input stringlengths 93 39k | output stringlengths 1 117 |
|---|---|
Please see attached.
Thank you.
Donna M. Cagle Executive Administrator to President & CEO Mariner Energy, Inc. 580 WestLake Park Blvd., Suite 1300 Houston, TX 77079 281/584-5511 (phone) 281/584-5515 (fax) dcagle@mariner-energy.com <<Special Qtrly BOD Mtg.
Notice - 11-29-01.doc>>
| Notice of Special Telephonic Quarterly BOD Meeting - 12/3/01 |
Please join me in welcoming Alexandra Gage, who will join the ISDA New York office on Tuesday, December 4.
Alexandra will be the Administrator for Research and Policy reporting to David Mengle and Stacy Carey.
Bob
| New Staff Member |
With all of the events of yesterday, information for the DPR for the above dates is not yet complete.
At the present time, we are planning to issue a final DPR for the 30th of November as well as a preliminary and then final for the 3rd of December.
However, we do not yet have an estimated time for these to be issued.
I will keep you up to date when I have additional information.
If you have any questions, please call me at 713 853 9123.
Best regards
| 11/30 and 12/3 DPR - update |
MD Anderson has approximately 500 job openings, some of which may be suitable for former Enron employees.
The jobs vary but include a number of IT and administrative positions.
MD Anderson's potential interest in employing laid off Enron employees came to our attention via Anne Marie Giltrop of MD Anderson who spoke with Angela Davis.
This morning, I spoke with Ms. Giltrop.
In light of our policy of only providing neutral references and other liability considerations, I stated that I did not believe we would provide MD Anderson a list of employees who were laid off, but that I would try to find an approved vehicle for getting information regarding job openings at MD Anderson to our former employees.
The MD Anderson web site does not reflect all current open positions, so I suggested that, if approved on both ends, MD Anderson could provide a list of openings with job descriptions that could be made available to former Enron employees.
Ms. Giltrop is attempting to obtain appropriate approval from MD Anderson.
She later phoned to inform me that I should expect to hear more from Deborah Manning, Jim Dorn, or Martha Jones.
On our end, I have contacted David Oxley who put me in touch with Cindy Olson.
Sarah Davis will now handle coordinating relations with MD Anderson.
This is an important opportunity for former employees, and for Enron and MD Anderson as good Houston citizens.
Please let me know if I can be of any further assistance.
| MD Anderson |
Emery Financial Group Conference Call With First Union Securities Chief Equity Strategist Doug Sandler.
A REMINDER: IF YOU HAVEN"T ALREADY, PLEASE RSVP IF YOU PLAN ON ATTENDING THE CALL SO THAT I CAN MAKE SURE WE HAVE ENOUGH LINES OPEN!!
On Friday, December 7 at 10:00am CST, the Emery Financial Group would like to invite you to join us on a conference call with First Union Securities Chief Equity Strategist Doug Sandler.
In 1995, Doug Sandler joined the portfolio strategy department and worked with the firm's former strategist, Don Hays, as a buy-side analyst, portfolio manager, and marketer.
In mid-2001, Doug was named the firm's Chief Equity Strategist and is responsible for stock selection and development of equity themes.
Doug completed the CFA designation in 1997.
He has a BS in accounting and an MBA from the University of Richmond.
We have scheduled a 30 minute call with Mr. Sandler in which he will share his thoughts on the overall markets and answer a few questions.
| Conference Call Reminder |
Mark, I wanted to let you know that today will be my last day at Enron.
Please remove me from all the boards.
I have really enjoyed working with you and my time at Enron.
I still can't believe all that has happened.
Best of luck to you and your family and I hope we get a chance to work together again someday.
Sincerely,
| Board reps |
GADSDEN RESEARCH SERVICES' FERCwatch Issued December 6, 2001 See docket numbers assigned to PG&E filings below...
Copies of the PG&E Reorganization Plan Regulatory Filings still available on CD-ROM or hardcopy!
Call 202-210-4771 or e-mail grs4ferc@starpower.net <mailto:grs4ferc@starpower.net>.
The reorganization filings made by PG&E on November 30, 2001 are still not available through FERC's Public Reference Room!
When finally available through Public Reference, hardcopies of these filings (approximately 9500 pages total) will cost 25 cents per page or nearly $2400 in copy charges alone!
Adding the hourly rate service charges of other research services will increase your cost to nearly $3000 for these filings!
GRS/FERCwatch has copies available now on CD-ROM or we can print hardcopies for you.
The cost of the CD-ROM (including all the filings listed below) is $100 plus delivery.
Printed copies are 15 cents per page plus delivery and service charges ($45 service charge for the complete set; $15 to $30 for partial sets).
To request a copy of the following filings on CD-ROM or hardcopy, please call 202-210-4771 or send e-mail to grs4ferc@starpower.net <mailto:grs4ferc@starpower.net>.
| GRS' FERCwatch [PG&E Reorganization Filings Docket Numbers] - 12/06/01 |
We just have been asked to review on an expedited basis all material contracts of ENE and ENA for change-of-control type provisions.
Please let us know what contracts or guidance you may have or know of; we need to begin reviewing/collecting information ASAP, i.e., this weekend.
If you know of someone who should receive this e-mail but who has not, please forward.
You may contact me at any of the below numbers.
Thanks for your help.
Regards, NJD
| Material Contract Review -- ASAP |
i can't wait till dinner!!!!!
it is going to be so good.
mom wants u to e-mail my soccer coach that we can't make it on sunday....thats all Justin
| (no subject) |
Emery Financial Group Conference Call With First Union Securities Chief Equity Strategist Doug Sandler.
A REMINDER: IF YOU HAVEN"T ALREADY, PLEASE RSVP IF YOU PLAN ON ATTENDING THE CALL SO THAT I CAN MAKE SURE WE HAVE ENOUGH LINES OPEN!!
