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Williams 2002 Case. Tough decisions are required during tough times
Finance & Accounting
Pages 4 (1004 words)
Williams Companies Inc is a company which is based in Tulsa and operates in the energy industry like the exploration and production of energy trading, pipelines and telecommunications. …
Williams Companies Inc was in trouble in 2002 as it experienced a financial distress as a result of changes in the market conditions and the large debts from Williams Communications Group which is one of its subsidiaries. Financial distress is a condition in which a company has difficulties or is unable to pay for its financial obligations to its creditors.
Reasons for the trouble
The trouble in Williams Companies Inc was as a result of the collapse in its telecommunications business, ongoing inquires from regulators about its reporting and the softness in the energy market led to financial distress in the Williams. 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.
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