Trouble in Williams Companies Inc. - Essay Example

Extract of sample
Trouble in Williams Companies Inc.

The collapse of Enron in the late 2000 and in the early 2001 was a problem to Williams. This led to uncertainty in the future of energy trading as participants assessed their exposure to Enron. As a result, it competitors like El Paso Corp. announced its intention to curtail investment in energy and concentrate in natural gas. Another rival Reliant resource also decided to scale down its energy trading. The businesses then become very difficult making Williams to record a loss, its first loss in a period of three years. The news about all the problems facing Enron Corporations broadband unit as well as Global Crossing highly exposed substantial weaknesses in the telecom industry and this made Williams Communication Group to be unable to meet its covenants which then led to breach of its lending agreements with its creditors making William Companies financially distressed.
Proposed $900 million funding agreement
As way to save its situation, Williams Companies Inc proposed a $900 million agreement with Lehman-Berkshire Hathaway which would fund the company and the agreement would be backed by the assets of Barrett Resources Corporation, a company which the Williams had acquired in 2001. The conditions provided for in this agreement were too strict and too onerous for Williams considering the fact that the company was going through tough financial times. The terms required Lehman Brothers would each advance Williams $ 450 million for a period of one year. ...
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In the paper “Trouble in Williams Companies Inc” the author examines the financial distress as a result of changes in the market conditions of Williams Companies Inc. which operates in the energy industry like the exploration and production of energy trading, pipelines and telecommunications. …
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