling from the IRS or an opinion
with respect to any of the tax aspects of the Plan. There can be no assurance
that the IRS or a court will agree with this discussion of material federal
income tax consequences. The costs of any contest with the IRS will be borne
directly or indirectly by Claimholders and Interestholders. Further, the Debtors
cannot assure you that the anticipated federal income tax consequences to the
Debtors or an investment in EOTT Energy LLC described below will not be
significantly modified by future legislative or administrative changes or court
decisions. Any modification may or may not be retroactively applied.
THE FOLLOWING SUMMARY OF CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX
PLANNING AND ADVICE BASED ON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A
PARTICULAR CLAIMHOLDER OR INTERESTHOLDER. ALL CLAIMHOLDERS AND INTERESTHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE U.S. FEDERAL,
STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM UNDER THE PLAN.
A. EOTT'S PARTNERSHIP STATUS
For Federal income tax purposes: (i) EOTT Energy LLC and its Operating
Subsidiaries each will be treated as a partnership for Federal income tax
purposes; and (ii) owners of New LLC Units (with some exceptions, as described
in Section E -- "Ownership and Disposition of New LLC Units -- Tax Treatment of
Unitholders -- Status as a Partner" of this Article XI) will be treated as
partners of EOTT Energy LLC (but not partners of the Operating Subsidiaries).
Based on applicable federal income tax law, EOTT Energy LLC believes that
it and each of its Operating Subsidiaries have been and will be classified as a
partnership for federal income tax purposes. This conclusion is based upon the
following facts:
- Neither EOTT Energy LLC nor any of its Operating Subsidiaries have
elected or will elect to be treated as an association taxable as a
corporation;
- For each taxable year, EOTT has derived and EOTT Energy LLC will continue
to derive less than 10% of its gross income from sources other than (i)
the exploration, development, mining or production, processing, refining,
transportation or marketing of any mineral or natural resource, including
oil, gas, or products thereof and naturally occurring carbon dioxide, or
(ii) other items of income that will be "qualifying income" within the
meaning of IRC Section 7704(d); and
- EOTT Energy LLC and each of its Operating Subsidiaries have been and will
continue to be organized and will be operated in accordance with (i) all
applicable limited liability company and partnership statutes, (ii) the
EOTT Energy LLC Agreement and the Operating Subsidiaries' partnership
agreements and (iii) the description of these entities' operations in
this Disclosure Statement.
IRC Section 7704 provides that publicly-traded partnerships will, as a
general rule, be taxed as corporations. However, an exception (the "NATURAL
RESOURCE EXCEPTION") exists with respect to publicly-traded partnerships 90% or
more of the gross income of which for every taxable year consists of "qualifying
income." Qualifying income includes income and gains derived from the
transportation and trading of oil and petroleum products and natural gas
processing as conducted by EOTT Energy LLC and its Operating Subsidiaries. Other
types of qualifying income generally include interest (from other than a
financial business), dividends, real property rents, gains from the sale of real
property and gains from the sale or other disposition of capital assets held for
the production of income that otherwise constitutes qualifying income. EOTT
Energy LLC estimates that less than 5% of its gross income is not qualifying
income under this test; however, this estimate could change from time to time.
Thus, EOTT Energy LLC believes that at least 95% of its gross income constitutes
qualifying income.
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For the first taxable year, if any, that EOTT Energy LLC fails to meet the
Natural Resource Exception (other than a failure determined by the IRS to be
inadvertent that is cured within a reasonable time after discovery), EOTT Energy
LLC will be treated as if it transferred all of its assets (subject to
liabilities) to a newly-formed corporation in return for stock in the
corporation and then distributed the stock to holders of New LLC Units
("UNITHOLDERS") in liquidation of their interests in EOTT Energy LLC. This
contribution and liquidation should be tax-free to Unitholders and EOTT Energy
LLC, so long as EOTT Energy LLC, at such time, does not have liabilities in
excess of the tax basis of its assets. Thereafter, EOTT Energy LLC would be
treated as a corporation for Federal income tax purposes.
If EOTT should have been treated as an association or otherwise taxable as
a corporation prior to the reorganization of EOTT pursuant to the Plan (the
"REORGANIZATION") (including as a result of the Reorganization), then the
Federal income tax consequences of the Reorganization would differ greatly from
those discussed below. For example, a corporate entity in bankruptcy would
likely not have cancellation of indebtedness income as a result of the
Reorganization, although it would be required to reduce certain of its tax
attributes. In addition, if EOTT is taxable as a corporation, the exchange of
the Senior Notes for New Notes and New LLC Units in EOTT Energy LLC would
qualify as a tax-free recapitalization to the Noteholders, assuming the Senior
Notes and New Notes constituted securities for federal income tax purposes and
certain other requirements were met. With respect to the Continuing Partners
(defined below) who receive LLC Warrants, such holders might have been deemed to
have exchanged certain of their Common Units for the LLC Warrants in the
tax-free recapitalization. Each person should consult, and should depend on, its
own tax advisor in analyzing the tax consequences to it in the event that EOTT
is treated as an association or it is otherwise taxable as a corporation prior
to the Reorganization.
If EOTT Energy LLC were treated as an association or otherwise taxable as a
corporation in any taxable year as a result of a failure to meet the Natural
Resource Exception or otherwise, EOTT Energy LLC's items of income, gain, loss,
deduction and credit would be reflected only on EOTT Energy LLC's tax return
rather than being passed through to its Unitholders, and EOTT Energy LLC's net
income would be taxed at the entity level at corporate rates. In addition, any
distribution made to the Unitholders would be treated as either taxable dividend
income (to the extent of EOTT Energy LLC's current or accumulated earnings and
profits), a nontaxable return or capital (in the absence of earnings and
profits, but only to the extent of a Unitholder's tax basis in its New LLC
Units) or taxable capital gain (after such tax basis in the New LLC Units is
reduced to zero). Accordingly, EOTT Energy LLC's treatment as an association
taxable as a corporation would result in a material reduction in a Unitholder's
cash flow and after-tax return.
The discussion below is based on the assumption that EOTT Energy LLC will
continue to be classified as a partnership for Federal income tax purposes.
B. THE REORGANIZATION
Pursuant to the Plan, the interests of EOTT, including the Common Units,
Subordinated Units, Additional Partnership Interests and the GP Interest, and
the currently outstanding Senior Notes will be cancelled. Also, the limited
liability company membership interests in EOTT LLC will be cancelled. Holders of
cancelled Common Units (the "CONTINUING PARTNERS") will receive for their
cancelled Common Units (i) New LLC Units (representing in the aggregate 3% of
the New LLC Units outstanding immediately after the Closing) and (ii) LLC
Warrants to purchase New LLC Units. The LLC Warrants will entitle the holders
thereof to purchase a number of New LLC Units equal to approximately 7% in the
aggregate of the New LLC Units outstanding immediately after the Closing.
Holders of cancelled Subordinated Units, Additional Partnership Interests and
the GP Interest (collectively, the "TERMINATED PARTNERS") will receive no
consideration for their cancelled interests. Holders of cancelled Senior Notes
who are now a part of Class 5, along with other Class 5 members and Class 5.1H,
will receive their Pro Rata Share of $104 million of New Notes and 11,947,820
New LLC Units (representing 97% of the New LLC Units outstanding immediately
following the Closing).
For federal income tax purposes, however, the Debtors believe the
transactions will be treated more simply as a continuation of the same
partnership, in which (i) the Terminated Partners' interests in EOTT
59
have been forfeited for no consideration, (ii) the Noteholders have made a
capital contribution of part of the debt to EOTT Energy LLC in exchange for New
LLC Units, (iii) the Continuing Partners have been thereby diluted and have
received LLC Warrants, and (iv) the taxable year of EOTT Energy LLC will
continue.
CONSEQUENCES TO EOTT ENERGY LLC. As a result of the Reorganization, EOTT
Energy LLC will be treated as exchanging the Senior Notes for the New Notes and
the New LLC Units. Although it is not entirely free from doubt, the exchange of
the Senior Notes will likely result in discharge of indebtedness income to EOTT
Energy LLC to the extent that the adjusted issue price of the Senior Notes
exceeds the sum of the issue price for the New Notes and the fair market value
of the New LLC Units. EOTT Energy LLC intends to report the discharge of
indebtedness income on its Federal income tax return.
If the IRS were to successfully take the position that indebtedness of a
partnership may be exchanged for an interest in the partnership without the
exchange resulting in discharge of indebtedness income to the partnership (the
"equity-for-debt exception"), the amount of discharge of indebtedness income
that results to EOTT Energy LLC may be significantly less than the amount
indicated immediately above.
Although the treatment of discharge of indebtedness income as qualifying
income for purposes of the Natural Resource Exception is not free from doubt,
EOTT intends to treat any discharge of indebtedness income as qualifying income.
However, if the discharge of indebtedness income is not considered to be
qualifying income, and as a result, EOTT Energy LLC fails to qualify for the
Natural Resource Exception, EOTT Energy LLC will be converted to an entity
taxable as a corporation as of the beginning of the taxable year of the
Reorganization, unless EOTT Energy LLC receives a ruling from the IRS that the
termination was inadvertent. (See Section A -- "EOTT's Partnership Status" of
this Article XI.)
Except for the discharge of indebtedness income resulting from the receipt
of the Senior Notes, EOTT Energy LLC will treat the exchange of the New LLC
Units for the Senior Notes as a tax-free contribution of capital to EOTT Energy
LLC and the cancellation of the interests in EOTT of the Terminated Partners as
a non-taxable event. The dilution of the interests in EOTT Energy LLC of the
Continuing Partners and the issuance of LLC Warrants to the Continuing Partners
should also be non-taxable to EOTT Energy LLC.
Regardless of whether the equity-for-debt exception applies, EOTT Energy
LLC will be treated as making a distribution of cash (a "deemed distribution")
to each Continuing Partner to the extent that the Reorganization results in a
reduction in the partner's allocable share of EOTT Energy LLC's liabilities. If
the distributee partner recognizes a gain on the deemed distribution, EOTT
Energy LLC will increase the tax basis of its remaining assets by the amount of
this gain. Any such increase will be allocated among EOTT Energy LLC's capital
assets based on their unrealized appreciation and, if necessary, their relative
fair market values. However, if the distributee partner recognizes a loss on the
deemed distribution, EOTT Energy LLC will reduce the tax basis of its remaining
assets by the amount of this loss. Any such decrease will be allocated among
EOTT Energy LLC's capital assets based on their unrealized depreciation and, if
necessary, their relative tax basis, taking into account any unrealized
depreciation adjustments.
CONSEQUENCES TO EOTT PARTNERS.
TERMINATED PARTNERS. As a result of the Reorganization, each of the
Terminated Partners will be allocated, pursuant to the EOTT Partnership
Agreement, its share of the discharge of indebtedness income, if any, that
results to EOTT on the Reorganization. In general, to the extent that an amount
of discharge of indebtedness income is allocated to a Terminated Partner, that
amount will increase the partner's tax basis in its interest in EOTT. The amount
of discharge of indebtedness income allocated to a Terminated Partner may be
significant. Special rules applicable to partners that are insolvent or bankrupt
may provide an exception to the recognition of income from discharge of
indebtedness.
The tax consequences to a Terminated Partner upon the termination of its
interest in EOTT will depend upon whether the Terminated Partner shared in the
liabilities of EOTT immediately before the Reorganization. EOTT GP is the only
Terminated Partner that was deemed to share in the allocation of EOTT
liabilities immediately prior to Reorganization. Thus, EOTT GP should recognize
a capital loss (or gain) to the extent that its tax basis in EOTT immediately
preceding the Reorganization exceeds (or is less than) the sum of the
60
amount of EOTT GP's share of EOTT's liabilities immediately prior to the
Reorganization. Each Terminated Partner (other than EOTT GP) should recognize an
ordinary loss in an amount equal to its tax basis in EOTT immediately preceding
the Reorganization.
CONTINUING PARTNERS. As a result of the Reorganization, each of the
Continuing Partners will be allocated pursuant to the EOTT Energy LLC Agreement,
its share of the discharge of indebtedness income, if any, that results to EOTT
Energy LLC in the Reorganization. A Continuing Partner will have a carryover tax
basis in the New LLC Units except to the extent that such tax basis is increased
by an allocation of discharge of indebtedness income. The amount of discharge of
indebtedness income allocated to a Continuing Partner may be significant.
Special rules applicable to partners that are insolvent or bankrupt may provide
an exception to the recognition of income from discharge of indebtedness. In
addition, this income may be offset by passive loss or other tax loss
carryforwards. Nevertheless, Continuing Partners should be aware that they may
have a tax liability arising from the Reorganization and they will not receive
any cash from EOTT to pay this liability.
Although it is not free from doubt, EOTT Energy LLC's issuance of the LLC
Warrants to Continuing Partners should not be treated as the issuance of a
partnership interest. As a result, a warrantholder should not be treated as a
partner with respect to the ownership of LLC Warrants unless and until it
exercises its LLC Warrants. The issuance of the LLC Warrants generally should
not be a taxable event to a Continuing Partner, and its initial tax basis for
its LLC Warrants will be zero unless it has income upon its receipt of the LLC
Warrants.
CONSEQUENCES TO NOTEHOLDERS. Collectively, Noteholders should be treated
as exchanging the Senior Notes for the New Notes and the New LLC Units. As a
result of the Reorganization, each of the Noteholders will also become a member
in EOTT Energy LLC. Each Noteholder will likely recognize a loss (or taxable
gain) to the extent that its tax basis in the Senior Notes exceeds (or is less
than) its amount realized upon the receipt of its portion of the New Notes and
the New LLC Units. The amount that each Noteholder will be deemed to realize on
the receipt of the New Notes and the New LLC Units should equal the fair market
value of the New LLC Units that it receives and the issue price of the New Notes
that it receives.
If the equity-for-debt exception applies, then each Noteholder's ability to
recognize any such loss will likely be deferred because, to the extent that the
Senior Notes are exchanged for the New LLC Units, the exchange will be treated
as a tax-free contribution of capital to EOTT Energy LLC. Instead of recognizing
a loss (or gain), each Noteholder will take a carryover tax basis in its share
of the New LLC Units in an amount equal to its tax basis in the portion of the
Senior Notes exchanged therefor. In addition, each Noteholder's holding period
in its share of the New LLC Units should include the amount of time that it held
the Senior Notes. Each Noteholder would, however, recognize a loss (or gain) on
its portion of the Senior Notes that is exchanged for New Notes to the extent
that its tax basis in this portion exceeds (or is less than) the issue price of
the New Notes exchanged therefor. Any such loss should be treated as a capital
loss, except Noteholders who hold the Senior Notes in connection with their
trade or business should be able to treat such taxable loss as an ordinary loss.
C. OWNERSHIP AND DISPOSITION OF NEW NOTES
ORIGINAL ISSUE DISCOUNT. Because the New Notes have a payment in kind
("PIK") feature that permits EOTT Energy LLC to pay the interest that accrues on
the New Notes during the first year that the New Notes are outstanding in either
cash or with additional notes issued by EOTT Energy LLC, none of the interest
that accrues under the New Notes during such first year will constitute
"qualified stated interest." Instead, all interest due under the New Notes
during such first year will constitute "original issue discount." In general,
each Noteholder will be required to include the original issue discount that
accrues on the New Notes that it holds as ordinary interest income (in advance
of the receipt of any cash payments attributable to such income) in accordance
with a constant yield method based on a compounding of interest, regardless of
such Noteholder's regular method of tax accounting. However, to the extent that
the interest constitutes "disqualified original issue discount" (see Section
E -- "Ownership and Disposition of New LLC Units --
61
Tax Treatment of Unitholders -- Limitations on Interest Deduction" of this
Article XI), and is received by a corporate Noteholder, it will be eligible for
the dividends received deduction.
SALE, REDEMPTION OR OTHER TAXABLE DISPOSITION OF THE NEW NOTES. A
Noteholder generally will recognize gain or loss on the sale, exchange or other
taxable disposition of a New Note equal to the difference between (i) the amount
realized on the sale, exchange or retirement of the New Note and (ii) the
Noteholder's tax basis in the New Note. Any gain or loss recognized on the sale,
exchange or retirement of a New Note will generally be long-term capital gain or
loss if the Noteholder has held the New Note as a capital asset for more than
twelve months.
D. OWNERSHIP OF THE LLC WARRANTS
TREATMENT OF LLC WARRANTS. Although it is not free from doubt, a LLC
Warrant should not be treated as a partnership interest in EOTT Energy LLC. As a
result, there should be no Federal income tax consequences to a warrantholder
while such warrantholder holds the LLC Warrant.
EXERCISE OF LLC WARRANTS. The exercise of the LLC Warrants will be treated
as an acquisition of New LLC Units and, as such, is not a taxable event to EOTT
Energy LLC or to the warrantholder exercising the LLC Warrants. Consequently,
neither EOTT Energy LLC nor the warrantholder should recognize gain or loss upon
the exercise of the LLC Warrants. The warrantholder's initial tax basis in the
New LLC Units acquired as a result of the exercise of the LLC Warrants will
include its tax basis in the LLC Warrants, if any, plus the exercise price paid
by the warrantholder upon exercise of the LLC Warrants. This initial tax basis
should be aggregated with the warrantholder's tax basis in its existing New LLC
Units as discussed in Section E -- "Ownership and Disposition of New LLC
Units -- Tax Treatment of Unitholders -- Tax Basis of New LLC Units" of this
Article XI. The IRS has taken note of the significant uncertainties as to the
federal income tax consequences of the exercise of a warrant or similar option
to acquire a partnership interest, particularly when the warrantholder
exercising the warrant receives an interest in the partnership that is more
valuable than the sum of the consideration previously transferred to the
partnership and any consideration transferred upon exercise of the warrant. The
federal income tax consequences of such a transaction, which is still under
review by the IRS, would affect not only the warrantholder exercising his right
to acquire New LLC Units, but may also have an impact on the other members and
EOTT Energy LLC. Upon exercise of the LLC Warrants, the holder of New LLC Units
will be treated as any other member of EOTT Energy LLC; provided, however, such
holder may be allocated certain items of gross income or gain in order to
achieve uniformity of the economic and tax characteristics of the New LLC Units.
EXPIRATION OF LLC WARRANTS. The failure of a warrantholder to exercise its
LLC Warrants should not result in any tax consequences to EOTT Energy LLC.
Generally, a warrantholder whose LLC Warrants expire is deemed to have sold the
LLC Warrants at a loss on the date of the expiration in an amount equal to the
warrantholder's tax basis in those LLC Warrants. The character of the loss on
this deemed sale will be determined by reference to the character of the New LLC
Units with respect to which the LLC Warrants were issued and the LLC Warrants
themselves in the hands of the warrantholders. Presumably, this loss would be a
capital loss to the warrantholder unless either the New LLC Units with respect
to which the LLC Warrants were issued or the LLC Warrants themselves were not
capital assets in the hands of the warrantholder.
E. OWNERSHIP AND DISPOSITION OF NEW LLC UNITS
TAX TREATMENT OF EOTT ENERGY LLC AND ITS OPERATIONS.
As a partnership, EOTT Energy LLC will not be a taxable entity, and it will
incur no federal income tax liability. Instead, each Unitholder will be required
to take into account its allocable share of items of EOTT Energy LLC's income,
gain, loss, deduction and credit in computing its federal income tax liability,
regardless of whether cash distributions are made.
ALLOCATIONS. Treasury Regulations provide that an allocation of items of
EOTT Energy LLC's income, gain, loss, deduction or credit, other than an
allocation required by IRC Section 704(c), will generally be
62
given effect for Federal income tax purposes in determining a Unitholder's
distributive share of an item of income, gain, loss or deduction only if the
allocation has substantial economic effect. In any other case, a Unitholder's
distributive share of an item will be determined on the basis of the
Unitholder's interest in EOTT Energy LLC, which will be determined by taking
into account all the facts and circumstances, including the Unitholder's
relative contributions to EOTT Energy LLC, the interests of the Unitholders in
economic profits and losses, the interests of the Unitholders in cash flow and
other non-liquidating distributions and the rights of the Unitholders to
distributions of capital upon liquidation.
IRC Section 704(c) requires that allocations be made to eliminate the
disparity between a Unitholder's "book" capital account (credited with the fair
market value of property contributed to EOTT Energy LLC ("CONTRIBUTED PROPERTY")
and credited or debited with any gain or loss attributable to property owned by
EOTT Energy LLC at the time New LLC Units are sold by EOTT Energy LLC ("ADJUSTED
PROPERTY")) and such Unitholder's "tax" capital account (credited with the tax
basis of Contributed Property) (the "BOOK-TAX DISPARITY"). Under the so-called
"ceiling limitation" of IRC Section 704(c), the Unitholders cannot be allocated
more depreciation, gain or loss than the total amount of the item recognized by
EOTT Energy LLC in a particular taxable period. However, to the extent the
ceiling limitation is or becomes applicable, the EOTT Energy LLC Agreement
requires that some items of income and deduction be allocated in a way designed
to effectively remedy this problem and eliminate the impact of the ceiling
limitations. These allocations will not have substantial economic effect because
they will not be reflected in the capital accounts of the Unitholders. Under
Treasury Regulations promulgated under IRC Section 704(c), allocations similar
to the remedial allocations are allowed. However, there can be no assurance that
EOTT Energy LLC's allocations will be respected.
