The Enron scandal is an isolated situation and does not reflect the rest of corporate America or E...
The Enron scandal is an isolated situation and does not reflect the rest of corporate America or Europe, according to Simon Chester, portfolio manager at LeggMason sister company Western Asset Management.
Speaking at the Investment Week Forum in London, he said: 'Enron is a bad situation but it is not a fundamental problem for the sector. The corporate bond market will stabilise and return to calm as the risk starts to fade away.'
Energy trader Enron, once the seventh-largest company by market value in the US, filed the biggest US bankruptcy in December last year, amid disclosures that it used accounting gimmicks to hide more than $1bn of losses and inflate earnings.
Chester went on to say that the bond market in Europe remains very attractive, especially in light of its expansion over the past couple of years. The bond market in Europe has doubled in size since 1999 and now stands at e700bn euros with 1,215 issues.
Other companies such as Tyco and GE have been in the spotlight since the Enron scandal, but Chester believes credit quality is stabilising: 'If you take Tyco, it is a very cash generative situation and there is nothing which has been disclosed in public which can fundamentally change the credit rating of that company.'
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