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Jaap de Jonge
Editor, Netherlands
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Off-Balance Sheet Financing Cases and Examples
Hi, do you have a case or do you have a good example in which Off-Balance Sheet Financing is used? Please enter a reaction to share it for other people to enjoy!
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Hira Aziz
Entrepreneur, Pakistan
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Example of Off Balance Sheet Financing: Enron and Worldcom
In 2001, the world's leading energy company, Enron, filed for bankruptcy. Its stock price was $80 and Wall Street analysts were appreciating the company for its innovation and management success. But the energy giant dramatically collapsed within a year because of its hidden debt. It's CFO, Andrew Fastow, had arranged many partnerships whose debt were guaranteed by Enron, but not reported in its financial statements.
Consequently, the company had to face losses and filed for bankruptcy. After this, analysts and its auditor company were heavily criticized and the auditor company, Arthur Andersen, was dissolved for this criminal blindness about Enron's activities.
This bankruptcy was followed by another leading company WorldCom in 2002, also due such off balance sheet financing.
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