EOTT Energy LLC believes that, with the exception of remedial allocations
and the allocation of recapture income discussed below and the deduction for
amortizable goodwill discussed below (see Section E -- "Ownership and
Disposition of New LLC Units -- Tax Treatment of EOTT Energy LLC and its
Operations -- Tax Basis, Depreciation and Amortization" of this Article XI),
allocations under the EOTT Energy LLC Agreement will be given effect for Federal
income tax purposes in determining a Unitholder's distributive share of an item
of income, gain, loss or deduction. There are, however, uncertainties in the
Treasury Regulations relating to allocations of partnership income, and
investors should be aware that the IRS may successfully challenge some of the
allocations in the EOTT Energy LLC Agreement.
In general, EOTT Energy LLC's taxable income and losses will be determined
annually and will be prorated on a monthly basis and subsequently apportioned
among Unitholders in proportion to the number of New LLC Units they owned as of
the first business day of each month as determined by EOTT Energy LLC. However,
gain or loss realized on a sale or other disposition of EOTT Energy LLC's assets
other than in the ordinary course of business will be allocated among
Unitholders of record as of the first business day of the month in which the
gain or loss is recognized. As a result of this allocation procedure, a
Unitholder transferring New LLC Units in the open market may be allocated
income, gain, loss, deduction and credit accrued after the transfer.
The use of the allocation procedure discussed above may not be permitted by
existing Treasury Regulations, and accordingly, there can be no certainty of the
validity of this method of allocating income and deductions between the
transferors and the transferees of New LLC Units. If an allocation procedure is
not allowed by the Treasury Regulations (or applies to only transfers of less
than all of a Unitholder's interest), EOTT Energy LLC's taxable income or losses
might be reallocated among Unitholders. EOTT Energy LLC is authorized to revise
its method of allocation between transferors and transferees (as well as among
Unitholders whose interests otherwise vary during a taxable period) to conform
to a method permitted by future Treasury Regulations.
ACCOUNTING ISSUES. EOTT Energy LLC uses the calendar year as its taxable
year and adopts the accrual method of accounting for federal income tax
purposes. EOTT Energy LLC will be considered to be terminated if there is a sale
or exchange of 50% or more of the total interests in its capital and profits
within a twelve-month period. A constructive termination results in the closing
of its taxable year for all Unitholders. A termination could result in the
non-uniformity of New LLC Units for Federal income tax purposes. EOTT
63
Energy LLC's constructive termination will cause a termination of the EOTT
Operating Subsidiaries. A termination could also result in penalties or loss of
tax basis adjustments under the IRC if EOTT Energy LLC were unable to determine
that the termination had occurred.
The New Notes issued by EOTT Energy LLC will be issued with original issue
discount. See Section C -- "Ownership and Disposition of New Notes -- Original
Issue Discount" of this Article XI. In addition, it is likely that the New Notes
will constitute an "applicable high yield discount obligation" ("AHYDO"). As a
result, the timing and ability of certain types of Unitholders to deduct their
share of the interest that accrues on the New Notes may be significantly
affected. See Section E -- "Ownership and Disposition of New LLC Units -- Tax
Treatment of Unitholders -- Limitations on Interest Deductions" of this Article
XI.
TAX BASIS, DEPRECIATION AND AMORTIZATION. The tax basis established for
EOTT Energy LLC's various assets will be used for purposes of computing
depreciation and cost recovery deductions and, ultimately, gain or loss on the
disposition of those assets. The IRS may challenge the method adopted by EOTT
Energy LLC to allocate its aggregate tax basis among its assets and its
treatment of certain amortizable intangible assets. The IRS may (i) challenge
either the fair market values or the useful lives assigned to EOTT Energy LLC's
assets or (ii) seek to characterize intangible assets as non-amortizable
goodwill. If any of these challenges were successful, the deductions allocated
to a Unitholder in respect of EOTT Energy LLC's assets would be reduced, and a
Unitholder's share of taxable income received from EOTT Energy LLC would be
increased accordingly. Any increase could be material.
To the extent allowable, EOTT Energy LLC's board of directors may elect to
use the depreciation and cost recovery methods that will result in the largest
depreciation deductions in EOTT Energy LLC's early years. Property that EOTT
Energy LLC subsequently acquires or constructs may be depreciated using
accelerated methods permitted by the IRC.
If EOTT Energy LLC disposes of depreciable property by sale, foreclosure or
otherwise, all or a portion of any gain (determined by reference to the amount
of depreciation previously deducted and the nature of the property) may be
subject to the recapture rules and taxed as ordinary income rather than capital
gain. Similarly, a Unitholder who has taken cost recovery or depreciation
deductions with respect to property owned by EOTT Energy LLC may be required to
recapture deductions upon a sale of its interest. See Section E -- "Ownership
and Disposition of New LLC Units -- Tax Treatment of Unitholders -- Recognition
of Gain or Loss on Dispositions" of this Article XI.
Certain costs that EOTT Energy LLC has incurred in the Reorganization may
be amortized over any period EOTT Energy LLC selects not shorter than 60 months.
Any costs incurred in promoting the issuance of New LLC Units must be
capitalized and cannot be deducted currently, ratably or upon EOTT Energy LLC's
termination. There are uncertainties regarding the classification of costs as
organization expenses, which may be amortized, and as syndication expenses,
which may not be amortized.
IRC SECTION 754 ELECTION. EOTT previously made the election permitted by
IRC Section 754, and such election will continue to apply to EOTT Energy LLC.
This election is irrevocable without the consent of the IRS. The election
generally permits a purchaser of New LLC Units to adjust its share of the tax
basis in EOTT Energy LLC's properties ("inside basis") pursuant to IRC Section
743(b) to fair market value (as reflected by its New LLC Unit price). See
Section E -- "Ownership and Disposition of New LLC Units -- Tax Treatment of
Unitholders -- Allocation of EOTT Energy LLC's Income, Gain, Loss and Deduction"
of this Article XI. The IRC Section 743(b) adjustment is attributed to only the
purchaser of New LLC Units and is not added to the tax basis of EOTT Energy
LLC's assets associated with its other Unitholders. (For purposes of this
discussion, a Unitholder's inside basis in EOTT Energy LLC's assets will be
considered to have two components: (i) its share of EOTT Energy LLC's actual tax
basis in its assets (the "COMMON TAX BASIS"); and (ii) its IRC Section 743(b)
adjustment allocated to each of its assets.)
An IRC Section 754 election is advantageous if the transferee's tax basis
in its New LLC Units is higher than its New LLC Units' share of the aggregate
tax basis of EOTT Energy LLC's assets immediately prior to the transfer. In that
case, pursuant to the election, the transferee would take a new and higher tax
basis in its
64
share of EOTT Energy LLC's assets for purposes of calculating, among other
items, its depreciation deductions and its share of any gain or loss on a sale
of EOTT Energy LLC's assets. Conversely, an IRC Section 754 election is
disadvantageous if the transferee's tax basis in its New LLC Units is lower than
its New LLC Units' share of the aggregate tax basis of EOTT Energy LLC's assets
immediately prior to the transfer. Thus, the amount that a Unitholder will be
able to obtain upon the sale of its New LLC Units may be affected either
favorably or adversely by the election.
The calculations involved in the IRC Section 754 election are complex, and
EOTT Energy LLC will make them on the basis of some assumptions as to the value
of EOTT Energy LLC's assets and other matters. There is no assurance that the
determinations EOTT Energy LLC makes will not be successfully challenged by the
IRS and that the deductions attributable to them will not be disallowed or
reduced. Should the IRS require a different tax basis adjustment to be made, and
should, in the opinion of EOTT Energy LLC's board of directors, the expense of
compliance exceed the benefit of the election, EOTT Energy LLC's board of
directors may seek permission from the IRS to revoke EOTT Energy LLC's IRC
Section 754 election. If permission is granted, a purchaser of New LLC Units
subsequent to the revocation probably will incur increased tax liability.
VALUATION OF EOTT ENERGY LLC'S PROPERTY. The federal income tax
consequences of the ownership and disposition of New LLC Units will depend in
part on EOTT Energy LLC's estimates of the relative fair market values and
determinations of the tax basis of its assets. Although EOTT Energy LLC may from
time to time consult with professional appraisers with respect to valuation
matters, many of the relative fair market value estimates will be made solely by
EOTT Energy LLC. These estimates are subject to challenge and will not be
binding on the IRS or the courts. In the event the determinations of fair market
value are subsequently found to be incorrect, the character and amount of items
of income, gain, loss, deductions or credits previously reported by EOTT Energy
LLC's Unitholders might change, and Unitholders might be required to amend their
previously filed tax returns or to file claims for refunds.
UNIFORMITY OF NEW LLC UNITS. Because EOTT Energy LLC cannot match
transferors and transferees of New LLC Units, uniformity of the economic and tax
characteristics of the New LLC Units to a purchaser of New LLC Units must be
maintained. In the absence of uniformity, compliance with a number of federal
income tax requirements, both statutory and regulatory, could be substantially
diminished. A lack of uniformity can result from a literal application of
Treasury Regulation Section 1.167(c)-1(a)(6) or Treasury Regulation Section
1.197-2(g)(3) and from the application of the "ceiling limitation" on EOTT
Energy LLC's ability to make allocations to eliminate Book-Tax Disparities
attributable to Contributed Properties and Adjusted Properties. Any
non-uniformity could have a negative impact on the value of a Unitholder's
interest in EOTT Energy LLC. Items of income and deduction will be specially
allocated in a manner that is intended to preserve the uniformity of intrinsic
tax characteristics among all New LLC Units, despite the application of the
"ceiling limitation" to Contributed Properties and Adjusted Properties. These
special allocations will be made solely for federal income tax purposes. EOTT
Energy LLC intends to depreciate the portion of an IRC Section 743(b) adjustment
attributable to unrealized appreciation in the value of Contributed Property or
Adjusted Property (to the extent of any unamortized Book-Tax Disparity) using
the rate of depreciation derived from the depreciation method and useful life
applied to the Common Tax Basis of EOTT Energy LLC's property, consistent with
the Treasury Regulations under IRC Section 743. If EOTT Energy LLC chooses not
to utilize the aggregate method described herein, EOTT Energy LLC may use any
other reasonable depreciation and amortization convention to preserve the
uniformity of the intrinsic tax characteristics of any New LLC Units that would
not have a material adverse effect on its Unitholders. The IRS may challenge any
method of depreciating or amortizing the IRC Section 743(b) adjustment described
in this paragraph. If this challenge were sustained, the uniformity of New LLC
Units might be affected.
TAX TREATMENT OF UNITHOLDERS.
STATUS AS A PARTNER. Unitholders who have become members of EOTT Energy
LLC will be treated as partners in a partnership for federal income tax
purposes.
65
FLOW-THROUGH OF TAXABLE INCOME. Each Unitholder will be required to report
in its taxable income its allocable share of EOTT Energy LLC's income, gains,
losses and deductions without regard to whether corresponding cash distributions
are received by it. Consequently, EOTT Energy LLC may allocate income to its
Unitholders although they have not received a cash distribution in respect of
that income.
ALLOCATION OF EOTT ENERGY LLC'S INCOME, GAIN, LOSS AND DEDUCTION. In
general, EOTT Energy LLC will allocate items of income, gain, loss and deduction
among the Unitholders in accordance with their respective percentage interests
in EOTT Energy LLC. However, as noted above, as required by IRC Section 704(c),
some items of EOTT Energy LLC's income, gain, loss and deduction will be
specially allocated to account for the difference between the tax basis and fair
market value of Contributed Property or Adjusted Property. In addition, some
items of recapture income will be allocated to the extent possible to the
Unitholder allocated the deduction giving rise to the treatment of the gain as
recapture income in order to minimize the recognition of ordinary income by some
of EOTT Energy LLC's Unitholders. Although EOTT Energy LLC believes that these
allocations will be respected under Treasury Regulations, if they are not
respected, the timing and character of the income or gain allocated to a
Unitholder may change. Finally, although EOTT Energy LLC does not expect that
its operations will result in the creation of negative capital accounts, if
negative capital accounts nevertheless result, items of EOTT Energy LLC's income
and gain will be allocated in an amount and manner sufficient to eliminate the
negative balance as quickly as possible.
TREATMENT OF DISTRIBUTIONS BY EOTT ENERGY LLC. EOTT Energy LLC's
distributions to any of its Unitholders will not be taxable for federal income
tax purposes to the extent of such Unitholder's tax basis in its New LLC Units
immediately before the distribution. Cash distributions in excess of a
Unitholder's tax basis generally will be considered to be gain from the sale or
exchange of the New LLC Units taxable in accordance with the rules described
under Section E -- "Ownership and Disposition of New LLC Units -- Tax Treatment
of Unitholders -- Recognition of Gain or Loss on Dispositions" of this Article
XI. Any reduction in a Unitholder's share of EOTT Energy LLC's liabilities for
Federal income tax purposes will be treated as a distribution of cash to that
Unitholder. If EOTT Energy LLC is required under applicable law to pay any
federal, state or local income tax on behalf of any Unitholder or any former
Unitholder, EOTT Energy LLC is authorized to pay those taxes from EOTT Energy
LLC's funds. The payments, if made, will be deemed current distributions of cash
to that Unitholder. EOTT Energy LLC's board of directors is authorized to amend
the EOTT Energy LLC Agreement in the manner necessary to maintain uniformity of
intrinsic tax characteristics of New LLC Units and to adjust subsequent
distributions so that, after giving effect to the deemed distributions, the
priority and characterization of distributions otherwise applicable under the
EOTT Energy LLC Agreement are maintained as nearly as is practicable. These
payments could give rise to an overpayment of tax on behalf of an individual
Unitholder in which event the Unitholder could file a claim for credit or
refund.
TAX BASIS OF NEW LLC UNITS. A Unitholder will have a single tax basis for
its aggregate interest in EOTT Energy LLC. A Unitholder who is Continuing
Partner will have a carryover tax basis in the New LLC Units, increased by any
allocation of discharge of indebtedness income, and further increased by its
share of EOTT Energy LLC's nonrecourse liabilities. Each other Unitholder will
have a tax basis in their New LLC Units equal to the price it paid (or is deemed
to have paid) for such interest plus its share of EOTT Energy LLC's nonrecourse
liabilities. The tax basis for the New LLC Units will be increased by the
Unitholder's share of EOTT Energy LLC's income and by any increase in the
Unitholder's share of EOTT Energy LLC's nonrecourse liabilities. The tax basis
for such interest will be decreased (but not below zero) by EOTT Energy LLC's
distributions, including any decrease in the Unitholder's share of EOTT Energy
LLC's nonrecourse liabilities, by the Unitholder's share of EOTT Energy LLC's
losses and by the Unitholder's share of EOTT Energy LLC's expenditures that are
not deductible in computing its taxable income and are not required to be
capitalized. A Unitholder's share of EOTT Energy LLC's nonrecourse liabilities
will be generally based on the Unitholder's share of EOTT Energy LLC's profits.
LIMITATIONS ON DEDUCTIBILITY OF EOTT ENERGY LLC'S LOSSES. To the extent
EOTT Energy LLC incurs losses, a Unitholder's ability to deduct its share of
deductions and losses will be limited to the tax basis of the Unitholder's New
LLC Units or, in the case of an individual Unitholder or a corporate Unitholder
(if more than 50% of the value of such corporate Unitholder's stock is owned
directly or indirectly by five or fewer
66
individuals or some tax-exempt organizations), to the amount that the Unitholder
is considered to be "at risk" with respect to EOTT Energy LLC's activities, if
that is less than the Unitholder's tax basis. A Unitholder must recapture losses
deducted in previous years to the extent that EOTT Energy LLC's distributions
cause the Unitholder's at risk amount to be less than zero at the end of any
taxable year. Losses disallowed to a Unitholder or recaptured as a result of
these limitations will carry forward and will be allowable to the extent that
the Unitholder's tax basis or at risk amount (whichever is the limiting factor)
is increased.
In general, a Unitholder will be at risk to the extent of the purchase
price of its New LLC Units, but this will be less than the Unitholder's tax
basis for its New LLC Units by the amount of the Unitholder's share of any of
EOTT Energy LLC's nonrecourse liabilities. A Unitholder's at risk amount will
increase or decrease as the tax basis of the Unitholder's New LLC Units
increases or decreases except that changes in EOTT Energy LLC's nonrecourse
liabilities will not increase or decrease the at risk amount.
The passive loss limitations generally provide that individuals, estates,
trusts and some closely held corporations and personal service corporations may
currently deduct losses from passive activities (generally, activities in which
the taxpayer does not materially participate) only to the extent that such
losses do not exceed such taxpayer's income from passive activities or
investments. The passive loss limitations are applied separately with respect to
each publicly-traded partnership. Consequently, any losses generated by EOTT
Energy LLC will be available to offset only future income that EOTT Energy LLC
generates and will not be available to offset income from other passive
activities or investments (including other publicly-traded partnerships) or
salary or active business income. Passive losses that are not deductible because
they exceed the Unitholder's income that EOTT Energy LLC generates may be
deducted in full when the Unitholder disposes of its entire investment in EOTT
Energy LLC in a fully taxable transaction to an unrelated party. The passive
activity loss rules are applied after other applicable limitations on deductions
such as the at risk rules and the tax basis limitation.
A Unitholder's share of EOTT Energy LLC's net income may be offset by any
of EOTT Energy LLC's suspended passive losses, but it may not be offset by any
other current or carryover losses from other passive activities, including those
attributable to other publicly-traded partnerships. The IRS has announced that
Treasury Regulations will be issued that characterize net passive income from a
publicly-traded partnership as investment income for purposes of the limitations
on the deductibility of investment interest.
LIMITATIONS ON INTEREST DEDUCTIONS. The deductibility of a non-corporate
taxpayer's "investment interest expense" is generally limited to the amount of
the taxpayer's "net investment income." As noted, a Unitholder's share of EOTT
Energy LLC's net passive income will be treated as investment income for this
purpose. In addition, the Unitholder's share of EOTT Energy LLC's portfolio
income will be treated as investment income. Investment interest expense
includes: (i) interest on indebtedness properly allocable to property held for
investment; (ii) EOTT Energy LLC's interest expense attributed to portfolio
income; and (iii) the portion of interest expense incurred to purchase or carry
an interest in a passive activity to the extent attributable to portfolio
income. The computation of a Unitholder's investment interest expense will take
into account interest on any margin account borrowing or other loan incurred to
purchase or carry a New LLC Unit to the extent attributable to its portfolio
income. Net investment income includes gross income from property held for
investment, gain attributable to the disposition of property held for investment
and amounts treated as portfolio income pursuant to the passive loss rules less
deductible expenses (other than interest) directly connected with the production
of investment income.
As discussed earlier, all interest due under the New Notes will constitute
original issue discount. To the extent that it is otherwise deductible, the
issuer of a debt instrument with original issue discount generally takes
deductions for original issue discount as it accrues on the instrument,
regardless of the issuer's regular method of accounting. In general, original
issue discount on a debt instrument is treated as accruing at a constant yield
over the life of the instrument. See Section C -- "Ownership and Disposition of
New Notes -- Original Issue Discount" of this Article XI. However, the timing
and ability of a corporate Unitholder to deduct its share of the original issue
discount on the New Notes may be restricted by the rules applicable to an AHYDO.
67
An AHYDO is a debt instrument that has (i) a term in excess of five years,
(ii) a yield to maturity that equals or exceeds the applicable federal rate in
effect for the calendar month in which the debt instrument is issued (the
"RELEVANT AFR") plus five percentage points and (iii) significant original issue
discount. For purposes of this rule, a debt instrument has significant original
issue discount if the aggregate amount that accrues on the instrument for
periods before the close of any accrual period ending more than five years after
the date the debt instrument is issued, exceeds the sum of (x) the aggregate
amount of interest to be paid under the instrument before the close of such
accrual period and (y) the product of the issue price of the debt instrument and
its yield to maturity. In the case of an AHYDO issued by a corporation, original
issue discount is generally not deductible until it is paid, and no portion of
the discount in excess of six percentage points over the Relevant AFR (the
"disqualified original issue discount") is deductible.
Based on the term, yield to maturity and the PIK feature associated with
the New Notes, the New Notes should constitute an AHYDO. Although the New Notes
are actually being issued by EOTT Energy LLC, for federal tax purposes,
applicable Treasury Regulations indicate that each Unitholder should be treated
as having issued its share of the obligations for purposes of determining the
deductibility of its distributive share of any interest on the New Notes. Thus,
a corporate Unitholder should be able to deduct the original issue discount that
accrues under its share of the New Notes only as it is paid in cash and should
not get a deduction for that portion of the interest that constitutes
disqualified original issue discount. Interest that accrues on those New Notes
attributable to a noncorporate Unitholder, however, should be subject to the
general rules of deductibility for original issue discount.
RECOGNITION OF GAIN OR LOSS ON DISPOSITIONS. Gain or loss will be
recognized on a sale of New LLC Units equal to the difference between the amount
realized and the Unitholder's tax basis for the New LLC Units sold. A
Unitholder's amount realized will be measured by the sum of the cash or the fair
market value of other property received plus its share of EOTT Energy LLC's
nonrecourse liabilities. Because the amount realized includes a Unitholder's
share of EOTT Energy LLC's nonrecourse liabilities, the gain recognized on the
sale of New LLC Units may result in a tax liability in excess of any cash
received from the sale.
