Remember that the creditors do not necessarily want their principal back if there is a way to generate cash flow sufficient to meet interest payments. Of course, if the company is really going down the drain then a reorganization becomes necessary and creditors may be forced to accept new lower yield securities in order to avoid liquidation altogether. So the short answer is that the money UBS pays to Enron (if the trading operation generates sufficient returns) will be used to continue to pay creditors. Of course, while in bankruptcy there are various ways to delay paying out cash to creditors, but only if management gets the approval of the court and that really means in essence approval of the creditors. Keep in mind that Enron is now run by a new CEO (a restructuring expert who is out to please the creditors) and a new Board chairman who are, in effect, agents of the creditors not shareholders now. In 8 out of 10 public company bankruptcies, common shareholders never get their money back, but creditors can often do much better.
Stephen F. Diamond School of Law Santa Clara University [EMAIL PROTECTED]
