New York -- ANGELO, GORDON & CO. LP and Baupost Group LLC are deep-pocketed but low-profile investment firms known for making big bets in search of big returns.

"If they don't get burned sometimes, they are not taking enough risk," says Mark Abrams, a lawyer with Wilkie Farr & Gallagher, speaking about the world of so-called vulture investors who buy bonds of down-and-out companies.

Now, one of these two firms, along with various investment allies, may get burned -- possibly quite badly -- for big bets they have placed on Enron Corp. and its subsidiaries.

In a move that surprised even other high rollers in the investment world, groups led by Angelo Gordon and Baupost snapped up a total of more than $2 billion of debt of the collapsed energy company in the days after its Dec. 2 Chapter-11 bankruptcy-court filing. Both camps bought the depressed debt at fire-sale prices -- paying several hundred million dollars -- effectively gambling that they could make a bundle if the assets of Enron are worth more than other investors expected.

But because the investments are in different types of Enron debt -- and Enron's assets are far lower than its total debt -- the two camps are pitted against each other. "You have two economic constituencies with diametrically opposing views, and both have enough at stake to really fight," says Isaac Pachulski, a lawyer with Stutman Treister & Glatt Professional Corp., Los Angeles, who represents the Baupost camp.

Enron's shareholders, of course, have been wiped out, losing tens of billions of dollars. But the fact that someone is likely to come out a winner in the Enron bankruptcy, albeit at the expense of others, underscores how savvy buyers of distressed debt -- the scavengers of the investment world -- can fare well even in seemingly hopeless cases.

No one knows for sure yet what Enron's debts are, but estimates go as high as $50 billion, far more than its estimated assets of $15 billion to $20 billion. Still, the upshot is that distressed-debt players who bought bonds at low prices can make a nice profit even if they get only 30 or 40 cents on the dollar of what is owed them.

Angelo Gordon and Baupost aren't the only big creditors, but the two groups they represent are the biggest who bought large chunks of debt as Enron was collapsing, meaning they paid little for the amount of debt they hold. The debt controlled by their two camps puts them alongside J.P. Morgan Chase -- which is owed more than $2 billion -- as some of the largest creditors in the biggest Chapter 11 filing ever.

The jockeying between the groups could help determine the fate of the remainder of once-mighty Enron. To some bankruptcy-court observers, the presence of these particular groups suggests that a liquidation may be inevitable; many of the players aren't seen as interested in receiving equity in a restructured Enron. "They are going to ask for speedy sales" of Enron assets to get cash, says the company's lawyer, Martin Bienenstock of Weil, Gotshal & Manges LLP.

Distressed-debt funds, of course, are a fixture at all big bankruptcies, and many lawyers predict that, by the time the Enron case book is shut, most of its debt will be in the hands of firms that bought it for a fraction of face value. "They are very bottom-line oriented," says Luc Despins, a lawyer at Millbank, Tweed, Hadley & McCloy representing the creditors committee, which speaks for hundreds of Enron claimants, including the distressed-debt specialists. "There are no histrionics with them."

Not histrionics, perhaps, but plenty of drama as they jockey for position, seeking to use the flexibility inherent in the proceedings to get an advantage. Both sides are lobbying the creditor group on a key issue: Should debt of Enron North America -- the unit that housed the firm's trading business and is considered the most valuable part of Enron -- be considered separate from or consolidated with the debt of the parent company?

Angelo Gordon, which owns Enron North America debt, wants to keep it separate, because assets from the unit would be used only for claims on the unit's debt rather than to pay off parent company debt, too. Baupost wants consolidation, because the Enron parent is worth more if it can make a claim on Enron North America assets.

No player in distressed debt is considered more adept at bankruptcy-court maneuvering than Angelo Gordon, despite a profile that is so low as to border on invisible. A few years ago, it had less than $500 million in assets under management; today it manages more than $8 billion. It has consistently delivered returns of more than 20% to its investors, according to people familiar with it. Its other big recent bets have been on debt of Excite@Home, an Internet company; AMF Bowling Worldwide Inc.; and NTL Corp., a British cable operator.

The Angelo Gordon camp holds more than $1 billion of the $2.4 billion in Enron North America notes that were part of a series of sophisticated financial transactions engineered by Citigroup Inc.'s Citibank in 1999 and 2000. The group bought that debt from institutional investors for 17 cents to 20 cents on the dollar; it now trades at around 23 or 24 cents on the dollar.

Some distressed-debt funds trade in and out of the paper of ailing companies, but Angelo Gordon usually keeps its stake until a restructuring plan is negotiated by creditors and approved by the bankruptcy judge. This enables it to have a major say in how to divvy assets among various creditors. "In a war of attrition, they win nine out of 10 times," says James O' Brien, managing director at Promethean Capital Group LLC, a private-equity fund that has teamed with the firm in the past. "They can either get a controlling position or at least be big enough to be a hindrance."

Tactically, Jeffrey Aronson, a former securities lawyer who heads Angelo Gordon's distressed-debt group, prefers to remain in the background, approaching individual creditors and persuading them to support the firm's position. "They litigate, but only when they have to," says David Frauman, head of the bankruptcy practice in New York for Allen & Overy, a London-based law firm.

By contrast, litigation is at the heart of the hardball style of its main ally in the Enron investment, Elliott Associates LP. Elliott's most famous bet was a few years ago, when it bought a large position in the sovereign debt of Peru. A bank steering committee agreed to forgive some debt of the cash-strapped nation, but Elliott refused to go along. Four years and extensive litigation later, Elliott received 100 cents on the dollar on claims it had bought for far less. Also joining with Angelo Gordon on Enron are Oaktree Capital Management LLC and Appaloosa Management.

As Angelo Gordon was scooping up the debt tied to Enron North America, Baupost Group acquired debt of Enron itself, betting that the potential upside was greater, according to people familiar with the matter. Enron Corp. debt currently trades at 15 cents to 16 cents on the dollar.

Baupost, a private partnership in Boston, is little known despite funds under management of $3 billion to $4 billion and a 20-year history. Since its founding, Baupost has taken positions in some of the biggest bankruptcy filings, including Texaco Inc. and Federated Department Stores Inc., with a track record of 20% in net annual returns under its chief, Seth Klarman. On Enron, it is teamed with Racepoint Partners LP.

Already, Baupost has $11 billion of debt whose interests are aligned with it, says Mr. Pachulski, the lawyer speaking for Baupost. "That's more than any [other] single economic constituency." Responds David M. Friedman, a lawyer with Kasowitz, Benson, Torres & Friedman LLP, which represents the other side: "We have more than enough in claims" to demonstrate the opposite position.

Mr. Despins, the lawyer representing the creditors' committee, says it will be several months before it is decided whether to keep the debt separate or consolidate it.