Gain or loss recognized by a Unitholder (other than a "dealer" in New LLC
Units) on the sale or exchange of a New LLC Unit held for more than twelve
months (which, in the case of a Continuing Partner, should include the period
that such Continuing Partner had held the Common Units exchanged therefor) will
generally be taxable as long-term capital gain or loss. A substantial portion of
this gain or loss, however, will be separately computed and taxed as ordinary
income or loss under IRC Section 751 to the extent attributable to assets giving
rise to depreciation recapture or other "unrealized receivables" or to inventory
EOTT Energy LLC owns. The term "unrealized receivables" includes potential
recapture items, including depreciation recapture. Ordinary income attributable
to unrealized receivables, inventory and depreciation recapture may exceed net
taxable gain realized upon the sale of the New LLC Unit and may be recognized
even if there is a net taxable loss realized upon the sale of the New LLC Unit.
Any loss recognized on the sale of New LLC Units will generally be a capital
loss. Thus, a Unitholder may recognize both ordinary income and a capital loss
upon a disposition of New LLC Units. In addition, a portion of the gain, if any,
that a Unitholder realizes upon a disposition of the New LLC Units may
constitute ordinary income if the Unitholder received the New LLC Units in
exchange for the Senior Notes, but only to the extent that the Unitholder takes
a bad debt deduction or other ordinary loss in connection with the
Reorganization. Net capital loss may offset no more than $3,000 of ordinary
income in the case of individuals and, in the case of a corporation, may be used
to offset only capital gain. Generally, disallowed capital loss deductions of
corporations are carried back to each of the three preceding taxable years,
beginning with the earliest of those taxable years, and any remaining disallowed
capital loss deductions are then carried forward to each of the following five
taxable years, beginning with the earliest of those taxable years. Any
disallowed capital loss deductions of taxpayers other than corporations
generally are treated as capital loss deductions in the succeeding taxable year
and may be carried forward indefinitely.
Even if a Unitholder acquired interests in EOTT Energy LLC in separate
transactions at different prices, upon sale or other disposition of some of the
interests, the IRS has ruled that such Unitholder will have a single tax basis
in its interest which must be allocated to the interest sold on the basis of
some equitable apportionment method. This ruling is unclear as to how the
holding period is affected by this aggregation
68
concept. This aggregation of tax basis may effectively prohibit a Unitholder
from choosing among New LLC Units with varying amounts of unrealized gain or
loss as would be possible in a stock transaction. Thus, the ruling may result in
an acceleration of gain or deferral of loss on a sale of a portion of New LLC
Units. It is not clear whether the ruling applies to publicly-traded
partnerships, such as EOTT Energy LLC, the interests in which are evidenced by
separate interests. If a Unitholder is considering the purchase of additional
New LLC Units or a sale of New LLC Units purchased at differing prices, it
should consult its tax advisor as to the possible consequences of this ruling.
NOTIFICATION REQUIREMENTS ON DISPOSITIONS. A Unitholder who sells or
exchanges New LLC Units is required to notify EOTT Energy LLC in writing of the
sale or exchange within 30 days of the sale or exchange and, in any event, no
later than January 15 of the year following the calendar year that the sale or
exchange occurred. EOTT Energy LLC is required to notify the IRS of the
transaction and to furnish specific information to the transferor and
transferee. However, these reporting requirements do not apply with respect to a
sale by an individual who is a citizen of the United States and who effects the
sale through a broker. Additionally, a transferor of a New LLC Unit will be
required to furnish a statement to the IRS, filed with its income tax return for
the taxable year in which the sale or exchange occurred that sets forth the date
of the sale or exchange, the amount of gain or loss attributable to IRC Section
751 property, and the amount of any gain or loss attributable to capital gain or
loss on the sale of the New LLC Units. Failure to satisfy these reporting
obligations may lead to the imposition of substantial penalties.
CONSTRUCTIVE TERMINATION ON DISPOSITIONS. As noted above, EOTT Energy LLC
will be considered to be terminated if there is a sale or exchange of 50% or
more of the total interests in its capital and profits within a twelve-month
period. In the case of a Unitholder reporting on a fiscal year other than a
calendar year, the closing of EOTT Energy LLC's tax year may result in more than
twelve months of EOTT Energy LLC's taxable income or loss being includable in
its taxable income for the year of termination. In addition, each Unitholder
will realize taxable gain to the extent that any money constructively
distributed to it (including any net reduction in its share of "partnership
nonrecourse liabilities") exceeds the tax basis of its New LLC Units. EOTT
Energy LLC may be required to make new elections, including a new election under
IRC Section 754, subsequent to the constructive termination. A constructive
termination would also result in a deferral of EOTT Energy LLC's deductions for
depreciation. In addition, a termination might either accelerate the application
of, or subject EOTT Energy LLC to, new tax legislation.
ALTERNATIVE MINIMUM TAX. Each Unitholder will be required to take into
account its distributive share of any items of EOTT Energy LLC's income, gain,
loss or deduction for purposes of the alternative minimum tax. A portion of EOTT
Energy LLC's depreciation deductions may be treated as an item of tax preference
for this purpose. A Unitholder's alternative minimum taxable income derived from
EOTT Energy LLC may be higher than its share of EOTT Energy LLC's net income
because EOTT Energy LLC may use more accelerated methods of depreciation for
purposes of computing Federal taxable income or loss. The minimum tax rate for
individuals is 26% on the first $175,000 of alternative minimum taxable income
in excess of the exemption amount and to 28% on any additional alternative
minimum taxable income. Each Unitholder should consult with its tax advisors as
to the impact of an investment in New LLC Units on its liability under the
alternative minimum tax.
F. TREATMENT OF CLAIMHOLDERS OTHER THAN NOTEHOLDERS
The federal income tax consequences of the implementation of the Plan to a
Claimholder, other than a Noteholder, will depend upon a number of factors,
including whether such Claimholder is deemed to have participated in an exchange
for federal income tax purposes, and, if so, whether such exchange transaction
constitutes a tax-free recapitalization or a taxable transaction; whether such
Claimholder's present debt claim constitutes a "security" for federal income tax
purposes; the type of consideration received by such Claimholder in exchange for
its allowed claim; and whether such Claimholder reports income on the accrual
basis.
A Claimholder, other than a Noteholder, whose claim is paid in full or
otherwise discharged on the Effective Date will recognize gain or loss for
federal income tax purposes in an amount equal to the difference
69
between (a) the sum of the money and the fair market value on the Effective Date
of any property received by such Claimholder in respect of its claim (excluding
any money and property received in respect of a claim for accrued interest that
had not been included in income) and (b) the Claimholder's adjusted tax basis in
the claim (other than any claim for such accrued interest). A Claimholder's tax
basis in property received in exchange for its claim will generally be equal to
the fair market value of such property on the Effective Date. The holding period
for any such property will begin on the day after the Effective Date.
Under the Plan, money or property may be distributed or deemed distributed
to certain Claimholders with respect to their claims for accrued interest.
Holders of claims for accrued interest which previously have not included such
accrued interest in taxable income will be required to recognize ordinary income
equal to the sum of any money and the fair market value of any property received
with respect to such claims for accrued interest. Holders of claims for accrued
interest which have included such accrued interest in taxable income generally
may take an ordinary deduction to the extent that such claim is not fully
satisfied under the Plan (after allocating the distribution between principal
and accrued interest), even if the underlying claim is held as a capital asset.
The tax basis of any property (other than money) received in exchange for claims
for accrued interest will equal the fair market value of such property on the
Effective Date, and the holding period for any property (other than money)
received in exchange for such claims will begin on the day after the Effective
Date. The extent to which consideration distributable under the Plan is
allocable to interest is not clear. Claimholders are advised to consult their
own tax advisors to determine the amount, if any, of consideration received
under the Plan that is allocable to interest.
The market discount provisions of the IRC may apply to holders of certain
claims. In general, a debt obligation other than a debt obligation with a fixed
maturity of one year or less that is acquired by a holder in the secondary
market (or, in certain circumstances, upon original issuance) is a "market
discount bond" as to that holder if its stated redemption price at maturity (or,
in the case of a debt obligation having original issue discount, the revised
issue price) exceeds the tax basis of the debt obligation in the holder's hands
immediately after its acquisition. However, a debt obligation will not be a
"market discount bond" if such excess is less than a statutory de minimis
amount. Gain recognized by a holder of a claim with respect to a "market
discount bond" will generally be treated as ordinary interest income to the
extent of the market discount accrued on such debt obligation during such
holder's period of ownership, unless such holder elected to include accrued
market discount in taxable income currently. A holder of a "market discount
bond" that is required under the market discount rules of the IRC to defer
deduction of all or a portion of the interest on indebtedness incurred or
maintained to acquire or carry the debt obligation may be allowed to deduct such
interest, in whole or in part, on disposition of such debt obligation.
70
ARTICLE XII
CONCLUSION
This Disclosure Statement provides information regarding the Debtors'
bankruptcy and the potential benefits that might accrue to holders of Claims
against and Equity Interests in the Debtors under the Plan as proposed. The Plan
is the result of extensive efforts by the Debtors and their advisors to provide
the holders of Allowed Claims and Allowed Equity Interests with a meaningful
dividend. The Debtors believe that the Plan is feasible and will provide each
holder of a Claim against and Equity Interest in the Debtors with an opportunity
to receive greater benefits than those that would be received by any other
alternative. The Debtors, therefore, urge interested parties to vote in favor of
the Plan.
DATED: December 6, 2002.
EOTT ENERGY PARTNERS, L.P.
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
President and Chief Executive
Officer, of EOTT Energy Corp., its
general partner
EOTT ENERGY FINANCE CORP.
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
President and Chief Executive
Officer
EOTT ENERGY GENERAL PARTNER, LLC
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
President and Chief Executive
Officer
EOTT ENERGY OPERATING
LIMITED PARTNERSHIP
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
as President and Chief Executive
Officer of EOTT Energy General
Partner, LLC, its general partner
71
EOTT ENERGY PIPELINE
LIMITED PARTNERSHIP
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
as President and Chief Executive
Officer of EOTT Energy General
Partner, LLC, its general partner
EOTT ENERGY CANADA
LIMITED PARTNERSHIP
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
as President and Chief Executive
Officer of EOTT Energy General
Partner, LLC, its general partner
EOTT ENERGY LIQUIDS, L.P.
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
as President and Chief Executive
Officer of EOTT Energy General
Partner, LLC, its general partner
EOTT ENERGY CORP.
/s/ Dana R. Gibbs
--------------------------------------
By: Dana R. Gibbs
------------------------------------
as President and Chief Executive
Officer
72
EXHIBIT A TO DISCLOSURE STATEMENT
THIRD AMENDED JOINT CHAPTER 11 PLAN OF DEBTORS
Filed separately as Exhibit 2.1 to the Form 8-K filed by EOTT Energy
Partners, L.P. on December 17, 2002.
EXHIBIT B TO DISCLOSURE STATEMENT
ORDER UNDER 11 U.S.C. SEC. 1125 AND FED. R. BANKR. P. 3017 (i) APPROVING
DISCLOSURE STATEMENT, (ii) FIXING TIME FOR FILING ACCEPTANCES OR REJECTIONS
OF JOINT CHAPTER 11 PLAN AND (iii) ESTABLISHING PROCEDURES RELATING
TO THE SOLICITATION OF VOTES ON THE PLAN
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
In re: )
)
EOTT ENERGY PARTNERS, L.P. ) CASE NO. 02-21730
)
EOTT ENERGY FINANCE CORP. ) CASE NO. 02-21731
)
EOTT ENERGY GENERAL PARTNER, L.L.C. ) CASE NO. 02-21732
)
EOTT ENERGY OPERATING LIMITED PARTNERSHIP ) CASE NO. 02-21733
)
EOTT ENERGY PIPELINE LIMITED PARTNERSHIP ) CASE NO. 02-21735
)
EOTT ENERGY CANADA LIMITED PARTNERSHIP ) CASE NO. 02-21734
)
EOTT ENERGY LIQUIDS, L.P. ) CASE NO. 02-21736
)
EOTT ENERGY CORP. ) CASE NO. 02-21788
)
Debtors ) (Jointly Administered under Case
) No. 02-21730)
ORDER UNDER 11 U.S.C. SEC. 1125 AND FED. R. BANKR. P. 3017
(I) APPROVING DISCLOSURE STATEMENT, (II) FIXING TIME FOR
FILING ACCEPTANCES OR REJECTIONS OF THE JOINT
CHAPTER 11 PLAN, AND (III) ESTABLISHING PROCEDURES
RELATING TO THE SOLICITATION OF VOTES ON THE PLAN
The Court has considered the Third Amended Disclosure Statement under 11
U.S.C. sec. 1125 in Support of the Joint Chapter 11 Plan of the Debtors (the
"Disclosure Statement") and proposed solicitation materials (the "Solicitation
Materials") filed pursuant to the Notice Regarding Solicitation Materials and
Proposed Order Approving Disclosure Statement in Support of Joint Chapter 11
Plan (the "Notice of Solicitation Materials"). The Court finds that notice of
the hearing on the Disclosure Statement was adequate under the United States
Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Rules of
this Court, and the Order and Notice for Hearing on Disclosure Statement entered
by this Court. The Court further finds that, in accordance with Bankruptcy Code
section 1125, the Disclosure Statement contains "adequate information" regarding
the Third Amended Joint Chapter 11 Plan of Debtors (the "Plan"), and the
Disclosure Statement and Solicitation Materials should therefore be approved.
Accordingly, it is ORDERED:
I. APPROVAL OF DISCLOSURE STATEMENT AND SOLICITATION MATERIALS AND SETTING OF
RELEVANT DATES
1. The Disclosure Statement is APPROVED as containing information of a
kind, and in sufficient detail, enabling a hypothetical reasonable investor
typical of holders of claims and interests to make an informed judgment
concerning the Plan. All objections to the Disclosure Statement that were not
voluntarily withdrawn are OVERRULED.
2. The Solicitation Materials, including the Common Unit Disclosure
Statement, Ad Valorem Taxing Authority Disclosure Statement, and RO/WIO
Disclosure Statement (as those terms are defined below), are APPROVED in
substantially the form attached to the Notice of Solicitation Materials. The
Solicitation
Materials may also include a solicitation letter from the Official Committee of
Unsecured Creditors supporting the Plan.
3. The hearing on confirmation of the Plan will be held on JANUARY 30,
2003 AT 10:00 A.M. CENTRAL STANDARD TIME, before U.S. Bankruptcy Judge Richard
S. Schmidt, U.S. Bankruptcy Court, 1133 North Shoreline Blvd., Corpus Christi,
Texas 78401.
4. The deadline for filing with the Court and serving written objections
to confirmation of the Plan is JANUARY 23, 2003 AT 4:00 P.M. CENTRAL STANDARD
TIME (the "Objection Deadline"). The mailing address for the Court is United
States Bankruptcy Court, Southern District of Texas, Corpus Christi Division,
1133 North Shoreline Blvd., Corpus Christi, Texas 78401. Any objections to the
Plan must specifically allege the nature of the objection(s) to the Plan.
Objections to the Plan must be served (whether by United States mail, facsimile,
or hand delivery) in sufficient time so as to be actually received by the
Objection Deadline. Objections to confirmation of the Plan that are not timely
and properly filed and served in accordance wit this Order will not be
considered by the Court. Objections to the Plan shall be served on the
following:
a. The Debtors
Molly Sample, Esq.
EOTT Energy Partners, LP
2000 West Sam Houston Parkway South, Suite 400
Houston, Texas 77042
Fax: (713) 993-5813
b. Counsel for Debtors:
Trey A. Monsour, Esq.
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Fax: (214) 651-5940
c. Counsel for the Official Unsecured Creditors Committee:
606 N. Carancachua, Suite 1107
Corpus Christi, Texas 78476
e. Counsel for Standard Chartered Bank
Tina L. Brozman, Esq.
Bingham McCutchen, LLP
399 Park Avenue
New York, New York 10022-4689
Fax: (212) 702-3627
-and-
Karen Ostad, Esq.
Lovells
900 Third Avenue, 16(th) Floor
New York, New York 10022
Fax: (212) 909-0666
II. PROVISIONS RELATING TO SOLICITATION OF THE PLAN
A. GENERAL
5. Except as otherwise provided in this Order, on or before December 17,
2002 (the "Solicitation Deadline"), the Debtors or their tabulation agent (the
"Tabulation Agent") shall transmit (by United States Mail) a Solicitation
Package (as defined below) to be served on (a) all creditors listed in the
Debtors' schedules of liabilities (as amended) filed with the Court (unless,
with respect to any such creditor, the creditor was (i) listed as disputed,
contingent, or unliquidated, (ii) the bar date applicable to such creditor for
filing a proof of claim has elapsed, and (iii) such creditor did not file a
timely proof of claim); (b) all parties who timely file or have already filed
proofs of claim with the Clerk of the Court that have not been finally
disallowed; (c) all parties who have filed valid notices of transfers of claims
pursuant to Bankruptcy Rule 3001(e); (d) all parties to executory contracts or
unexpired leases with the Debtors that have already been rejected pursuant to an
Order entered during the Case; (e) all parties in interest who have requested
special notice; and (f) the United States Trustee.
6. The "Solicitation Package" shall be composed of the following
documents: (i) a copy of this Order; (ii) the Disclosure Statement and Plan;
(iii) an appropriate form of ballot, substantially in a form included in the
Solicitation Materials; (iv) the solicitation letter from the Debtors; (v) if
applicable, the solicitation letter from the Committee; and (vi) a
postage-prepaid return envelope.
B. HOLDERS OF SENIOR NOTES AND CLASS 7.1A COMMON UNITS
7. December 6, 2002 is established as the "Voting Record Date" for
purposes of establishing the holders of the $235 million aggregate principal
amount of 11% Senior Notes due 2009 (the "Senior Notes") and holders of Class
7.1A Common Units entitled to vote on the Plan. By December 13, 2002, the
Depository Trust Company, the holder of the Senior Note, shall furnish the
Debtors or the Tabulation Agent with (i) a list or mailing labels containing the
names and addresses of the registered holders of the Senior Notes and (ii) the
principal amount of Senior Notes held by each registered holder on the Voting
Record Date.
8. On or before the Solicitation Deadline, the Debtors or the Tabulation
Agent shall transmit (by United States Mail) the Solicitation Package to any
person who is a "record holder" on the Voting Record Date of the Senior Notes
(i.e., a person shown as the registered holder of Senior Notes in the registry
maintained by an indenture trustee or a registrar of the Senior
Notes) -- including any bank, agent, broker or other nominee who holds Senior
Notes in its name (the "Senior Note Nominal Holder" or "Senior Note Nominee")
for a beneficial holder or holders.
9. On or before the Solicitation Deadline, the Debtors or the Tabulation
Agent shall transmit (by United States Mail) the "Common Unit Solicitation
Package" (as defined below) to any person who is a "record holder" on the Voting
Record Date of Class 7.1A Common Units (i.e., a person shown as the registered
holder of Class 7.1A Common Units by a transfer agent of the Class 7.1A Common
Units) --
including any bank, agent, broker or other nominee who holds Class 7.1A Common
Units in its name (collectively with the Senior Note Nominal Holder or Senior
Note Nominee, the "Nominal Holder" or "Nominee") for a beneficial holder or
holders. The Debtors are entitled to rely solely on the records of the transfer
agent in determining the record holders of Class 7.1A Common Units on the Voting
Record Date. The "Common Unit Solicitation Package" shall be composed of the
following documents: (i) a copy of this Order; (ii) the Shortened Disclosure
Statement and Notice Pursuant to 11 U.S.C. sec. 1125(c) for Solicitation of
Holders of Common Units of EOTT Energy Partners, L.P. in Connection with the
Third Amended Joint Chapter 11 Plan of the Debtors, Combined with Plan Summary
(the "Common Unit Disclosure Statement"); (iii) an appropriate form of ballot,
substantially in a form included in the Solicitation Materials; (iv) the
solicitation letter from the Debtors; (v) if applicable, the solicitation letter
from the Committee; and (vi) a postage-prepaid return envelope.
