SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K*
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 5, 2002
AZURIX CORP.
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
- ------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
001-15065 76-0589114
- ------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
1400 Smith Street, Houston, Texas 77002
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(713) 853-5151
- ------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
333 Clay Street, Suite 1000, Houston, Texas 77002
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
* The Company is not subject to the filing requirements of the
Securities Exchange Act of 1934. This current report is filed
pursuant to contractual obligations imposed on the Company by an
Indenture, dated as of February 18, 2000, under which the Company
is the issuer of certain debt.
Item 4. Change in Registrant's Certifying Accountant.
On February 5, 2002, Azurix Corp.'s independent certified public
accountants, Arthur Andersen LLP, informed Azurix that it is resigning from
its position as independent certified public accountants for Azurix.
Arthur Andersen's report on Azurix's financial statements as of
and for each of the years ended December 31, 2000 and 1999 did not contain
an adverse opinion or a disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope, or accounting principles. During
each of the years ended December 31, 2000 and 1999 and the subsequent
interim period immediately preceding the date of Arthur Andersen's
resignation, there were no disagreements with Arthur Andersen on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Arthur Andersen, would have caused it to make reference to
the subject matter of the disagreement(s) in connection with its reports.
Further, no circumstances exist that are reportable under Rule 304(a)(1)(v)
of Regulation S-K of the Securities and Exchange Commission.
Azurix is providing a copy of this Current Report on Form 8-K to
Arthur Andersen LLP.
Item 5. Other Events.
As a result of the resignation of Arthur Anderson (see Item 4),
Azurix currently is attempting to identify and retain other independent
certified public accountants to audit its consolidated financial statements
as of and for the year ended December 31, 2001. Azurix expects that it may
take some time to retain new independent certified public accountants and
for that audit to be completed. Azurix believes that it is unlikely that an
audit of its 2001 consolidated financial statements will be completed by
April 1, 2002.
Azurix Corp. has retained Schroder Salomon Smith Barney to advise
Azurix in exploring a possible sale or recapitalization of its largest
asset, Wessex Water Ltd., which owns a water supply and wastewater services
company in the United Kingdom. Azurix has received indications of interest
from several parties regarding a purchase of Wessex. Azurix intends to
explore a possible sale of Wessex with one or more of these parties, as
well as other alternatives, such as a recapitalization. Azurix does not
intend to make any further announcement unless and until a definitive
agreement is reached with respect to any such transaction. There can be no
assurance that a definitive agreement will be reached or that any
transaction will be consummated. A sale of Wessex, among other things,
would require the approval of Azurix's board of directors and shareholders,
would likely require consent of holders of Azurix's senior notes and may
require governmental clearances. Depending on its structure, a
recapitalization may not require the consent of Azurix's shareholders, or
holders of its senior notes or governmental authorities.
The indications of interest in Wessex that Azurix has received are
in a range substantially below the carrying value of Wessex on Azurix's
books as of September 30, 2001. Azurix is currently performing an
impairment analysis of the long-lived assets of Wessex. If an impairment is
determined to have occurred, it would be material to Azurix's financial
position and results of operations.
The shares of Wessex are pledged to secure the credit facility of
Azurix's wholly owned indirect subsidiary Azurix Europe Ltd. That credit
facility currently matures on May 10, 2002. As of December 31, 2001, the
Azurix Europe credit facility had a principal balance outstanding of
approximately $329 million, net of cash in a collateral account securing
the facility. Although Azurix originally used proceeds of the sale of
Azurix North America to repay outstanding indebtedness under Azurix
Europe's credit facility, it reborrowed substantially all those amounts
before the end of 2001. As of December 31, 2001, Azurix Europe also had
approximately $72 million of other debt outstanding, excluding a note
payable to Wessex, resulting in total debt of approximately $401 million,
net of cash in a collateral account securing the credit facility. As of
December 31, 2001, Wessex had debt of approximately $813 million.
If Azurix does not close a sale of Wessex before Azurix Europe's
credit facility matures for a price sufficient to retire the facility, or
if Azurix does not recapitalize Wessex with proceeds sufficient to retire
the facility, then unless the facility is extended, the lenders would have
the right to sell Wessex and apply the proceeds to repayment of the balance
outstanding. Although it is likely, given the indications of interest that
Azurix has received, that such a sale, if it occurs, would generate
proceeds sufficient to repay all of Azurix Europe's debt, there is no
assurance that would be the case. Azurix currently expects to be able to
extend the Azurix Europe facility on an interim basis to allow for a sale
or recapitalization after May 10, although no assurance can be given that
an extension will be obtained.
In December 2001, Azurix Europe voluntarily prepaid indebtedness
of (pound)73 million, together with accrued interest, that it owed to an
affiliate, Bristol Water Trust. The terms of that indebtedness permitted
Bristol Water Trust or its assignee to require early payment on the
occurrence of various events relating to Enron Corp., including, among
other things, a filing for protection under the U. S. Bankruptcy Code. As
disclosed in Enron Corp.'s Current Report on Form 8-K filed on December 17,
2001, Enron Corp. and certain of its subsidiaries each filed voluntary
petitions for relief under the chapter 11 of the U. S. Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of New York.
Such an acceleration, had it occurred, might have permitted acceleration of
other debt of Azurix. Azurix Europe funded the principal repayment through
a borrowing under its credit facility. Interest rates under Azurix Europe's
credit facility currently are lower than the fixed interest rate under the
note to Bristol Water Trust. No premium was due on the prepayment.
In addition, JPMorgan Chase Bank has informed Azurix that it is
resigning as trustee under the Indenture, dated as of February 18, 2000,
between Azurix Corp. and JPMorgan Chase Bank, as successor trustee,
pursuant to which certain senior notes of Azurix Corp. were issued. Azurix
is currently attempting to identify and appoint another trustee.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
AZURIX CORP.
Date: February 8, 2002 By: /s/ J. Michael Anderson
-----------------------------
J. Michael Anderson
Chief Financial Officer