10. A Nominee shall, on receipt of the Solicitation Packages and/or Common
Unit Solicitation Packages, promptly forward the Solicitation Packages to the
beneficial owners so that such beneficial owner may vote on the Plan. Nominal
Holders will have two options for obtaining the votes of beneficial owners of
Senior Notes or of the Class 7.1A Common Units, consistent with usual customary
practices for obtaining the votes of securities held in street name: (i) the
Nominal Holder may prevalidate the individual ballot contained in the
Solicitation Package (by indicating that the record holders of the Senior Notes
or Class 7.1A Common Units voted, and the appropriate account numbers through
which the beneficial owner's holdings are derived) and then forward the
Solicitation Package onto the beneficial owner of the Senior Notes or Class 7.1A
Common Units. The beneficial owner shall then indicate its acceptance or
rejection of the Plan and otherwise indicate his choices to the extent requested
to do so on the ballot, and then return the individual ballot directly to the
Tabulation Agent in the return envelope to be provided in the Solicitation
Package by the Voting Deadline or (ii) the Nominal Holder may forward the
Solicitation Package to the beneficial owner of the Senior Notes or Class 7.1A
Common Units for voting, along with a return envelope provided by and addressed
to the Nominal Holder, with the beneficial owner then returning the individual
ballot to the Nominal Holder by the Voting Deadline. The Nominal Holder will
subsequently summarize the votes, including, at a minimum, the number of
beneficial holders voting to accept and to reject the Plan who submitted ballots
to the Nominal Holder and the amount of such Senior Notes or Class 7.1A Common
Units so voted, in a form of master ballot and/or affidavit (the "Affidavit of
Voting Results"), and then return the Affidavit of Voting Results to the
Tabulation Agent within two (2) business days after the Voting Deadline. By
submitting an Affidavit of Voting Results, each such Nominal Holder certifies
that the Affidavit of Voting Results accurately reflects votes from its
beneficial owners holding such Senior Notes or Class 7.1A Common Units as of the
Voting Record Date.
11. Pursuant to 28 U.S.C. sec.sec. 157 and 1334, 11 U.S.C. sec. 105, and
Bankruptcy Rules 1007(i) and (j), the Nominees shall maintain the individual
ballots of its beneficial owners and evidence of authority to vote on behalf of
such beneficial owners. No such ballots shall be destroyed or otherwise disposed
of or made unavailable without such action first being approved by prior order
of the Bankruptcy Court.
12. In the event that ballots are submitted by beneficial owners of Senior
Notes or of Class 7.1A Common Units directly to the Nominees (as opposed to the
Tabulation Agent), (i) such ballots must be received by the Nominees by the
Voting Deadline in order to be counted, and (ii) the Affidavits of Voting
Results required of the Nominees then must be received by the Tabulation Agent
within two (2) business days after the Voting Deadline, and may be sent by
facsimile transmission, provided that an original, signed Affidavit of Voting
Results is also sent by the Nominee to the Tabulation Agent as soon as
practicable thereafter.
13. The Debtors shall provide for reimbursement, as an administrative
expense, of all the reasonable expenses of Nominal Holders in distributing the
Solicitation Packages to the beneficial security holders.
C. AD VALOREM TAXING AUTHORITIES
14. Notwithstanding any other provision of this Order, on or before the
Solicitation Deadline, the Debtors or the Tabulation Agent shall transmit (by
United States Mail) the "Ad Valorem Taxing Authority
Solicitation Package" (as defined below) to any holder of a Secured Tax Claim.
The "Ad Valorem Taxing Authority Solicitation Package" shall be composed of the
following documents: (i) a copy of this Order; (ii) the Shortened Disclosure
Statement and Notice Pursuant to 11 U.S.C. sec. 1125(c) for Solicitation of
Holders of Ad Valorem Tax Claims Against the Debtors in Connection with the
Third Amended Joint Chapter 11 Plan of the Debtors, Combined with Plan Summary
(the "Ad Valorem Taxing Authority Disclosure Statement"); (iii) an appropriate
form of ballot, substantially in a form included in the Solicitation Materials;
(iv) the solicitation letter from the Debtors; (v) if applicable, the
solicitation letter from the Committee; and (vi) a postage-prepaid return
envelope.
D. ROYALTY OWNERS AND WORKING INTEREST OWNERS
15. Notwithstanding any other provision of this Order, on or before the
Solicitation Deadline, the Debtors or the Tabulation Agent shall transmit (by
United States Mail) the "RO/WIO Solicitation Package" (as defined below) to
royalty owners or lessors or a working interest owner on one or more oil or gas
leases from which one of the Debtors has in the past purchased, or currently
purchases, crude oil (as reflected on the Debtors' books and records). The
"RO/WIO Solicitation Package" shall be composed of the following documents: (i)
a copy of this Order; (ii) the Shortened Disclosure Statement and Notice
Pursuant to 11 U.S.C. sec. 1125(c) for Solicitation of Royalty Owners and
Working Interest Owners in Connection with the Third Amended Joint Chapter 11
Plan of the Debtors, Combined with Plan Summary (the "RO/WIO Disclosure
Statement"); (iii) an appropriate form of ballot, substantially in a form
included in the Solicitation Materials; (iv) the solicitation letter from the
Debtors; (v) if applicable, the solicitation letter from the Committee; and (vi)
a postage-prepaid return envelope.
III. MISCELLANEOUS PROVISIONS
16. Debtors are authorized to (i) update the Disclosure Statement, the
Common Unit Disclosure Statement, the Ad Valorem Taxing Authority Disclosure
Statement, and the RO/WIO Disclosure Statement (collectively, the "Disclosure
Statements") with postpetition events and (ii) make other administerial,
non-substantive modifications (including the correction of typographical and
mathematical errors and the addition of pertinent dates and deadlines
established by the Court) to the Disclosure Statements, the Plan, and the
Solicitation Materials prior to service of those documents without further
approval of the Court. Debtors are authorized to make further non-material
modifications to the Solicitation Materials.
17. Service of the various Solicitation Packages shall be by first class
mail, addressed to the party at the address listed in the request for special
notices, proof of claim, or notice of transfer of claim, or, if none of these
items has been filed by such party, at the address contained in the Debtors'
books and records (or, in the case of the Senior Notes, in the books and records
of the Indenture Trustee or a registrar of the Senior Notes such as Depository
Trust Corporation or, in the case of the Common Units, in the books and records
of a transfer agent of the Common Units or other registrar of the Common Units).
18. The Debtors shall not be required to serve any Solicitation Package on
any entity for which the notice of the hearing on the approval of the Disclosure
Statement has been returned by the United States Postal Service as
undeliverable, unless the Debtors receive an accurate address for such
addressee. Notwithstanding anything else in this Order, the Debtors shall not
serve any Solicitation Package on any entity (including a so-called "critical
vendor," crude oil supplier, raw material supplier or trade partners) whose
prepetition claim was fully and completely paid by the Debtors during this Case
pursuant to that certain order dated October 9, 2002, entered in response to the
Debtors' Emergency Motion for Authority to Pay or Honor Prepetition Obligations
to Critical Customers and Vendors Including Crude Oil Suppliers, Raw Materials
Suppliers and Trade Partners, and the payment of which eliminated any
prepetition claim held by such entities. The Debtors shall not pay "critical
vendors" for any unpaid amounts after the Confirmation Hearing Date.
19. The Debtors shall not be required to provide any part of any
Solicitation Package to any creditor (or alleged creditor) (a) whose Claim has
either not been scheduled or has been scheduled as disputed, contingent, or
unliquidated and the bar date applicable to such creditor for filing a proof of
claim has passed,
and such creditor did not file a timely proof of claim; (b) who filed a proof of
claim with the Clerk of the Court that was subsequently disallowed and all
appeals have been exhausted; (c) who may allege it is the transferee of a Claim
but has not filed a notice of transfer of claim, to the extent required by
Bankruptcy Rule 3001(e); provided, however, that the Debtors shall cause
Solicitation Packages to be served on (a) all parties to executory contracts or
leases with the Debtors that have already been rejected in the Case; (b) all
registered holders of the Senior Notes pursuant to paragraph 8 of this Order;
and (c) all registered holders of Common Units pursuant to paragraph 9 of this
Order.
20. With regard to parties to executory contracts or unexpired leases with
the Debtors that have not already been rejected or assumed during the Case, the
Debtors shall not be required to provide any part of any Solicitation Package to
such parties (unless specifically requested in writing). Rather, consistent with
Article 5 of the Plan, such parties shall receive a notice at least fifteen (15)
days prior to the date that the confirmation hearing commences which notice
shall contain: (a) the list of executory contracts and unexpired leases proposed
to be rejected pursuant to the Plan (the "Rejection Schedule"); (b) information
regarding the procedure and deadline to file a rejection damaged claim; (c)
language informing all parties that are not on the Rejection Schedule that their
executory contracts and unexpired leases are proposed to be assumed pursuant and
subject to the Plan; (d) a listing of any proposed "cure" amounts that the
Debtors believe are associated with any particular executory contract or
unexpired lease being assumed; (e) language informing parties how they may
dispute or assert a "cure" amount or otherwise oppose either an assumption or
rejection proposed by the Debtors; and (f) information regarding how a party may
obtain a full Solicitation Package.
21. With regard to parties that have not filed proofs of claim as of the
December 17, 2002 Solicitation Deadline (and who would not otherwise be entitled
to receive a Solicitation Package) but who timely file a proof of claim
thereafter, the following procedures are approved: (a) the Debtors and/or their
Tabulation Agent shall check the proofs of claim register every Friday between
the Solicitation Deadline and the Confirmation Hearing (December 20, December
27, January 3, January 10, January 17, and January 24) and shall mail out on
such dates Solicitation Packages to any new parties who are determined to have
timely filed proofs of claim after the Solicitation Deadline, and such notice to
such parties shall be deemed reasonable under the circumstances pursuant to the
Bankruptcy Code and Rules.
22. The deadline for submitting ballots accepting or rejecting the Plan is
JANUARY 23, 2003 AT 4:00 P.M. CENTRAL STANDARD TIME (the "Voting Deadline").
Except with regard to beneficial holders of Senior Notes or of Class 7.1A Common
Units voting through a Nominee, to be counted, Ballots must be received (either
by mail or hand delivery) by the Voting Deadline at the following address:
Logan & Company, Inc.
Attn: EOTT Balloting Center
546 Valley Road, Second Floor
Montclair, New Jersey 07043
23. The balloting and voting procedures described in Article 3 of the
Disclosure Statement are APPROVED. The Debtors and other interested parties may
seek further clarification from the Court on the vote tabulation and
solicitation processes, and retain the right to object or raise any issue
regarding any ballot.
24. The Debtors are permitted to use the services of Logan & Company, Inc.
as mailout and Tabulation Agent and it will be reimbursed, as an administrative
expense, for its reasonable fees and expenses in connection therewith in
accordance with the procedures previously approved for it in their case. The
Debtors are also permitted to use the services of Bowne in connection with
printing the Solicitation Materials and the services of DF King as a
solicitation agent for the Senior Notes and Common Units and the Debtors shall
provide for reimbursement, as an administrative expense, of all reasonable
expenses of Bowne and DF King in providing these services.
25. Any objections, comments, or responses not timely filed and served in
accordance with this Order will be deemed waived.
Signed: December 6, 2002.
/s/ RICHARD SCHMIDT
--------------------------------------
UNITED STATES BANKRUPTCY JUDGE
HONORABLE RICHARD S. SCHMIDT
EXHIBIT C TO DISCLOSURE STATEMENT
ORGANIZATIONAL CHART
[FLOW CHART]
EXHIBIT D TO DISCLOSURE STATEMENT
FINANCIAL PROJECTIONS AND NOTES AND ASSUMPTIONS
Balance Sheet EOTT Busplan 100802.06 Final e-mail.xls
EOTT ENERGY PARTNERS, L.P.
BALANCE SHEET
PROJECTED BALANCE SHEET 12/31/2001 1/31/2002 2/28/2002 3/31/2002 4/30/2002
---------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 2,941,000 $ 637,000 $ 4,034,000 $ 617,000 $ 2,815,000
Accounts Receivable-Trade net 495,896,000 432,594,000 398,112,000 455,696,000 424,476,000
Restricted Cash
Inventory 89,685,000 65,454,000 74,510,000 94,514,000 90,303,000
Prepaid Expenses 31,650,000 29,740,000 29,676,000 23,535,000 23,735,000
---------------------------------------------------------------------------------
Total current assets 620,172,000 528,425,000 506,332,000 574,362,000 541,329,000
Property, Plant & Equipment
Property, Plant & Equipment 656,993,000 661,942,000 664,834,000 664,752,000 667,131,000
Construction-in-Progress
Accumulated Depreciation (191,118,000) (193,989,000) (196,789,000) (199,544,000) (202,421,000)
---------------------------------------------------------------------------------
PP&E, Net 465,875,000 467,953,000 468,045,000 465,208,000 464,710,000
Deposits & Other 14,463,000 15,900,000 19,958,000 19,760,000 20,203,000
---------------------------------------------------------------------------------
Total Assets 1,100,510,000 1,012,278,000 994,335,000 1,059,330,000 1,026,242,000
=================================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 336,143,000 234,443,000 239,396,000 252,570,000 243,811,000
Accrued Liabilities 187,502,000 207,819,000 194,825,000 214,979,000 212,123,000
Liabilities Subject to Compromise -- -- -- -- --
Accrued Payroll 8,590,000 7,850,000 8,723,000 9,474,000 9,430,000
Accrued Taxes 8,846,000 8,099,000 9,306,000 10,867,000 11,101,000
Other Current 51,646,000 48,746,000 54,269,000 59,125,000 40,442,000
Payable to Affiliates 37,681,000 35,260,000 35,525,000 40,228,000 37,560,000
---------------------------------------------------------------------------------
TOTAL CURRENT LIABILITES 630,408,000 542,217,000 542,044,000 587,243,000 554,467,000
LONG TERM LIABILITIES
Loan Balance Standard Charter 182,500,000 182,800,000 180,500,000 190,000,000 187,600,000
Loan Balance Term 1
Loan Balance Term 2
Senior Notes 235,000,000 235,000,000 235,000,000 235,000,000 235,000,000
General Unsecured Creditors
Property Taxes
Refinance of Term 1 & 2
Enron Affiliate Payable
Other 5,316,000 1,500,000 2,050,000 6,858,000 6,906,000
Partnership Interest 9,318,000 13,633,000 9,634,000 9,318,000 9,318,000
---------------------------------------------------------------------------------
432,134,000 432,933,000 427,184,000 441,176,000 438,824,000
PARTNERS' CAPITAL
Common Unitholders 2,685,000 2,132,000 (2,487,000) (2,487,000) (2,135,000)
Subordinated Unitholders 29,155,000 28,885,000 22,000,000 27,467,000 29,057,000
General Partner 6,128,000 6,111,000 5,594,000 5,931,000 6,029,000
New Equity -- Bondholders
New Equity
Retained Earnings/(Loss)
---------------------------------------------------------------------------------
37,968,000 37,128,000 25,107,000 30,911,000 32,951,000
---------------------------------------------------------------------------------
Total Liabilities & Partners' Equity 1,100,510,000 1,012,278,000 994,335,000 1,059,330,000 1,026,242,000
---------------------------------------------------------------------------------
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and
Outstanding $ 260,000,000 $ 260,000,000 $ 260,000,000 $ 260,000,000 $ 260,000,000
---------------------------------------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 260,000,000 $ 260,000,000 $ 260,000,000 $ 260,000,000 $ 260,000,000
---------------------------------------------------------------------------------
PROJECTED BALANCE SHEET 5/31/2002 6/30/2002 7/31/2002 8/31/2002 9/30/2002
------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 5,850,000 $ 6,088,000 $ 6,088,000 $ 6,088,000 $ 6,088,000
Accounts Receivable-Trade net 534,922,000 423,016,000 404,747,927 445,783,940 426,363,782
Restricted Cash
Inventory 36,676,000 24,022,000 24,022,000 24,022,000 24,022,000
Prepaid Expenses 21,929,000 25,916,000 25,468,063 25,076,686 26,687,110
------------------------------------------------------------------------------
Total current assets 599,377,000 479,042,000 460,325,990 500,970,626 483,160,892
Property, Plant & Equipment
Property, Plant & Equipment 670,301,999 661,957,000 661,957,000 663,957,000 665,957,000
Construction-in-Progress
Accumulated Depreciation (205,219,000) (199,825,000) (202,886,220) (205,947,440) (209,008,660)
------------------------------------------------------------------------------
PP&E, Net 465,082,999 462,132,000 459,070,780 458,009,560 456,948,340
Deposits & Other 20,335,000 19,877,000 19,877,000 19,877,000 19,877,000
------------------------------------------------------------------------------
Total Assets 1,084,794,999 961,051,000 939,273,770 978,857,186 959,986,232
===============================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 300,981,000 235,314,000 219,322,463 259,200,045 243,906,987
Accrued Liabilities 218,193,000 190,392,109 190,392,109 190,392,109 190,392,109
Liabilities Subject to Compromise -- -- -- -- --
Accrued Payroll 9,317,000 12,318,000 11,831,231 11,874,191 11,966,774
Accrued Taxes 12,147,000 11,340,000 11,892,754 12,524,483 13,156,212
Other Current 37,394,000 35,466,000 40,731,513 43,317,748 44,768,877
Payable to Affiliates 37,111,000 39,491,000 38,877,275 38,263,941 38,295,602
------------------------------------------------------------------------------
TOTAL CURRENT LIABILITES 615,143,000 524,321,109 513,047,346 555,572,517 542,486,560
LONG TERM LIABILITIES
Loan Balance Standard Charter 189,800,000 160,908,891 157,444,217 160,244,826 165,619,939
Loan Balance Term 1
Loan Balance Term 2
Senior Notes 235,000,000 235,000,000 235,000,000 235,000,000 235,000,000
General Unsecured Creditors
Property Taxes
Refinance of Term 1 & 2
Enron Affiliate Payable
Other 7,002,000 7,875,000 7,875,000 7,875,000 7,875,000
Partnership Interest 9,318,000 9,318,000 9,318,000 9,318,000 9,318,000
------------------------------------------------------------------------------
441,120,000 413,101,891 409,637,217 412,437,826 417,812,939
PARTNERS' CAPITAL
Common Unitholders (2,135,000) (2,135,000) (2,135,000) (2,135,000) (2,135,000)
Subordinated Unitholders 24,894,000 20,275,000 20,275,000 20,275,000 20,275,000
General Partner 5,773,000 5,488,000 5,488,000 5,488,000 5,488,000
New Equity -- Bondholders
New Equity
Retained Earnings/(Loss) (7,038,792) (12,781,157) (23,941,266)
------------------------------------------------------------------------------
28,532,000 23,628,000 16,589,208 10,846,843 (313,266)
------------------------------------------------------------------------------
Total Liabilities & Partners' Equity 1,084,795,000 961,051,000 939,273,770 978,857,186 959,986,232
===============================================================================
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and
Outstanding $ 260,000,000 $ 260,000,000 $ 263,200,000 $ 267,519,942 $ 280,879,045
------------------------------------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 260,000,000 $ 260,000,000 $ 263,200,000 $ 267,519,942 $ 280,879,045
===============================================================================
PROJECTED BALANCE SHEET 10/31/2002 11/30/2002 12/31/2002
---------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 6,088,000 $ 6,088,000 $ 6,088,000
Accounts Receivable-Trade net 416,407,500 398,583,472 404,423,698
Restricted Cash --
Inventory 24,022,000 24,022,000 24,022,000
Prepaid Expenses 31,607,422 31,197,041 30,789,836
---------------------------------------------
Total current assets 478,124,923 459,890,512 465,323,535
Property, Plant & Equipment
Property, Plant & Equipment 668,457,000 670,957,000 673,257,000
Construction-in-Progress
Accumulated Depreciation (212,069,880) (215,131,100) (218,192,320)
---------------------------------------------
PP&E, Net 456,387,120 455,825,900 455,064,680
Deposits & Other 20,439,500 20,252,000 20,064,500
---------------------------------------------
Total Assets 954,951,543 935,968,412 940,452,715
==============================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 228,877,941 211,541,332 215,912,092
Accrued Liabilities 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise 30,132,000 28,132,000 28,132,000
Accrued Payroll 11,944,369 12,016,557 12,158,416
Accrued Taxes 13,787,941 14,419,669 15,051,398
Other Current 48,356,747 51,068,825 53,516,799
Payable to Affiliates 38,327,262 34,177,262 34,177,262
---------------------------------------------
TOTAL CURRENT LIABILITES 531,686,369 511,615,755 519,208,076
LONG TERM LIABILITIES
Loan Balance Standard Charter 104,916,068 115,669,263 120,931,370
Loan Balance Term 1 50,000,000 50,000,000 50,000,000
Loan Balance Term 2 25,000,000 25,000,000 25,000,000
Senior Notes 235,000,000 235,000,000 235,000,000
General Unsecured Creditors
Property Taxes
Refinance of Term 1 & 2
Enron Affiliate Payable
Other 7,875,000 7,875,000 7,875,000
Partnership Interest 9,318,000 9,318,000 9,318,000
---------------------------------------------
432,109,068 442,862,263 448,124,370
PARTNERS' CAPITAL
Common Unitholders (2,135,000) (2,135,000) (2,135,000)
Subordinated Unitholders 20,275,000 20,275,000 20,275,000
General Partner 5,488,000 5,488,000 5,488,000
New Equity -- Bondholders
New Equity
Retained Earnings/(Loss) (32,471,894) (42,137,606) (50,507,732)
---------------------------------------------
(8,843,894) (18,509,606) (26,879,732)
---------------------------------------------
Total Liabilities & Partners' Equity 954,951,543 935,968,412 940,452,715
==============================================
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and
Outstanding $ 299,058,859 $ 296,081,883 $ 290,109,994
---------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 299,058,859 $ 296,081,883 $ 290,109,994
==============================================
DISCLAIMER: This presentation is provided only as a
general guideline to the estimated performance of the
Company
and cannot be relied upon to reflect actual circumstances
or results. It is based upon historical data and
management's
assumptions. It is provided for the internal use of the
Company.
1 of 4
Balance Sheet EOTT Busplan 100802.06 Final e-mail.xls
EOTT ENERGY PARTNERS, L.P.
FRESH START
PROJECTED BALANCE SHEET 1/31/2003 2/1/2003 2/28/2003 3/31/2003 4/30/2003
-------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 6,088,000 $ 6,088,000 $ -- $ -- $ --
Accounts Receivable-Trade net 379,304,339 379,304,339 360,374,267 392,271,263 402,017,227
Restricted Cash -- -- -- -- --
Inventory 24,022,000 24,022,000 24,022,000 24,022,000 24,022,000
Prepaid Expenses 30,307,632 23,605,632 17,801,427 16,269,223 19,387,018
-------------------------------------------------------------------------
Total current assets 439,721,971 433,019,971 402,197,694 432,562,486 445,426,245
Property, Plant & Equipment
Property, Plant & Equipment 673,757,000 413,182,951 413,682,951 414,182,951 415,682,951
Construction-in-Progress -- -- -- --
Accumulated Depreciation (221,255,813) -- (2,298,239) (4,599,255) (6,908,605)
-------------------------------------------------------------------------
PP&E, Net 452,501,187 413,182,951 411,384,712 409,583,696 408,774,346
Deposits & Other 19,877,000 -- 1,888,889 1,777,778 1,666,667
-- -- -- --
-------------------------------------------------------------------------
Total Assets 912,100,157 846,202,922 815,471,296 843,923,960 855,867,258
=========================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 192,599,762 192,599,762 171,799,773 201,660,036 209,554,472
Accrued Liabilities 160,260,109 160,260,109 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise 28,132,000 1,500,000 -- -- --
Accrued Payroll 11,516,239 11,516,239 11,477,804 11,617,421 11,537,024
Accrued Taxes 15,625,122 5,782,000 6,355,724 6,434,448 6,898,172
Other Current 54,977,888 14,356,180 15,173,353 13,377,761 14,537,149
Payable to Affiliates 34,177,262 -- -- -- --
-------------------------------------------------------------------------
TOTAL CURRENT LIABILITES 497,288,383 386,014,291 365,066,763 393,349,775 402,786,925
LONG TERM LIABILITIES
Loan Balance Standard Charter 124,720,251 124,720,251 120,152,000 122,745,029 126,324,270
Loan Balance Term 1 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000
Loan Balance Term 2 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
Senior Notes 235,000,000 100,000,000 100,833,333 101,666,667 102,500,000
General Unsecured Creditors 4,000,000 4,000,000 4,000,000 4,000,000
Property Taxes 9,843,122 9,843,122 9,843,122 9,843,122
Refinance of Term 1 & 2
Enron Affiliate Payable 6,200,000 6,200,000 6,200,000 6,200,000
Other 7,875,000 -- -- -- --
Partnership Interest 9,318,000 1,250,000 -- -- --
-------------------------------------------------------------------------
451,913,251 321,013,373 316,028,455 319,454,818 323,867,393
PARTNERS' CAPITAL
Common Unitholders (2,135,000) -- -- -- --
Subordinated Unitholders 20,275,000 -- -- -- --
General Partner 5,488,000 -- -- -- --
New Equity -- Bondholders 135,000,000 135,000,000 135,000,000 135,000,000
New Equity 4,175,258 4,175,258 4,175,258 4,175,258
Retained Earnings/(Loss) (60,729,476) -- (4,799,181) (8,055,891) (9,962,318)
-------------------------------------------------------------------------
(37,101,476) 139,175,258 134,376,077 131,119,367 129,212,940
-------------------------------------------------------------------------
Total Liabilities & Partners' Equity #912,100,157 846,202,921 815,471,295 843,923,960 855,867,258
=========================================================================
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and
Outstanding $ 288,970,821 $288,970,821 $236,516,569 $196,787,776 $209,447,018
-------------------------------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 288,970,821 $288,970,821 $236,516,569 $196,787,776 $209,447,018
=========================================================================
PROJECTED BALANCE SHEET 5/31/2003 6/30/2003 7/31/2003 8/31/2003 9/30/2003
------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ -- $ -- $ -- $ -- $ --
Accounts Receivable-Trade net 432,798,188 439,761,432 471,099,456 490,395,381 493,518,565
Restricted Cash -- -- -- -- --
Inventory 24,022,000 24,022,000 24,022,000 24,022,000 24,022,000
Prepaid Expenses 18,904,814 20,522,609 20,040,405 19,558,201 19,075,996
------------------------------------------------------------------------
Total current assets 475,725,002 484,306,041 515,161,861 533,975,581 536,616,562
Property, Plant & Equipment
Property, Plant & Equipment 417,182,951 418,682,951 420,182,951 421,682,951 422,682,951
Construction-in-Progress -- -- -- -- --
Accumulated Depreciation (9,226,288) (11,552,304) (13,886,654) (16,229,337) (18,577,576)
------------------------------------------------------------------------
PP&E, Net 407,956,663 407,130,647 406,296,297 405,453,614 404,105,375
Deposits & Other 1,555,556 1,444,444 1,333,333 1,222,222 1,111,111
-- -- -- -- --
------------------------------------------------------------------------
Total Assets 885,237,220 892,881,132 922,791,491 940,651,418 941,833,048
========================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 238,931,117 245,466,112 275,160,811 294,235,804 297,241,733
Accrued Liabilities 160,260,109 160,260,109 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise -- -- -- -- --
Accrued Payroll 11,679,855 11,756,432 11,739,077 11,851,599 11,923,696
Accrued Taxes 7,141,896 7,605,619 8,069,343 8,588,067 9,161,791
Other Current 15,345,891 16,582,191 18,447,481 13,786,141 15,028,141
Payable to Affiliates -- -- -- -- --
------------------------------------------------------------------------
TOTAL CURRENT LIABILITES 433,358,867 441,670,465 473,676,821 488,721,721 493,615,471
LONG TERM LIABILITIES
Loan Balance Standard Charter 125,929,992 125,681,005 123,715,444 127,146,504 123,792,222
Loan Balance Term 1 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000
Loan Balance Term 2 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
Senior Notes 103,333,333 104,166,667 105,000,000 105,833,333 106,666,667
General Unsecured Creditors 4,000,000 4,000,000 4,000,000 3,714,286 3,714,286
Property Taxes 9,350,966 9,350,966 9,350,966 8,858,810 8,858,810
Refinance of Term 1 & 2
Enron Affiliate Payable 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000
Other -- -- -- -- --
Partnership Interest -- -- -- -- --
------------------------------------------------------------------------
323,814,292 324,398,638 323,266,410 326,752,933 324,231,984
PARTNERS' CAPITAL
Common Unitholders -- -- -- -- --
Subordinated Unitholders -- -- -- -- --
General Partner -- -- -- -- --
New Equity -- Bondholders 135,000,000 135,000,000 135,000,000 135,000,000 135,000,000
New Equity 4,175,258 4,175,258 4,175,258 4,175,258 4,175,258
Retained Earnings/(Loss) (11,111,196) (12,363,228) (13,326,998) (13,998,494) (15,189,665)
------------------------------------------------------------------------
128,064,062 126,812,029 125,848,260 125,176,763 123,985,593
------------------------------------------------------------------------
Total Liabilities & Partners' Equity# 885,237,220 892,881,132 922,791,491 940,651,417 941,833,048
=========================================================================
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and
Outstanding $222,289,885 $234,655,036 $247,367,060 $263,965,301 $271,985,816
------------------------------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $222,289,885 $234,655,036 $247,367,060 $263,965,301 $271,985,816
=========================================================================
PROJECTED BALANCE SHEET 10/31/2003 11/30/2003 12/31/2003
--------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ -- $ -- $ --
Accounts Receivable-Trade net 528,360,971 531,854,948 566,629,949
Restricted Cash -- -- --
Inventory 24,022,000 24,022,000 24,022,000
Prepaid Expenses 18,593,792 18,111,587 17,629,383
--------------------------------------------
Total current assets 570,976,762 573,988,535 608,281,332
Property, Plant & Equipment
Property, Plant & Equipment 423,682,951 424,682,951 425,682,951
Construction-in-Progress -- -- --
Accumulated Depreciation (20,931,370) (23,290,720) (25,655,625)
--------------------------------------------
PP&E, Net 402,751,581 401,392,232 400,027,326
Deposits & Other 1,000,000 888,889 777,778
-- -- --
--------------------------------------------
Total Assets 974,728,343 976,269,655 1,009,086,436
============================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
#
Trade Payables 330,607,869 333,837,389 366,815,809
Accrued Liabilities 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise -- -- --
Accrued Payroll 11,907,374 11,976,521 12,134,197
Accrued Taxes 9,405,515 9,484,239 8,242,963
Other Current 15,965,701 16,755,747 17,649,468
Payable to Affiliates -- -- --
--------------------------------------------
TOTAL CURRENT LIABILITES 528,146,568 532,314,005 565,102,546
LONG TERM LIABILITIES
Loan Balance Standard Charter 121,812,037 119,679,155 118,708,873
Loan Balance Term 1 50,000,000 50,000,000 50,000,000
Loan Balance Term 2 25,000,000 25,000,000 25,000,000
Senior Notes 107,500,000 108,333,333 109,166,667
General Unsecured Creditors 3,714,286 3,714,286 3,714,286
Property Taxes 8,858,810 8,366,654 8,366,654
Refinance of Term 1 & 2
Enron Affiliate Payable 6,200,000 6,200,000 6,200,000
Other -- -- --
Partnership Interest -- -- --
--------------------------------------------
323,085,133 321,293,428 321,156,479
PARTNERS' CAPITAL
Common Unitholders -- -- --
Subordinated Unitholders -- -- --
General Partner -- -- --
New Equity -- Bondholders 135,000,000 135,000,000 135,000,000
New Equity 4,175,258 4,175,258 4,175,258
Retained Earnings/(Loss) (15,678,616) (16,513,036) (16,347,848)
--------------------------------------------
123,496,642 122,662,222 122,827,410
--------------------------------------------
Total Liabilities & Partners' Equity# 974,728,343 976,269,655 1,009,086,435 #
============================================
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and
Outstanding $284,503,423 $296,554,994 $ 295,607,285
--------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $284,503,423 $296,554,994 $ 295,607,285
============================================
DISCLAIMER: This presentation is provided only as a
general guideline to the estimated performance of the
Company
and cannot be relied upon to reflect actual circumstances
or results. It is based upon historical data and
management's
assumptions. It is provided for the internal use of the
Company.
2 of 4
BALANCE SHEET EOTT BUSPLAN 100802.06 FINAL E-MAIL.XLS
EOTT ENERGY PARTNERS, L.P.
PROJECTED BALANCE SHEET 1/31/2004 2/28/2004 3/31/2004 4/30/2004
------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash # $ - $ - $ - $ -
Accounts Receivable-Trade net 554,512,449 519,506,253 583,728,422 553,221,036
Restricted Cash - - - -
Inventory 24,022,000 24,022,000 24,022,000 24,022,000
Prepaid Expenses 17,147,178 16,664,974 16,182,769 19,300,565
----------------------------------------------------------------------------
Total current assets 595,681,627 560,193,227 623,933,191 596,543,601
Property, Plant & Equipment
Property, Plant & Equipment 426,182,951 426,682,951 427,182,951 428,682,951
Construction-in-Progress - - - -
Accumulated Depreciation (28,023,308) (30,393,769) (32,767,007) (35,148,579)
----------------------------------------------------------------------------
PP&E, Net 398,159,643 396,289,182 394,415,944 393,534,372
Deposits & Other 666,667 555,556 444,444 333,333
- - - -
----------------------------------------------------------------------------
Total Assets 994,507,937 957,037,965 1,018,793,579 990,411,306
============================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables # 356,882,754 320,866,260 382,537,253 351,803,256
Accrued Liabilities 160,260,109 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise - - - -
Accrued Payroll 12,016,533 11,937,017 12,178,882 11,968,032
Accrued Taxes 7,316,687 7,890,411 8,014,135 8,487,858
Other Current 18,024,140 13,650,790 13,658,060 14,816,724
Payable to Affiliates - - - -
----------------------------------------------------------------------------
TOTAL CURRENT LIABILITES 554,500,223 514,604,587 576,648,438 547,335,979
LONG TERM LIABILITIES
Loan Balance Standard Charter 115,884,577 125,922,984 124,095,070 123,108,049
Loan Balance Term 1 50,000,000 50,000,000 50,000,000 50,000,000
Loan Balance Term 2 25,000,000 25,000,000 25,000,000 25,000,000
Senior Notes 110,000,000 110,000,000 110,000,000 110,000,000
General Unsecured Creditors 3,714,286 3,428,571 3,428,571 3,428,571
Property Taxes 8,366,654 7,874,498 7,874,498 7,874,498
Refinance of Term 1 & 2
Enron Affiliate Payable 6,200,000 - - -
Other - - - -
Partnership Interest - - - -
----------------------------------------------------------------------------
319,165,517 322,226,053 320,398,140 319,411,118
PARTNERS' CAPITAL
Common Unitholders - - - -
Subordinated Unitholders - - - -
General Partner - - - -
New Equity -- Bondholders 135,000,000 135,000,000 135,000,000 135,000,000
New Equity 4,175,258 4,175,258 4,175,258 4,175,258
Retained Earnings/(Loss) (18,333,061) (18,967,934) (17,428,256) (15,511,049)
----------------------------------------------------------------------------
120,842,196 120,207,324 121,747,001 123,664,208
----------------------------------------------------------------------------
Total Liabilities & Partners' Equity 994,507,937 957,037,964 1,018,793,579 990,411,305
----------------------------------------------------------------------------
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and Outstanding $ 293,412,351 $ 279,214,979 $ 283,947,437 $ 293,412,351
----------------------------------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 293,412,351 $ 279,214,979 $ 283,947,437 $ 293,412,351
============================================================================
PROJECTED BALANCE SHEET 5/31/2004 6/30/2004 7/31/2004 8/31/2004
------------------------------------------ -------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ - $ - $ - $ -
Accounts Receivable-Trade net 569,109,679 552,748,042 568,099,831 567,861,679
Restricted Cash - - - -
Inventory 24,022,000 24,022,000 24,022,000 24,022,000
Prepaid Expenses 18,818,361 20,436,156 19,953,952 19,471,747
=========================================================================
Total current assets 611,950,039 597,206,198 612,075,782 611,355,426
Property, Plant & Equipment
Property, Plant & Equipment 430,182,951 431,682,951 433,182,951 434,682,951
Construction-in-Progress - - - -
Accumulated Depreciation (37,538,485) (39,936,723) (42,343,295) (44,758,200)
=========================================================================
PP&E, Net 392,644,466 391,746,228 390,839,656 389,924,751
Deposits & Other 222,222 111,111 - -
- - - -
=========================================================================
Total Assets 1,004,816,728 989,063,537 1,002,915,438 1,001,280,176
-------------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 367,212,754 351,595,256 366,309,570 366,960,697
Accrued Liabilities 160,260,109 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise - - - -
Accrued Payroll 12,072,503 12,085,219 12,014,625 12,073,457
Accrued Taxes 8,761,582 9,235,306 9,709,030 10,232,754
Other Current 15,636,669 16,796,984 18,675,857 14,054,758
Payable to Affiliates - - - -
=========================================================================
TOTAL CURRENT LIABILITES 563,943,618 549,972,874 566,969,191 563,581,775
LONG TERM LIABILITIES
Loan Balance Standard Charter 119,080,480 115,628,004 110,926,593 111,945,210
Loan Balance Term 1 50,000,000 50,000,000 50,000,000 50,000,000
Loan Balance Term 2 25,000,000 25,000,000 25,000,000 25,000,000
Senior Notes 110,000,000 110,000,000 110,000,000 110,000,000
General Unsecured Creditors 3,428,571 3,428,571 3,428,571 3,142,857
Property Taxes 7,382,342 7,382,342 7,382,342 6,890,186
Refinance of Term 1 & 2
Enron Affiliate Payable - - - -
Other - - - -
Partnership Interest - - - -
=========================================================================
314,891,393 311,438,917 306,737,506 306,978,253
PARTNERS' CAPITAL
Common Unitholders - - - -
Subordinated Unitholders - - - -
General Partner - - - -
New Equity -- Bondholders 135,000,000 135,000,000 135,000,000 135,000,000
New Equity 4,175,258 4,175,258 4,175,258 4,175,258
Retained Earnings/(Loss) (13,193,542) (11,523,512) (9,966,517) (8,455,110)
-------------------------------------------------------------------------
125,981,716 127,651,746 129,208,741 130,720,148
-------------------------------------------------------------------------
Total Liabilities & Partners' Equity 1,004,816,727 989,063,537 1,002,915,438 1,001,280,176
-------------------------------------------------------------------------
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and Outstanding $ 288,679,894 $ 288,679,894 $ 288,679,894 $ 293,412,351
-------------------------------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 288,679,894 $ 288,679,894 $ 288,679,894 $ 293,412,351
-------------------------------------------------------------------------
PROJECTED BALANCE SHEET 9/30/2004 10/31/2004 11/30/2004 12/31/2004
------------------------------------------ -------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ - $ - $ - $ -
Accounts Receivable-Trade net 549,689,536 566,950,837 550,501,979 566,629,949
Restricted Cash - - - -
Inventory 24,022,000 24,022,000 24,022,000 24,022,000
Prepaid Expenses 18,989,543 18,507,338 18,025,134 17,542,930
-------------------------------------------------------------------------
Total current assets 592,701,079 609,480,175 592,549,113 608,194,878
Property, Plant & Equipment
Property, Plant & Equipment 435,682,951 436,682,951 437,682,951 438,682,951
Construction-in-Progress - - - -
Accumulated Depreciation (47,178,661) (49,604,678) (52,036,250) (54,473,377)
-------------------------------------------------------------------------
PP&E, Net 388,504,290 387,078,273 385,646,701 384,209,574
Deposits & Other - - - -
- - - -
-------------------------------------------------------------------------
Total Assets 981,205,368 996,558,449 978,195,814 992,404,452
=========================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 349,942,199 366,828,697 351,334,199 366,846,697
Accrued Liabilities 160,260,109 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise - - - -
Accrued Payroll 12,086,173 12,015,579 12,028,295 12,413,436
Accrued Taxes 10,806,478 11,080,202 11,203,926 10,127,650
Other Current 15,217,632 15,950,164 16,748,705 17,679,929
Payable to Affiliates - - - -
=========================================================================
TOTAL CURRENT LIABILITES 548,312,591 566,134,751 551,575,234 567,327,821
LONG TERM LIABILITIES
Loan Balance Standard Charter 108,692,177 106,506,011 104,355,286 103,411,149
Loan Balance Term 1 - - - -
Loan Balance Term 2 - - - -
Senior Notes 110,000,000 110,000,000 110,000,000 110,000,000
General Unsecured Creditors 3,142,857 3,142,857 3,142,857 3,142,857
Property Taxes 6,890,186 6,890,186 6,398,029 6,398,029
Refinance of Term 1 & 2 75,000,000 73,750,000 72,500,000 71,250,000
Enron Affiliate Payable - - - -
Other - - - -
Partnership Interest - - - -
-------------------------------------------------------------------------
303,725,220 300,289,054 296,396,172 294,202,036
PARTNERS' CAPITAL
Common Unitholders - - - -
Subordinated Unitholders - - - -
General Partner - - - -
New Equity -- Bondholders 135,000,000 135,000,000 135,000,000 135,000,000
New Equity 4,175,258 4,175,258 4,175,258 4,175,258
Retained Earnings/(Loss) (10,007,701) (9,040,614) (8,950,850) (8,300,662)
-------------------------------------------------------------------------
129,167,557 130,134,644 130,224,408 130,874,595
-------------------------------------------------------------------------
Total Liabilities & Partners' Equity 981,205,368 996,558,448 978,195,814 992,404,452
-------------------------------------------------------------------------
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and Outstanding $ 288,679,894 $ 288,679,894 $ 288,679,894 $ 288,679,894
-------------------------------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 288,679,894 $ 288,679,894 $ 288,679,894 $ 288,679,894
=========================================================================
DISCLAIMER: This presentation is
provided only as a general
guideline to the estimated
performance of the Company
and cannot be relied upon to
reflect actual circumstances or
results. It is based upon
historical data and management's
assumptions. It is provided for the
internal use of the Company.
3 of 4
BALANCE SHEET EOTT BUSPLAN 100802.06 FINAL E-MAIL.XLS
EOTT ENERGY PARTNERS, L.P.
PROJECTED BALANCE SHEET 12/31/2005 12/31/2006 12/31/2007
----------------------- -----------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ - $ - $ -
Accounts Receivable-Trade net 566,629,949 370,056,949 370,056,949
Restricted Cash - - -
Inventory 14,471,000 14,471,000 14,471,000
Prepaid Expenses 17,542,930 17,542,930 17,542,930
-----------------------------------------------------
Total current assets 598,643,878 402,070,878 402,070,878
Property, Plant & Equipment
Property, Plant & Equipment 431,651,951 444,651,951 457,651,951
Construction-in-Progress - - -
Accumulated Depreciation (74,126,796) (101,478,190) (129,696,250)
-----------------------------------------------------
PP&E, Net 357,525,155 343,173,761 327,955,701
Deposits & Other - - -
-----------------------------------------------------
Total Assets 956,169,033 745,244,640 730,026,580
=====================================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Payables 366,846,697 193,316,544 193,316,544
Accrued Liabilities 160,260,109 160,260,109 160,260,109
Liabilities Subject to Compromise - - -
Accrued Payroll 12,413,436 12,413,436 12,413,436
Accrued Taxes 10,127,650 10,127,650 10,127,650
Other Current 17,679,929 17,679,929 17,679,929
Payable to Affiliates - - -
-----------------------------------------------------
TOTAL CURRENT LIABILITES 567,327,821 393,797,668 393,797,668
LONG TERM LIABILITIES
Loan Balance Standard Charter 82,800,953 57,764,247 53,588,499
Loan Balance Term 1 - - -
Loan Balance Term 2 - - -
Senior Notes 110,000,000 110,000,000 110,000,000
General Unsecured Creditors 2,571,429 2,000,000 1,428,571
Property Taxes 4,429,405 2,460,781 492,156
Refinance of Term 1 & 2 56,250,000 41,250,000 26,250,000
Enron Affiliate Payable - - -
Other - - -
Partnership Interest - - -
-----------------------------------------------------
256,051,786 213,475,027 191,759,226
PARTNERS' CAPITAL
Common Unitholders - - -
Subordinated Unitholders - - -
General Partner - - -
New Equity - Bondholders 135,000,000 135,000,000 135,000,000
New Equity 4,175,258 4,175,258 4,175,258
Retained Earnings/(Loss) (6,385,832) (1,203,313) 5,294,428
-----------------------------------------------------
132,789,426 137,971,944 144,469,685
-----------------------------------------------------
Total Liabilities & Partners' Equity 956,169,033 745,244,639 730,026,579
-----------------------------------------------------
SUMMARY OF OFF-BALANCE SHEET AMOUNTS
Letters of Credits Issued and Outstanding $ 288,679,894 $ 288,679,894 $ 288,679,894
-----------------------------------------------------
TOTAL OF OFF BALANCE SHEET AMOUNTS $ 288,679,894 $ 288,679,894 $ 288,679,894
=====================================================
DISCLAIMER: This presentation is
provided only as a general guideline to
the estimated performance of the Company
and cannot be relied upon to reflect
actual circumstances or results. It is
based upon historical data and
management's
assumptions. It is provided for the
internal use of the Company.
4 of 4
CASH FLOW EOTT BUSPLAN 100802.06 FINAL E-MAIL.XLS
EOTT ENERGY PARTNERS, L.P.
PROJECTED STATEMENT OF CASH FLOWS 1/31/2002 2/28/2002 3/31/2002 4/30/2002
--------------------------------- ----------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($560,274) ($7,783,170) $5,822,788 $1,876,862
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 3,114,317 3,108,411 2,934,410 3,049,233
Amortization of Loan Fees
Provision for bad debts
(Gain)/Loss on Sale of Business Units --
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments 2,304,000 (3,397,000) 3,417,000 (2,198,000)
(Increase) Decrease in Accounts Receivable 63,302,000 34,482,000 (57,584,000) 31,220,000
(Increase) Decrease in Accounts Receivable-other -- -- -- --
(Increase) Decrease in Inventory 24,231,000 (9,056,000) (20,004,000) 4,211,000
(Increase) Decrease in Prepaid Expenses 1,910,000 64,000 6,141,000 (200,000)
(Increase) Decrease in Deposits & Other Assets (1,437,000) (4,058,000) 198,000 (443,000)
Increase (Decrease) in Accounts Payable (101,700,000) 4,953,000 13,174,000 (8,759,000)
Increase (Decrease) in Accrued Expenses-other 20,317,000 (12,994,000) 20,154,000 (2,856,000)
Increase (Decrease) in Liabilities Subject to Compromise -- -- -- --
Increase (Decrease) in Accrued payroll & benefits (740,000) 873,000 751,000 (44,000)
Increase (Decrease) in Taxes Payable (747,000) 1,207,000 1,561,000 234,000
Increase (Decrease) in Other Liabilities (2,900,000) 5,523,000 4,856,000 (18,683,000)
Increase (Decrease) in Affiliates Payable (2,421,000) 265,000 4,703,000 (2,668,000)
(279,726) (6,541,829) 3,378,211 (3,253,862)
----------------------------------------------------------
Net Cash Provided (Used) by Operations 4,393,317 6,645,412 (10,497,591) 1,486,233
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (5,192,317) (3,200,411) (97,410) (2,551,233)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of Business Unit -- -- -- --
----------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (5,192,317) (3,200,411) (97,410) (2,551,233)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance 300,000 (2,300,000) 9,500,000 (2,400,000)
Net Borrowings (Paydowns) Senior Notes -- -- -- --
Net Borrowings (Paydowns) General Unsecured Creditors
Net Borrowings (Paydowns) Property Taxes
Net Borrowings (Paydowns) Refinanced Debt
Net Borrowings (Paydowns) Enron Affiliate Payable -- -- -- --
Net Borrowings (Paydowns) Other 499,000 (3,449,000) 4,492,000 48,000
----------------------------------------------------------
Net cash flow provided by Financing Activities 799,000 (5,749,000) 13,992,000 (2,352,000)
----------------------------------------------------------
Increase (Decrease) in Cash -- (2,303,999) 3,396,999 (3,417,000)
Beginning Cash 2,941,000 2,941,000 637,000 4,034,000
----------------------------------------------------------
Ending Cash $2,941,000 $637,000 $4,034,000 $617,000
----------------------------------------------------------
PROJECTED STATEMENT OF CASH FLOWS 5/31/2002 6/30/2002 7/31/2002 8/31/2002
--------------------------------- ----------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($4,333,439) ($4,500,339) ($7,038,792) ($5,742,365)
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 3,042,251 4,471,060 3,061,220 3,061,461
Amortization of Loan Fees
Provision for bad debts
(Gain)/Loss on Sale of Business Units --
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments (3,035,000) (238,000)
(Increase) Decrease in Accounts Receivable (110,446,000) 111,906,000 18,268,073 (41,036,013)
(Increase) Decrease in Accounts Receivable-other -- -- -- --
(Increase) Decrease in Inventory 53,627,000 12,654,000 -- --
(Increase) Decrease in Prepaid Expenses 1,806,000 (3,987,000) 447,937 391,377
(Increase) Decrease in Deposits & Other Assets (132,000) 458,000 -- --
Increase (Decrease) in Accounts Payable 57,170,000 (65,667,000) (15,991,537) 39,877,581
Increase (Decrease) in Accrued Expenses-other 6,070,000 (27,800,891) -- --
Increase (Decrease) in Liabilities Subject to Compromise -- -- -- --
Increase (Decrease) in Accrued payroll & benefits (113,000) 3,001,000 (486,769) 42,960
Increase (Decrease) in Taxes Payable 1,046,000 (807,000) 552,754 631,729
Increase (Decrease) in Other Liabilities (3,048,000) (1,928,000) 5,265,513 2,586,235
Increase (Decrease) in Affiliates Payable (449,000) 2,380,000 (613,725) (613,334)
2,112,438 2,869,340
----------------------------------------------------------
Net Cash Provided (Used) by Operations 3,317,250 32,811,170 3,464,674 (800,369)
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (3,415,250) (1,520,061) -- (2,000,241)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of Business Unit -- --
----------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (3,415,250) (1,520,061) -- (2,000,241)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance 2,200,000 (28,891,109) (3,464,674) 2,800,610
Net Borrowings (Paydowns) Senior Notes -- -- -- --
Net Borrowings (Paydowns) General Unsecured Creditors
Net Borrowings (Paydowns) Property Taxes
Net Borrowings (Paydowns) Refinanced Debt
Net Borrowings (Paydowns) Enron Affiliate Payable -- -- -- --
Net Borrowings (Paydowns) Other 96,000 873,000 -- --
----------------------------------------------------------
Net cash flow provided by Financing Activities 2,296,000 (28,018,109) (3,464,674) 2,800,610
----------------------------------------------------------
Increase (Decrease) in Cash 2,198,000 3,273,000 -- --
Beginning Cash 617,000 2,815,000 6,088,000 6,088,000
----------------------------------------------------------
Ending Cash $2,815,000 $6,088,000 $6,088,000 $6,088,000
==========================================================
PROJECTED STATEMENT OF CASH FLOWS 9/30/2002 10/31/2002 11/30/2002 12/31/2002
--------------------------------- --------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($11,160,110) ($8,530,628) ($9,665,712) ($8,370,125)
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 3,061,461 3,061,461 3,061,461 3,061,461
Amortization of Loan Fees 187,500 187,500 187,500
Provision for bad debts
(Gain)/Loss on Sale of Business Units --
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments
(Increase) Decrease in Accounts Receivable 19,420,158 9,956,282 17,824,029 (5,840,227)
(Increase) Decrease in Accounts Receivable-other -- -- -- --
(Increase) Decrease in Inventory -- -- -- --
(Increase) Decrease in Prepaid Expenses (1,610,424) (4,920,312) 410,382 407,204
(Increase) Decrease in Deposits & Other Assets -- (750,000) -- --
Increase (Decrease) in Accounts Payable (15,293,058) (15,029,046) (17,336,609) 4,370,760
Increase (Decrease) in Accrued Expenses-other -- (30,132,000) -- --
Increase (Decrease) in Liabilities Subject to Compromise -- 30,132,000 (2,000,000) --
Increase (Decrease) in Accrued payroll & benefits 92,583 (22,405) 72,188 141,859
Increase (Decrease) in Taxes Payable 631,729 631,729 631,729 631,729
Increase (Decrease) in Other Liabilities 1,451,129 3,587,870 2,712,078 2,447,973
Increase (Decrease) in Affiliates Payable 31,661 31,661 (4,150,000) --
----------------------------------------------------------
Net Cash Provided (Used) by Operations (3,374,872) (11,795,888) (8,252,955) (2,961,866)
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (2,000,241) (2,500,241) (2,500,241) (2,300,241)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of Business Unit
--------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (2,000,241) (2,500,241) (2,500,241) (2,300,241)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance 5,375,112 14,296,129 10,753,195 5,262,107
Net Borrowings (Paydowns) Senior Notes -- -- -- --
Net Borrowings (Paydowns) General Unsecured Creditors
Net Borrowings (Paydowns) Property Taxes
Net Borrowings (Paydowns) Refinanced Debt
Net Borrowings (Paydowns) Enron Affiliate Payable -- -- -- --
Net Borrowings (Paydowns) Other -- -- -- --
--------------------------------------------------------
Net cash flow provided by Financing Activities 5,375,112 14,296,129 10,753,195 5,262,107
--------------------------------------------------------
Increase (Decrease) in Cash -- -- -- --
Beginning Cash 6,088,000 6,088,000 6,088,000 6,088,000
--------------------------------------------------------
Ending Cash $6,088,000 $6,088,000 $6,088,000 $6,088,000
========================================================
YEAR ENDING
PROJECTED STATEMENT OF CASH FLOWS 12/31/2002
--------------------------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($59,985,304)
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 38,088,206
Amortization of Loan Fees 562,500
Provision for bad debts --
(Gain)/Loss on Sale of Business Units --
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments (3,147,000)
(Increase) Decrease in Accounts Receivable 91,472,302
(Increase) Decrease in Accounts Receivable-other --
(Increase) Decrease in Inventory 65,663,000
(Increase) Decrease in Prepaid Expenses 860,164
(Increase) Decrease in Deposits & Other Assets (6,164,000)
Increase (Decrease) in Accounts Payable (120,230,908)
Increase (Decrease) in Accrued Expenses-other (27,241,891)
Increase (Decrease) in Liabilities Subject to Compromise 28,132,000
Increase (Decrease) in Accrued payroll & benefits 3,568,416
Increase (Decrease) in Taxes Payable 6,205,398
Increase (Decrease) in Other Liabilities 1,870,799
Increase (Decrease) in Affiliates Payable (3,503,738)
(1,715,428)
-------------
Net Cash Provided (Used) by Operations 14,434,516
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (27,277,886)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of Business Unit
-------------
Net Cash Provided (Used) by Investing Activities (27,277,886)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance 13,431,370
Net Borrowings (Paydowns) Senior Notes --
Net Borrowings (Paydowns) General Unsecured Creditors
Net Borrowings (Paydowns) Property Taxes
Net Borrowings (Paydowns) Refinanced Debt
Net Borrowings (Paydowns) Enron Affiliate Payable --
Net Borrowings (Paydowns) Other 2,559,000
-------------
Net cash flow provided by Financing Activities 15,990,370
-------------
Increase (Decrease) in Cash 3,147,000
Beginning Cash 2,941,000
-------------
Ending Cash $6,088,000
=============
DISCLAIMER: This presentation is provided only as a general
guideline to the estimated performance of the Company
and cannot be relied upon to reflect actual circumstances or
results. It is based upon historical data and management's
assumptions. It is provided for the internal use of the
Company.
CASH FLOW EOTT BUSPLAN 100802.06 FINAL E-MAIL.XLS
EOTT ENERGY PARTNERS, L.P.
PROJECTED STATEMENT OF CASH FLOWS 1/31/2003 2/28/2003 3/31/2003 4/30/2003 5/31/2003
--------------------------------- -----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($10,221,744) ($4,799,181) ($3,256,710) ($1,906,427) ($1,148,878)
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 3,063,493 2,298,239 2,301,016 2,309,350 2,317,683
Amortization of Loan Fees 187,500 111,111 111,111 111,111 111,111
Provision for bad debts
(Gain)/Loss on Sale of Business Units --
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments
(Increase) Decrease in Accounts Receivable 25,119,360 18,930,072 (31,896,996) (9,745,963) (30,780,961)
(Increase) Decrease in Accounts Receivable-other -- -- -- -- --
(Increase) Decrease in Inventory -- -- -- -- --
(Increase) Decrease in Prepaid Expenses 482,204 5,804,204 1,532,204 (3,117,796) 482,204
(Increase) Decrease in Deposits & Other Assets -- (2,000,000) 0 0 0
Increase (Decrease) in Accounts Payable (23,312,330) (20,799,988) 29,860,262 7,894,436 29,376,645
Increase (Decrease) in Accrued Expenses-other -- -- -- -- --
Increase (Decrease) in Liabilities Subject to
Compromise -- (1,500,000) -- -- --
Increase (Decrease) in Accrued payroll & benefits (642,176) (38,436) 139,617 (80,397) 142,831
Increase (Decrease) in Taxes Payable 573,724 573,724 78,724 463,724 243,724
Increase (Decrease) in Other Liabilities 1,461,089 817,172 (1,795,592) 1,159,388 808,742
Increase (Decrease) in Affiliates Payable -- -- -- -- --
-----------------------------------------------------------------------
Net Cash Provided (Used) by Operations (3,288,880) (603,083) (2,926,363) (2,912,575) 1,553,101
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (500,000) (500,000) (500,000) (1,500,000) (1,500,000)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of Business
Unit
-----------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (500,000) (500,000) (500,000) (1,500,000) (1,500,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance 3,788,880 (4,568,251) 2,593,029 3,579,241 (394,278)
Net Borrowings (Paydowns) Senior Notes -- 833,333 833,333 833,333 833,333
Net Borrowings (Paydowns) General Unsecured
Creditors -- -- -- -- --
Net Borrowings (Paydowns) Property Taxes -- -- -- -- (492,156)
Net Borrowings (Paydowns) Refinanced Debt -- -- -- -- --
Net Borrowings (Paydowns) Enron Affiliate Payable -- -- -- -- --
Net Borrowings (Paydowns) Other -- (1,250,000) -- -- --
-----------------------------------------------------------------------
Net cash flow provided by Financing Activities 3,788,880 (4,984,917) 3,426,363 4,412,575 (53,101)
-----------------------------------------------------------------------
Increase (Decrease) in Cash -- (6,088,000) -- -- --
Beginning Cash 6,088,000 6,088,000 -- -- --
-----------------------------------------------------------------------
Ending Cash $6,088,000 $ -- $ -- $ -- $ --
=======================================================================
PROJECTED STATEMENT OF CASH FLOWS 6/30/2003 7/31/2003 8/31/2003 9/30/2003 10/31/2003
--------------------------------- ----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($1,252,032) ($963,770) ($671,496) ($1,191,170) ($488,951)
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 2,326,016 2,334,350 2,342,683 2,348,239 2,353,794
Amortization of Loan Fees 111,111 111,111 111,111 111,111 111,111
Provision for bad debts
(Gain)/Loss on Sale of Business Units
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments
(Increase) Decrease in Accounts Receivable (6,963,244) (31,338,024) (19,295,925) (3,123,185) (34,842,405)
(Increase) Decrease in Accounts Receivable-other -- -- -- -- --
(Increase) Decrease in Inventory -- -- -- -- --
(Increase) Decrease in Prepaid Expenses (1,617,796) 482,204 482,204 482,204 482,204
(Increase) Decrease in Deposits & Other Assets 0 0 0 0 0
Increase (Decrease) in Accounts Payable 6,534,996 29,694,699 19,074,993 3,005,929 33,366,136
Increase (Decrease) in Accrued Expenses-other -- -- -- -- --
Increase (Decrease) in Liabilities Subject to
Compromise -- -- -- -- --
Increase (Decrease) in Accrued payroll & benefits 76,577 (17,355) 112,522 72,097 (16,323)
Increase (Decrease) in Taxes Payable 463,724 463,724 518,724 573,724 243,724
Increase (Decrease) in Other Liabilities 1,236,301 1,865,289 (4,661,340) 1,242,000 937,560
Increase (Decrease) in Affiliates Payable -- -- -- -- --
----------------------------------------------------------------------
Net Cash Provided (Used) by Operations 915,654 2,632,228 (1,986,523) 3,520,949 2,146,851
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (1,500,000) (1,500,000) (1,500,000) (1,000,000) (1,000,000)
(Increase)/Decrease on Sale of Fixed Assets -- --
Cash Inflows/(outflows) from Closure of Business
Unit
----------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (1,500,000) (1,500,000) (1,500,000) (1,000,000) (1,000,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance (248,987) (1,965,561) 3,431,060 (3,354,282) (1,980,184)
Net Borrowings (Paydowns) Senior Notes 833,333 833,333 833,333 833,333 833,333
Net Borrowings (Paydowns) General Unsecured
Creditors -- -- (285,714) -- --
Net Borrowings (Paydowns) Property Taxes -- -- (492,156) -- --
Net Borrowings (Paydowns) Refinanced Debt -- -- -- -- --
Net Borrowings (Paydowns) Enron Affiliate Payable -- -- -- -- --
Net Borrowings (Paydowns) Other -- -- -- -- --
----------------------------------------------------------------------
Net cash flow provided by Financing Activities 584,346 (1,132,228) 3,486,523 (2,520,949) (1,146,851)
----------------------------------------------------------------------
Increase (Decrease) in Cash -- -- -- -- --
Beginning Cash -- -- -- -- --
----------------------------------------------------------------------
Ending Cash $ -- $ -- $ -- $ -- $ --
======================================================================
YEAR ENDING
PROJECTED STATEMENT OF CASH FLOWS 11/30/2003 12/31/2003 12/31/2003
-------------------------------------------------- ------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($834,420) $165,188 (26,569,592)
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 2,359,350 2,364,905 28,719,118
Amortization of Loan Fees 111,111 111,111 1,409,722
Provision for bad debts --
(Gain)/Loss on Sale of Business Units --
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments --
(Increase) Decrease in Accounts Receivable (3,493,977) (34,775,001) (162,206,250)
(Increase) Decrease in Accounts Receivable-other -- -- --
(Increase) Decrease in Inventory -- -- --
(Increase) Decrease in Prepaid Expenses 482,204 482,204 6,458,453
(Increase) Decrease in Deposits & Other Assets -- -- (2,000,000)
Increase (Decrease) in Accounts Payable 3,229,520 32,978,420 150,903,717
Increase (Decrease) in Accrued Expenses-other -- -- --
Increase (Decrease) in Liabilities Subject to
Compromise -- -- (1,500,000)
Increase (Decrease) in Accrued payroll & benefits 69,147 157,676 (24,218)
Increase (Decrease) in Taxes Payable 78,724 (1,241,276) 3,034,687
Increase (Decrease) in Other Liabilities 790,046 893,721 4,754,376
Increase (Decrease) in Affiliates Payable -- -- --
------------------------------------------
Net Cash Provided (Used) by Operations 2,791,705 1,136,949 2,980,013
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (1,000,000) (1,000,000) (13,000,000)
(Increase)/Decrease on Sale of Fixed Assets -- -- --
Cash Inflows/(outflows) from Closure of Business
Unit
------------------------------------------
Net Cash Provided (Used) by Investing Activities (1,000,000) (1,000,000) (13,000,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance (2,132,882) (970,283) (2,222,497)
Net Borrowings (Paydowns) Senior Notes 833,333 833,333 9,166,667
Net Borrowings (Paydowns) General Unsecured
Creditors -- -- (285,714)
Net Borrowings (Paydowns) Property Taxes (492,156) -- (1,476,468)
Net Borrowings (Paydowns) Refinanced Debt -- -- --
Net Borrowings (Paydowns) Enron Affiliate Payable -- -- --
Net Borrowings (Paydowns) Other -- -- (1,250,000)
------------------------------------------
Net cash flow provided by Financing Activities (1,791,705) (136,949) 3,931,987
------------------------------------------
Increase (Decrease) in Cash -- -- (6,088,000)
Beginning Cash -- -- 6,088,000
------------------------------------------
Ending Cash $ -- $ -- $ --
==========================================
DISCLAIMER: This presentation is provided only as a general
guideline to the estimated performance of the Company
and cannot be relied upon to reflect actual circumstances or
results. It is based upon historical data and management's
assumptions. It is provided for the internal use of the Company.
Cash Flow EOTT Busplan 100802.06 Final E-mail.xls
EOTT ENERGY PARTNERS, L.P.
PROJECTED STATEMENT OF CASH FLOWS 1/31/2004 2/28/2004 3/31/2004 4/30/2004 5/31/2004
--------------------------------- ----------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) ($1,985,214) ($ 634,872) $ 1,539,677 $ 1,917,207 $ 2,317,508
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 2,367,683 2,370,461 2,373,239 2,381,572 2,389,905
Amortization of Loan Fees 111,111 111,111 111,111 111,111 111,111
Provision for bad debts
(Gain)/Loss on Sale of Business Units
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments
(Increase) Decrease in Accounts Receivable 12,117,500 35,006,196 (64,222,169) 30,507,386 (15,888,643)
(Increase) Decrease in Accounts
Receivable-other -- -- -- -- --
(Increase) Decrease in Inventory -- -- -- -- --
(Increase) Decrease in Prepaid Expenses 482,204 482,204 482,204 (3,117,796) 482,204
(Increase) Decrease in Deposits & Other
Assets (0) -- -- -- --
Increase (Decrease) in Accounts Payable (9,933,055) (36,016,494) 61,670,993 (30,733,996) 15,409,498
Increase (Decrease) in Accrued
Expenses-other -- -- -- -- --
Increase (Decrease) in Liabilities Subject
to Compromise -- -- -- -- --
Increase (Decrease) in Accrued payroll &
benefits (117,664) (79,516) 241,865 (210,850) 104,471
Increase (Decrease) in Taxes Payable (926,276) 573,724 123,724 473,724 273,724
Increase (Decrease) in Other Liabilities 374,672 (4,373,350) 7,270 1,158,664 819,946
Increase (Decrease) in Affiliates Payable -- -- -- -- --
-----------------------------------------------------------------------
Net Cash Provided (Used) by Operations 2,490,962 (2,560,537) 2,327,914 2,487,022 6,019,724
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (500,000) (500,000) (500,000) (1,500,000) (1,500,000)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of
Business Unit
-----------------------------------------------------------------------
Net Cash Provided (Used) by Investing
Activities (500,000) (500,000) (500,000) (1,500,000) (1,500,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance (2,824,295) 10,038,407 (1,827,914) (987,022) (4,027,568)
Net Borrowings (Paydowns) Senior Notes 833,333 -- -- -- --
Net Borrowings (Paydowns) General Unsecured
Creditors -- (285,714) -- -- --
Net Borrowings (Paydowns) Property Taxes -- (492,156) -- -- (492,156)
Net Borrowings (Paydowns) Refinanced Debt -- -- -- -- --
Net Borrowings (Paydowns) Enron Affiliate
Payable -- (6,200,000) -- -- --
Net Borrowings (Paydowns) Other -- -- -- -- --
-----------------------------------------------------------------------
Net cash flow provided by Financing
Activities (1,990,962) 3,060,537 (1,827,914) (987,022) (4,519,724)
-----------------------------------------------------------------------
Increase (Decrease) in Cash -- -- (0) -- 0
Beginning Cash -- -- -- -- --
-----------------------------------------------------------------------
Ending Cash $ -- $ -- $ -- $ -- $ --
=======================================================================
PROJECTED STATEMENT OF CASH FLOWS 6/30/2004 7/31/2004 8/31/2004 9/30/2004 10/31/2004
--------------------------------- ------------ ------------ ----------- ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) $ 1,670,030 $ 1,556,995 $ 1,511,407 ($ 1,552,591) $ 967,087
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 2,398,239 2,406,572 2,414,905 2,420,461 2,426,016
Amortization of Loan Fees 111,111 111,111 -- -- --
Provision for bad debts
(Gain)/Loss on Sale of Business Units
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments
(Increase) Decrease in Accounts Receivable 16,361,637 (15,351,789) 238,152 18,172,143 (17,261,301)
(Increase) Decrease in Accounts
Receivable-other -- -- -- -- --
(Increase) Decrease in Inventory -- -- -- -- --
(Increase) Decrease in Prepaid Expenses (1,617,796) 482,204 482,204 482,204 482,204
(Increase) Decrease in Deposits & Other
Assets -- -- -- -- --
Increase (Decrease) in Accounts Payable (15,617,498) 14,714,313 651,127 (17,018,498) 16,886,498
Increase (Decrease) in Accrued
Expenses-other -- -- -- -- --
Increase (Decrease) in Liabilities Subject
to Compromise -- -- -- -- --
Increase (Decrease) in Accrued payroll &
benefits 12,716 (70,594) 58,832 12,716 (70,594)
Increase (Decrease) in Taxes Payable 473,724 473,724 523,724 573,724 273,724
Increase (Decrease) in Other Liabilities 1,160,315 1,878,874 (4,621,099) 1,162,874 732,532
Increase (Decrease) in Affiliates Payable -- -- -- -- --
------------------------------------------------------------------------
Net Cash Provided (Used) by Operations 4,952,477 6,201,411 1,259,253 4,253,033 4,436,166
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (1,500,000) (1,500,000) (1,500,000) (1,000,000) (1,000,000)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of
Business Unit
------------------------------------------------------------------------
Net Cash Provided (Used) by Investing
Activities (1,500,000) (1,500,000) (1,500,000) (1,000,000) (1,000,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance (3,452,477) (4,701,411) 1,018,618 (78,253,033) (2,186,166)
Net Borrowings (Paydowns) Senior Notes -- -- -- -- --
Net Borrowings (Paydowns) General Unsecured
Creditors -- -- (285,714) -- --
Net Borrowings (Paydowns) Property Taxes -- -- (492,156) -- --
Net Borrowings (Paydowns) Refinanced Debt -- -- -- 75,000,000 (1,250,000)
Net Borrowings (Paydowns) Enron Affiliate
Payable -- -- -- -- --
Net Borrowings (Paydowns) Other -- -- -- -- --
------------------------------------------------------------------------
Net cash flow provided by Financing
Activities (3,452,477) (4,701,411) 240,747 (3,253,033) (3,436,166)
------------------------------------------------------------------------
Increase (Decrease) in Cash -- -- -- -- --
Beginning Cash -- -- -- -- --
------------------------------------------------------------------------
Ending Cash $ -- $ -- $ -- $ -- $ --
========================================================================
YEAR ENDING
PROJECTED STATEMENT OF CASH FLOWS 11/30/2004 12/31/2004 12/31/2004
--------------------------------- ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) $ 89,764 $ 650,187 8,047,185
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 2,431,572 2,437,128 28,817,752
Amortization of Loan Fees -- -- 777,778
Provision for bad debts --
(Gain)/Loss on Sale of Business Units --
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments --
(Increase) Decrease in Accounts Receivable 16,448,858 (16,127,970) 0
(Increase) Decrease in Accounts
Receivable-other -- -- --
(Increase) Decrease in Inventory -- -- --
(Increase) Decrease in Prepaid Expenses 482,204 482,204 86,453
(Increase) Decrease in Deposits & Other
Assets -- -- (0)
Increase (Decrease) in Accounts Payable (15,494,498) 15,512,498 30,888
Increase (Decrease) in Accrued
Expenses-other -- -- --
Increase (Decrease) in Liabilities Subject
to Compromise -- -- --
Increase (Decrease) in Accrued payroll &
benefits 12,716 385,141 279,239
Increase (Decrease) in Taxes Payable 123,724 (1,076,276) 1,884,687
Increase (Decrease) in Other Liabilities 798,541 931,224 30,462
Increase (Decrease) in Affiliates Payable -- -- --
------------------------------------------
Net Cash Provided (Used) by Operations 4,892,882 3,194,136 39,954,443
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (1,000,000) (1,000,000) (13,000,000)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of
Business Unit
------------------------------------------
Net Cash Provided (Used) by Investing
Activities (1,000,000) (1,000,000) (13,000,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance (2,150,726) (944,136) (90,297,723)
Net Borrowings (Paydowns) Senior Notes -- -- 833,333
Net Borrowings (Paydowns) General Unsecured
Creditors -- -- (571,429)
Net Borrowings (Paydowns) Property Taxes (492,156) -- (1,968,624)
Net Borrowings (Paydowns) Refinanced Debt (1,250,000) (1,250,000) 71,250,000
Net Borrowings (Paydowns) Enron Affiliate
Payable -- -- (6,200,000)
Net Borrowings (Paydowns) Other -- -- --
------------------------------------------
Net cash flow provided by Financing
Activities (3,892,882) (2,194,136) (26,954,443)
------------------------------------------
Increase (Decrease) in Cash -- -- --
Beginning Cash -- -- --
------------------------------------------
Ending Cash $ -- $ -- $ --
==========================================
DISCLAIMER: This presentation is provided only as a general
guideline to the estimated performance of the Company
and cannot be relied upon to reflect actual circumstances or
results. It is based upon historical data and management's
assumptions. It is provided for the internal use of the Company.
Cash Flow EOTT Busplan 100802.06 Final E-mail.xls
EOTT ENERGY PARTNERS, L.P.
YEAR ENDING YEAR ENDING YEAR ENDING
PROJECTED STATEMENT OF CASH FLOWS 12/31/2005 12/31/2006 12/31/2007
--------------------------------- ------------ ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) 1,914,830 5,182,518 6,497,741
NON CASH ITEMS INCLUDED IN NET INCOME
Depreciation & Amortization 29,684,419 27,351,394 28,218,060
Amortization of Loan Fees Provision for bad
debts (Gain)/Loss on Sale of Business Units
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Investments -- -- --
(Increase) Decrease in Accounts Receivable (0) 196,573,000 --
(Increase) Decrease in Accounts
Receivable-other -- -- --
(Increase) Decrease in Inventory 9,551,000 -- --
(Increase) Decrease in Prepaid Expenses -- -- --
(Increase) Decrease in Deposits & Other Assets -- -- --
Increase (Decrease) in Accounts Payable -- (173,530,153) --
Increase (Decrease) in Accrued Expenses-other -- -- --
Increase (Decrease) in Liabilities Subject to
Compromise -- -- --
Increase (Decrease) in Accrued payroll &
benefits -- -- --
Increase (Decrease) in Taxes Payable -- -- --
Increase (Decrease) in Other Liabilities -- -- --
Increase (Decrease) in Affiliates Payable -- -- --
-------------------------------------------
Net Cash Provided (Used) by Operations 41,150,249 55,576,759 34,715,801
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in Fixed Assets (13,000,000) (13,000,000) (13,000,000)
(Increase)/Decrease on Sale of Fixed Assets
Cash Inflows/(outflows) from Closure of
Business Unit 10,000,000
-------------------------------------------
Net Cash Provided (Used) by Investing
Activities (3,000,000) (13,000,000) (13,000,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings (Paydowns) on Loan Balance (20,610,196) (25,036,706) (4,175,748)
Net Borrowings (Paydowns) Senior Notes -- -- --
Net Borrowings (Paydowns) General Unsecured
Creditors (571,429) (571,429) (571,429)
Net Borrowings (Paydowns) Property Taxes (1,968,624) (1,968,624) (1,968,624)
Net Borrowings (Paydowns) Refinanced Debt (15,000,000) (15,000,000) (15,000,000)
Net Borrowings (Paydowns) Enron Affiliate
Payable -- -- --
Net Borrowings (Paydowns) Other -- -- --
-------------------------------------------
Net cash flow provided by Financing
Activities (38,150,249) (42,576,759) (21,715,801)
-------------------------------------------
Increase (Decrease) in Cash -- -- --
Beginning Cash -- -- --
-------------------------------------------
Ending Cash $ -- $ -- $ --
===========================================
DISCLAIMER: This presentation is provided only as a general
guideline to the estimated performance of the Company
and cannot be relied upon to reflect actual circumstances or
results. It is based upon historical data and management's
assumptions. It is provided for the internal use of the Company.
SUMMARY P&L EOTT BUSPLAN 100802 05 FINAL E-MAIL XLS EOTT ENERGY PARTNERS,
L.P.
12 MONTHS ENDED
PROJECTED P&L 12/31/2002
------------- ---------------
GROSS MARGINS
Revenues Marketing/Pipeline $4,273,467,185
CGS Marketing/Pipeline 4,118,616,852
--------------
Gross Margin Marketing/Pipeline 154,850,332
Grid/Storage 5,296,873
MBTE 184,265,000
--------------
Total Liquid Revenues 189,561,873
CGS Liquids 137,123,000
--------------
Gross Margin Liquids 52,438,873
Revenues West Coast 30,509,067
CGS West Coast 15,637,017
--------------
Gross Margins West Coast 14,872,050
Other 3,680,000
--------------
GROSS MARGINS 225,841,256
OPERATING EXPENSES
Trucking 37,518,927
Proprietary 7,260,192
Marketing Administration 8,489,578
Common Carrier 58,061,158
Liquids 38,108,532
West Coast 12,416,084
Corporate 28,762,022
Contingency 1,863,427
--------------
192,479,921
Depreciation/ Amortization 38,088,206
--------------
TOTAL OPERATING EXPENSES 230,568,127
INTEREST & OTHER INCOME/(EXPENSE)
Interest Income 113,000
LC Fees (8,915,498)
Interest expense (40,436,645)
Loan Fee Amortization (562,500)
Other, net 2,161,000
--------------
(47,640,643)
NON-RECURRING EXPENSES
Severence Costs (2,441,000)
Professional Fees (5,176,790)
Loss on Plant Closure --
Gain/(Loss) on Closure of Business Unit --
--------------
(7,617,790)
--------------
NET INCOME/(LOSS) $ (59,985,304)
--------------
EBIDA
NET INCOME/(LOSS) $ (59,985,304)
Non-Cash (Income)/Expense Adjustments --
Non-recurring Costs 7,617,790
Net Interest (Income)/Expense, Loan Fee Amortization 47,640,643
Depreciation & Amortization 38,088,206
--------------
EBIDA $ 33,361,335
==============
DISCLAIMER: This presentation is provided only as a general
guideline to the estimated performance of the Company
and cannot be relied upon to reflect actual circumstances or
results. It is based upon historical data and management's
assumptions. It is provided for the internal use of the
Company.
SUMMARY P&L EOTT BUSPLAN 100802 05 FINAL E-MAIL XLS EOTT ENERGY PARTNERS,
L.P.
12 MONTHS ENDED
PROJECTED P&L 12/31/2003
------------- ---------------
GROSS MARGINS
Revenues Marketing/Pipeline $4,525,532,527
CGS Marketing/Pipeline 4,368,286,869
--------------
Gross Margin Marketing/Pipeline 157,245,659
Grid/Storage 6,350,480
MBTE 196,573,000
--------------
Total Liquid Revenues 202,923,480
CGS Liquids 151,559,000
--------------
Gross Margin Liquids 51,364,480
Revenues West Coast 28,772,139
CGS West Coast 13,844,256
--------------
Gross Margins West Coast 14,927,883
Other --
--------------
GROSS MARGINS 223,538,022
OPERATING EXPENSES
Trucking 37,199,142
Proprietary 7,743,410
Marketing Administration 8,238,926
Common Carrier 49,394,489
Liquids 35,260,624
West Coast 12,111,413
Corporate 25,448,685
Contingency 5,102,895
--------------
180,499,584
Depreciation/ Amortization 28,719,118
--------------
TOTAL OPERATING EXPENSES 209,218,702
INTEREST & OTHER INCOME/(EXPENSE)
Interest Income --
LC Fees (10,162,170)
Interest expense (27,747,020)
Loan Fee Amortization (1,409,722)
Other, net --
--------------
(39,318,912)
NON-RECURRING EXPENSES
Severence Costs (520,000)
Professional Fees (1,050,000)
Loss on Plant Closure --
Gain/(Loss) on Closure of Business Unit
--------------
(1,570,000)
--------------
NET INCOME/(LOSS) $ (26,569,592)
--------------
EBIDA
NET INCOME/(LOSS) $ (26,569,592)
Non-Cash (Income)/Expense Adjustments --
Non-recurring Costs 1,570,000
Net Interest (Income)/Expense, Loan Fee Amortization 39,318,912
Depreciation & Amortization 28,719,118
--------------
EBIDA $ 43,038,438
==============
DISCLAIMER: This presentation is provided only as a general
guideline to the estimated performance of the Company
and cannot be relied upon to reflect actual circumstances or
results. It is based upon historical data and management's
assumptions. It is provided for the internal use of the
Company.
SUMMARY P&L EOTT BUSPLAN 100802.06 FINAL E-MAIL.XLS
DISCLAIMER: This presentation is provided
only as a general guideline to the
estimated performance of the Company
and cannot be relied upon to reflect actual
circumstances or results. It is based upon
historical data and management's
assumptions. It is provided for the
internal use of the Company.
3 of 4
SUMMARY P&L EOTT BUSPLAN 100802.06 FINAL E-MAIL.XLS
DISCLAIMER: This presentation is provided only
as a general guideline to the estimated
performance of the Company
and cannot be relied upon to reflect actual
circumstances or results. It is based upon
historical data and management's
assumptions. It is provided for the internal
use of the Company.
4 of 4
EOTT ENERGY PARTNERS, LP
KEY ASSUMPTIONS TO FINANCIAL PROJECTIONS/CASH FORECAST
PROJECTION PERIOD 2002 THROUGH 2004
GROSS MARGINS
Marketing & Pipeline
-- Average approximately $12.4mm per month from July through
October 2002. This forecasted run rate represents over a 10%
decline in actual marketing volumes of $14.1mm per month for 2nd
quarter of 2002. Due to the negative affects of the Chapter 11
filing, a continual erosion of marketing volumes and margins
begin in October and run through March of 2003. Reduced to $11.4
million beginning 4th quarter 2002.
-- Beginning in April of 2003 the marketing volumes begin to
recover at a rate of 5% per month through December 2003 or until
the marketing volumes recover to 100% of "normalized levels".
"Normalized levels" are defined as the actual experience in
July, August and September of 2001 excluding barrels that
resulted in unprofitable transactions. The recovery reflects the
Company's ability to win back business lost due to financial
instability and the anticipated Chapter 11 filing.
-- Pipeline volumes decrease by 5% in October 2002 through March of
2003. As marketing volumes begin to recover barrels, pipeline
volumes pickup 75% of the marketing volume increases beginning
in April 2003.
-- Marketing volumes projected for 2003 average 296,000 barrels/day
versus 2002 of 282,000 barrels/day. The 2002 rate is a
combination of actuals through June and forecasts from July
through December. (Actual January through June 2002 run rate was
296,000 barrels/day.) At December 2003 the recovery to
normalized levels total 353,000 barrels/day.
MTBE
-- Reflects actual plant production results thru mid-August
-- No significant plant downtime projected through year-end
-- MTBE margins: $.12/gallon-Q4/2002. With an annual average of
.21/gallon for the year ended 2002.
-- In 2003 planned plant downtime is reflected in January
production for maintenance.
-- Average MTBE equivalent production for 2003: 15,000 barrels per
day.
-- Annualized margins of $.196/gal in 2003; compared to $.221/gal
in 2002
Grid & Storage
-- Monthly fee/throughput income increased from an actual monthly
run rate of $500,000/month to $650,000/month by November 2002
and remains at that level throughout 2003.
West Coast/NGLs
-- Income held constant at $1.2mm/mo. thru term of forecast base on
most recent actual run rates.
MARKETING & PIPELINE OPERATING COST & EXPENSES
Fleet Costs
-- Fleet Costs are more variable in nature than other categories.
There is a projected reduction in Fleet costs of approximately
$1.5 million on a variable basis (i.e., variable costs savings
at same level of volume). The cost reductions are accomplished
through fixed payroll reductions and reducing the size of the
fleet in 2003. The 2002 projections reflect actual run rates
incurred in the first 7 months.
Marketing Administration Costs
-- Head count reductions constitute the costs savings identified in
2003 from 2002 actual January through July run rates.
Common Carrier/Proprietary Costs
-- Cost savings for Common Carrier expenses (included in the
Pipeline operations) and Proprietary Pipeline expenses in the
Marketing operations were reduced by $8.1 million in 2003 from
the actual January through July run rate experienced in 2002.
The primary costs savings come from environmental costs savings.
Environmental costs for 2002 totaled $9 million. Projected 2003
environmental costs total $3.3 million with the prevailing
assumption that the projected $10 million pipeline maintenance
capital and payments in
prior years will reduce the monthly exposure. The remainder of
costs savings relate to a corresponding reduction to property
taxes of $700,000 and reductions in payroll headcount.
LIQUIDS OPERATING COST & EXPENSES
MTBE & Grid Storage
-- Reductions in 2003 from the actual January through July run rate
experienced in 2002 for Liquids are approximately $2.6 million.
The reduction comes primarily from payroll costs reduction for
both Grid Storage and MTBE of $1.4 million. Other reductions of
approximately $1.2 million in 2003 result from reductions in
outside contractor costs. All other costs are assumed to reflect
the 2002 actual run rate.
WEST COAST OPERATING COST & EXPENSES
-- No reductions in costs identified in 2002 or 2003 from actual
January through July run rate experienced in 2002.
OTHER OPERATING COST & EXPENSES
Contingency
-- A general operating expense contingency of a 1/4% of total
operating cost was projected for the last 4 months of 2002 and
all of 2003. The monthly contingency charge approximates
$425,000.
CORPORATE OPERATING COST & EXPENSES
-- Reductions in 2003 from the actual January through July run rate
experienced in 2002 for corporate costs are approximately $3.3
million. The reduction comes primarily from payroll costs
reductions of $2 million. Other reductions of approximately $1.3
million result from reductions projected for Legal and
Accounting costs as well as a reduction in office lease expense.
These reductions anticipate that the emerging entity would not
be subject to any significant litigation or involved in the
filing with any registration statements. All other costs are
assumed to reflect the 2002 actual run rate.
DEPRECIATION
-- The actual monthly depreciation run rate, based on $674 million
in asset costs, for 2002 is $3.1 million. Due to estimated
revaluation of the fixed assets at the anticipated confirmation
date 2003 monthly depreciation run rate, based on $401 million
in asset value, is projected to be approximately $2.25 million
per month. The new rate reflects an average 15-year useful life.
INTEREST & DEBT
-- The actual interest expense incurred in 2002, including letter
of credit fees, indicated a run rate of approximately $4.3
million per month. The expense was comprised of a Standard
Charter Facility fee of 2% per annum, Standard Charter Loan
Interest of approximately 5% and Letter of Credit fees of 3%.
Additionally the bondholders held senior debt of $235 million at
11%. In 2003 the fees and debt structure are as follows:
Standard Charter Facility fee of 1% per annum, no change in the
Loan Interest of approximately 5% and the Letter of Credit fees
of 3%. Bondholder debt is restructured to $100 million with PIK
interest at 10% until the anniversary date of the confirmation
of the plan. The interest rate then converts to a 9% rate
payable semi-annually. The Standard Charter Loan Balance was
reduced by a $75 million new loan facility with two traunches.
The first traunch is for $50 million at 9% interest amortized
over 2 years. The second traunch is for $25 million at 10%
amortized over 2 years. The general unsecured creditors receive
a loan for $4 million at 6% interest amortized semi-annually
over 7 years. The Ad Valorem tax liability is projected at $9.8
million amortized quarterly over 5 years at 6% interest. The
projected 2003 monthly interest expense run-rate is anticipated
to be approximately $3 million.
BALANCE SHEET ASSUMPTIONS - ASSETS
Working Capital
-- Crude, Liquids and West Coast receivables and payables are
assumed to be paid in the month following the expense or 30 day
terms.
Inventory
-- The assumption is that the Company would not engage in strategic
marketing. The lack of strategic trading results in inventory
levels remaining constant throughout the projection period.
Prepaids
-- The assumption is that the Company would incur over $5 million
in non-critical supplier deposits in reaction to the Chapter 11
filing. The deposits would be recovered the anticipated
confirmation date of February 1st. Other prepaids continue to be
amortized at paid at historical experience. Professional
retainage payments of a $1 million are incurred in September
2002 and applied against open invoices in March of 2003.
Fixed Assets
-- Included in the Capital Expenditure budget is a run rate of $13
million a year for maintenance capital. Additionally in August
through December of 2002 there are presumed to be $4.8 million
of payments for the construction of a pipeline. The construction
costs are currently in litigation and the timing and amount of
payments may vary significantly with the projected cash outflow.
In October through December of 2002 are $1.5 million of payments
to upgrade the facilities. See assumptions discussed in the
depreciation assumption.
Other Assets
-- No changes from June 2002 balances.
BALANCE SHEET ASSUMPTIONS - LIABILITIES
Accrued Payroll, Benefits & Related
-- The assumption is that the payroll accounts are funded in the
month incurred, except for Driver payroll, which is paid in the
month following the expense.
Accrued Liabilities
-- Accrued Interest Payable is assumed to be paid in the month
following the accrual except for; Bond interest, which is paid
semi-annually commencing 6 months from Plan confirmation date;
General Unsecured principle and interest, which is paid
semi-annually commencing 6 months from Plan confirmation date;
Ad Valorem principle and interest, which is paid quarterly
commencing 3 months from Plan confirmation date.
-- Accrued Taxes, which represent Trust Fund taxes, such as State
Severance taxes, are paid on schedule. Whereas non Trust Fund
taxes, such as Ad Valorem taxes, are not paid on schedule and
are reclassified as long term debt, with a 5 year effective
amortization rate at 6% interest, paid quarterly.
-- Accrued Professional fees are assumed to be payable monthly at
80% of projected fees with a 20% holdback accrued until March of
2003. (See related assumptions in Prepaids.) The first payments
are projected to be disbursed in November 2002.
-- Accrued Environmental Reserves are being paid at a rate of
$100,000 per month over the monthly run rate on the profit &
loss statement.
-- Other accrued amounts are paid in accordance with historical
experience.
-- There is a projected payment of $2 million in November of 2002
for Escheat liability in Other Liabilities on the balance sheet.
The amount and timing of the payment is uncertain.
Unsecured Creditors
There is $1.5 million dollars accrued and paid on Plan Confirmation
for unsecured creditors who elect to participate in the convenience
class. For all remaining unsecured creditors who do not elect to
participate a long term note of $4 million has been established in
long term debt (see related terms of the note in long term debt
narrative).
OFF-BALANCE SHEET ASSUMPTIONS - LETTERS OF CREDIT
-- The assumption for Letters of Credit is that in conjunction with
the Chapter 11 filing that the population of suppliers who do
not currently require a letter of credit will begin to require
one at a rate of 15% increase in October 2002. In November the
rate increases to 24% and stays at that level until the Company
emerges from Chapter 11 in February 2003. The LC requirement %
then drops down to 90% of September's actual supplier
requirements. The increase in the suppliers requiring LC's is
coupled with a barrel price assumption that begins at $25/barrel
in July 2002 and rises to $29/barrel in November. The barrel
prices then start to decline and ultimately level off at
$27/barrel in February 2003. That rate is assumed to remain
constant throughout the projection period. The barrel prices for
October through February are based on information obtained from
Bloomberg's index based on the NYMEX oil futures less $1.50
differentials.
PROJECTION PERIOD 2005-2007
3. FYE 2005 through 2007 were added to the projection period with the
following assumptions:
Marketing & Pipeline
-- Marketing volumes projected for 2005 through 2007 average the
"normalized" rate projected to be achieved in December of 2003
or 353,000 barrels/day. Pipeline volumes are held constant with
levels projected in 2004 without regard for tariff increases or
barrel price fluctuations. See related comments for operation
expenses.
MTBE/Grid Storage
-- Due to environmental constraints the MTBE facility is assumed to
be closed down at December 31, 2005. The cost of the plant
closure is estimated to be $10 million and is reflected on the
December 31, 2005 P&L. At confirmation the property, plant and
equipment were revalued under the Fresh Start accounting
guidelines. In that revaluation the MTBE facility and Grid
Storage was reduced to reflect changes in net recoverable value.
It is assumed that the closure of the MTBE plant will result in
proceeds of $10 million. The proceeds are offset against the net
recoverable value of the assets sold and therefore did not
result in a gain or loss on the transaction. Additionally, there
was $9.5 million in MTBE inventory sold at cost due to the
closure. The proceeds from the closure and sale of inventory
were applied against cash outflows at December 31, 2005.
-- There is no projected increase in operational expenses in 2005
through 2007. The assumption is that any increase in operational
costs would be offset by the increase in tariff prices on the
pipeline operations, which were also not included in the 2005
through 2007 projections.
Balance Sheet Assumptions - Assets
-- There is no change in the 2005 through 2007 balance sheet
accounts from 2004 amounts except for Capital Expenditures and
debt service. Maintenance Capital Expenditures are consistent
with the $13 million run rate in 2004. The additions are
capitalized and are depreciated at a rate of 15 years resulting
in a corresponding increase in depreciation expense. Debt
service is continued at 2004 amortization and interest rate
assumptions resulting in a reduction of debt for each of the
years ending of $17.5 million.
EXHIBIT E TO DISCLOSURE STATEMENT
CHAPTER 7 LIQUIDATION ANALYSIS
EOTT ENERGY PARTNERS, L.P.
LIQUIDATION ANALYSIS
In the event that the Plan is not confirmed and liquidation under a chapter 7 of
the Bankruptcy Code is pursued, the Debtors believe that the highest value for
creditors would be received by attempting to sell their businesses or business
segments as going concerns as opposed to ceasing operations and selling the
assets of discontinued businesses.
In the event that liquidation under chapter 7 is pursued, businesses and assets
sold under an announced plan to liquidate typically suffer a significant
reduction in market value because potential acquirers will capitalize on the
impact of the announcement. Other factors relative to the business of the
Debtors' can also be expected to have a negative impact on value received
through liquidation. Due to the month-to-month contracts associated with the
Debtors' crude business, customer volumes will be lost during the liquidation
period due to customer concerns and competitor efforts. Additionally, difficult
and uncertain capital market conditions combined with the difficulty of
obtaining financing for a business in liquidation may negatively impact recovery
through liquidation.
This chapter 7 liquidation analysis is presented on a consolidated basis
including all eight (8) Debtor entities. The Debtors believe this is the most
appropriate view of liquidation recoveries for secured and unsecured creditors
regardless of a creditor's class or actual Debtor entity, because the Debtors'
secured financing was obtained on a consolidated basis. Under the Debtors'
secured debt financing agreements, each of the Debtor entities, exclusive of
EOTT Energy Finance Corp. and EOTT Energy Corp., is a borrower, co-borrower or
guarantor under the Standard Chartered facilities and the Tier-A Term Note and
Tier-B Term Note. All funded debt and letters of credit outstanding under these
financing agreements are secured by all assets of the Debtors, excluding EOTT
Energy Finance Corp. and EOTT Energy Corp. and the intercreditor agreement
provides all secured creditors with the benefit of cross collateralization and
prescribed application of asset liquidation proceeds to their debt. As such, in
liquidation the aggregate claims of the Debtors' secured creditors have a
priority claim on the proceeds from assets sold in liquidation regardless of the
entity being liquidated. EOTT Energy Finance Corp. and EOTT Energy Corp. are not
parties to the Standard Chartered, Tier-A and Tier-B Term Note agreements or the
intercreditor agreement, but are in the view of the Debtors correctly included
in this consolidated liquidation analysis because: a) EOTT Energy Finance Corp.
has no secured liabilities and exists only to serve as a co-issuer of the
unsecured Senior Notes, and b) by virtue of the Enron Settlement Agreement, EOTT
Energy Corp. has no liabilities other than liabilities related to employees of
the Debtors, and its only asset is a potential and undeterminable claim against
Enron Corp or its affiliates.
In the following analysis, the chapter 7 liquidation of the Debtors would be
directed by a chapter 7 trustee approved by the Bankruptcy Court. The Debtors
believe the liquidation could be materially accomplished over a six month
period. Under this analysis, chapter 11 administrative and priority claims as
well as chapter 7 administrative and priority and secured claims should be fully
recovered. The analysis below excludes any reserves a chapter 7 trustee may deem
necessary for litigation.
Funds available for unsecured creditors would approximate $20 million, and would
approximate a recovery of 7.8% to 7.2% given a range of unsecured claims of
$258-280 million.
-------------------
BALANCES AT 1/31/03
($ THOUSANDS)
-------------------
(1) Business Unit Value $ 273,912
(2) Current Assets 405,466
---------------
Liquidation Value 679,378
(3) Chapter 11 Professional Fees (2,863)
(4) Estimated Liquidation Costs (39,825)
(5) Chapter 7 Trustee Fees (8,500)
(6) Post-Petition Trade Accounts Payable or L/C
Drawings (359,562)
(7) Accrued Taxes (15,625)
(8) Accrued Payroll (13,113)
---------------
Net Proceeds for Application 239,890
(9) Secured Debt
Tier A Term Note (50,000)
SCTSC Financings (125,000)
Tier B Term Note (25,000)
Administrative Letters of Credit (5,859)
Estimated Post Petition Interest (7,542)
(10) Enron Settlement Note (6,250)
--------------- -----------
Proceeds Available for Unsecured Claims $ 20,240 $ 20,240
(11) Range of Unsecured Claims $ 258,000 $ 280,000
RANGE OF RECOVERY TO UNSECURED CLAIMS 7.8% 7.2%
12/5/2002 5:08 PM
Liquidation Analysis PAGE 1 OF 2
NOTES:
(1) Assumes the Debtors' businesses are sold over a six (6) month period as
going concern operating units based on geography and/or business lines in a
manner that yields the highest value through a timely, broad and efficient
marketing effort. The September 30, 2002 adjusted trailing 12 month
operating cash flow for the operating businesses (less the Liquids
business) approximates $58 million. An operating cash flow valuation
multiple of 4.0 times was selected, reflecting the impact of selling these
businesses under a chapter 7 liquidation, given the risk of crude and
pipeline volumes lost following the conversion to a Chapter 7 and
environmental uncertainties. An operating cash flow valuation multiple of
3.5 times was selected for the Liquids business unit due to uncertainty
surrounding the future of the Debtor's Liquids business resulting from
pending legislation proposing to ban the continued production of MTBE over
a three year period.
(2) For the purposes of this analysis the projected current assets as of
January 31, 2003 per the Debtors' reorganization projection model are
assumed as the starting point for determining liquidation values. Current
asset book values have been reduced by assumed discount factors to reflect
realizable liquidation values.
Cash was not subjected to a discount factor.
The trade accounts receivable discount reflects the normal industry and
Debtor practice where by a significant portion trade accounts receivable
are subject to offset by accounts payable when the same counterparty is
involved. Trade accounts receivable not subject to offset were discounted
by 15%.
Inventory includes the book value of crude, refined products, natural gas
liquids and MTBE feedstock of approximately $18.9 million with an assumed
liquidation discount factor of 5%. Inventory also includes materials and
supplies with a book value of approximately $5.1 million and an assumed 75%
discount factor.
Other current assets include futures and derivatives deposits, assets from
price risk management and deposits with vendors which are assumed to be
fully recoverable. Other current assets also include prepaid expenses for
the crude, liquids, pipeline and the Canadian subsidiary which were
discounted 80%. Third party line fill, also included in this asset
category, was discounted 5%.
The assumed liquidation value of current assets is summarized below:
Cash 6,088
Trade & Other Accounts
Receivable 354,325
Inventory 19,241
Other Current Assets 25,812
-------
Total 405,466
(3) Projected chapter 11 professional fees as of January 31, 2003 to be paid
upon conversion to chapter 7.
(4) Estimated liquidation costs are assumed as follows:
a. Six (6) month negative
EBIDA $ 3,000
b. Chapter 7 Professional
Fees 6,000
c. Investment Banking
Fees 4,109
e. Six (6) month
financing
costs 12,716
f. Stay Bonuses 8,000
g. Severance Expense 6,000
-------
$39,825
(5) While the Bankruptcy Code generally provides for chapter 7 trustee fees
equal to 3% of the proceeds distributed to creditors, a fee of $8.5 million
is assumed in this analysis.
(6) Given the nature of the Debtors' business, counterparty offset
arrangements, Orders in the Case allowing the Debtors to pay pre-petition
critical vendors, the current need for letters of credit and the
anticipated increased necessity for letters of credit while attempting to
liquidate businesses as a going concern, it is assumed the holders of
Post-Petition trade accounts payable claims will fully recover their claims
either by virtue of offset, drawn letters of credit or payments to these
creditors under first day orders. If letters of credit are drawn, they
would be secured obligations of the Debtors. Includes $352.9 million of
trade accounts payable and $6.7 million of price risk management
liabilities.
(7) Accrued taxes include ad valorem taxes of approximately $9.8 million which
are assumed to be paid in full as a taxing authority requirement or a
condition precedent to a sale of the businesses. Accrued taxes also include
production severance taxes of approximately $5.8 million also assumed to
receive a full recovery due to potential liens of the taxing authorities.
(8) Based on projected accrued payroll and accrued chapter 11 retention bonuses
approved by the Court. Both amounts are projected as of January 31, 2003.
(9) Net liquidation proceeds are applied to secured debt in order of the
priority established under the Intercreditor Agreement. The SCTSC Purchase
Agreements are listed under secured debt for convenience purposes only. The
crude oil and receivables that are the subject of the SCTSC Purchase
Agreements are not property of the Debtors, however, SCTSC has a secured
claim against the Debtors with respect to the Debtors' obligations under
the SCTSC Purchase Agreements. Outstanding administrative letters of credit
which total $5.8 million are assumed drawn in a chapter 7 liquidation.
(10) Based on the Enron Settlement Agreement as approved November 22, 2002
payment of this note is guaranteed by EOTT Canada, Ltd. and secured with an
irrevocable letter of credit. The Enron Settlement Agreement and resulting
note of $6.25 million eliminated Enron-related liabilities of $50.1 million
at January 31, 2003.
(11) The range of unsecured claims is calculated as follows: Pre petition
unsecured principal on 11% notes of $235 million plus pre petition accrued
interest of approximately $12.9 million, plus the estimated allowed
nonbondholder unsecured claims of $8 million plus the $2 million
convenience class allocation per the Disclosure Statement. A range of
unsecured claims is provided to account for a potential increased allowance
for general unsecured claims in a chapter 7 liquidation. The current
reserve of approximately $12 million is the Debtors' best estimate based on
information available at this time of future remediation expenses.
Environmental claims by any third party are not included in this reserve.
12/5/2002 5:08 PM
Liquidation Analysis PAGE 2 OF 2
EXHIBIT 99.1
EOTT ENERGY PARTNERS, L.P.
P.O. BOX 4666, HOUSTON, TX 77210-4666
FOR FURTHER INFORMATION CONTACT:
Kirk Brewer or
Caroline Pecquet
713-993-5152
COURT APPROVES EOTT'S SETTLEMENT AGREEMENT WITH ENRON
AND SETS DATE FOR APPROVAL OF REORGANIZATION PLAN
HOUSTON, DEC 12, 2002 -- EOTT Energy Partners, L.P. (OTC Pink Sheets: EOTPQ)
today provided an update on the company's progress relative to its restructuring
plan that includes legal and operational separation from Enron. The Bankruptcy
Courts for the Southern District of Texas and the Southern District of New York
have given final approval of EOTT's settlement agreement with Enron. The court
approvals clear the way for EOTT's separation from Enron to occur upon
confirmation of the EOTT plan of reorganization, which is expected to take place
early in 2003.
The Court has also approved EOTT's disclosure statement to be distributed to its
creditors and unitholders in connection with solicitation of approval of the
reorganization plan. The EOTT Creditors' Committee also approved to the contents
of the disclosure statement. Solicitation packages, including the disclosure
statement, plan of reorganization, and ballots, will be mailed to creditors and
unitholders during the week of December 16, 2002. The deadline for submitting
ballots is January 23, 2003. The Court has scheduled a hearing on January 30,
2003 to approve the reorganization plan.
"We are pleased with the progress of our restructuring plan and believe that the
Creditors' Committee and the company are working well together in achieving the
required approvals to complete the Chapter 11 proceedings promptly," stated Dana
Gibbs, EOTT President and Chief Executive Officer. "We are on track to emerge
from the Chapter 11 process in early 2003 with solid customer relationships, a
stronger financial position and a plan for growth."
ABOUT EOTT
On October 9, EOTT Energy Partners, L.P. and its subsidiaries announced the
filing of a voluntary, pre-negotiated plan of reorganization.
A complete copy of EOTT's disclosure statement and plan of reorganization, as
filed with the Bankruptcy Court, are available at www.eott.com or through the
SEC's EDGAR database.
Page 1 of 2
EOTT Energy Partners, L.P. is a major independent marketer and transporter of
crude oil in North America. EOTT also processes, stores, and transports MTBE,
natural gas and other natural gas liquids products. EOTT transports most of the
lease crude oil it purchases via pipeline that includes 8,000 miles of
intrastate and interstate pipeline and gathering systems and a fleet of more
than 230 owned or leased trucks. The partnership's common units are traded under
the ticker symbol EOTPQ:PK.
SAFE HARBOR STATEMENT
This press release includes "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Although EOTT Energy
Partners, L.P. believes that its expectations are based on reasonable
assumptions, it can give no assurance that such expectations will be achieved.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements herein include, but are not limited to,
approval by the Bankruptcy Court of the pre-negotiated restructuring plan,
EOTT's ability to successfully operate under the plan once approved and
implemented, EOTT's ability to maintain its critical commercial relationships,
demand for various grades of crude oil and the resulting changes in pricing
conditions, the success of the partnership's risk management activities, the
partnership's success in its continuing efforts to reduce costs, and general
conditions in the oil and gas and financial markets during the periods covered
by the forward-looking statements.
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