On Friday, December 7 at 10:00am CST, the Emery Financial Group would like to invite you to join us on a conference call with First Union Securities Chief Equity Strategist Doug Sandler.
In 1995, Doug Sandler joined the portfolio strategy department and worked with the firm's former strategist, Don Hays, as a buy-side analyst, portfolio manager, and marketer.
In mid-2001, Doug was named the firm's Chief Equity Strategist and is responsible for stock selection and development of equity themes.
Doug completed the CFA designation in 1997.
He has a BS in accounting and an MBA from the University of Richmond.
We have scheduled a 30 minute call with Mr. Sandler in which he will share his thoughts on the overall markets and answer a few questions.
| Conference Call Tomorrow at 10am CST |
To All: Today we funded the sale of the Haina Note.
Enron Caribe Ltd. received approximately $14.5 million.
Brian Zatarain, Coralina Rivera, and Darleene McKeever were instrumental in getting the transaction documented, approved, and funded in a very short timeframe.
Dan
| Haina Note |
There is a board meeting scheduled for Tuesday, December 11 at 8:00 a.m. in the Glass Room.
Would you please let me know if you will not be attending.
Thank you.
| Board Meeting |
The following limited liability companies are being considered for dissolution this week.
Please let me know by 1:00 p.m. on Wednesday, December 12, 2001 if there is any reason not to dissolve these limited liability companies.
If I receive no responses, we will proceed with the cancellations.
Please distribute this memo to all interested parties within your group.
Chiricahua I LLC (Company #1382-CHRI) Chiricahua II LLC (Company #1383-CHR2) Chiricahua III LLC (Company #1384-CHR3) Chiricahua IV LLC (Company #1385-CHR4) Chiricahua V LLC (Company #1386-CHR5) Chiricahua VI LLC (Company #1387-CHR6) Chiricahua VII LLC (Company #1388-CHR7) Chiricahua VIII LLC (Company #1389-CHR8) Chiricahua IX LLC (Company #1390-CHR9) Chiricahua X LLC (Company #1391-CHR10) Chiricahua XI LLC (Company #1392-CHR11) Chiricahua XII LLC (Company #1393-CHR12) Chiricahua XIII LLC (Company #1394-CHR13) Chiricahua XIV LLC (Company #1395-CHR14)
| Proposed Cancellation of 14 LLC's - Expedited Response Request needed |
All, Jim requested I get everyone a copy of the bankruptcy document he referred to in Tuesday's meeting.
Can you please confirm your current location so that I can send you a copy or if you prefer to have a copy picked up, my location is EB4522.
Many thanks, Lucy
| Bankruptcy Document |
Mark and Jeff: There is an impression circulating among some of the commercial teams that their compensation may be directly linked to asset dispositions, ie.
success fees.
Apparently, this may have started due to "rumors" that the London Receiver is allowing for such payments--for example, the pending Arcos turbine sale.
This is unsubstantiated, but may be worthy of inquiry.
Accordingly, in at least one domestic example, it is my understanding that the deal team was fairly unmotivated until they heard about the London "arrangement" and are now pursuing with great exuberance.
Maybe this is a good thing, but clearly an arrangement that needs to be vetted and then communicated so people understand what the "rules" may be.
| Asset Dispositions--"Success Fees" |
Microsoft's in-house counsel called me on my cell phone a few minutes ago.
He just wanted to let me know that they received our proposal this morning and that they have retained Preston Gates & Ellis LLP to assist them in reviewing and analyzing our proposal.
He said they would be getting back with us shortly -- hopefully tomorrow -- and said that his business folks where intent on moving "forward instead of backward," whatever that means.
| Microsoft |
Lisa, I'm the commercial person responsible for the sale of the Alberta PPA.
I was looking for an update on where this issue is at.
It is my understanding that we need to have the bankruptcy court bless ENA's shareholders resolution for the sale of the PPA.
Have we applied to the court to hear this matter?
What does the prospective timing look like?
I'm assuming that you are the individual responsible for coordinating this effort.
We are in a situation here where collateral demands ($23.7MM) have been made on Enron Canada Power Corp. which are due on Tuesday, December 18.
ECPC does not have the capacity to post this collateral.
It is my fear that the counterparty demanding the collateral will petition ECPC into court protection upon non-compliance with the collateral demand.
Additionally, it is unclear how any court proceeding with Enron Canada Corp. may affect both ECPC and the PPA.
It is my understanding that there may be some activity on this front early next week.
Either one of these issues may cause a default under the PPA.
At that point in time the Owner of the PPA is free to terminate.
If the PPA is terminated, the value of this asset would go to zero.
It is clear that the Owner of the PPA is itching to terminate and this would terminate the proposed sale to Altagas Services of $215 MM.
Could you please get back to me with some guidance on this issue.
ENRON CANADA CORP. Derek J. Davies Vice President
| Alberta PPA |
The following 12 applications will go for approval at the next executive committee meeting on Thursday, November 1.
Please let me know if you know Kommunalbanken AS or KommunKredit.
Thank you.
Mary Primary Regional 1.
Hamburger Sparkasse - German bank Associate Broker 2.
Tradition (North America), Inc. - broker Associate 3.
LIFFE - exchange 4.
Arendt & Medernach - Luxembourg law firm 5.
Wistrand Advokatbyra - Swedish law firm Associate Emerging 6.
Deacons - Hong Kong law firm Subscriber 7.
Kommunalbanken AS - local gov't (Norway) funding agency 8.
KommunKredit - provides loans to the Danish local authorities and Danish semi-municipal institutions 9.
CDC IXIS Asset Management - (its parent CDC IXIS Capital Markets is a Primary member) 10.
DKR Capital Inc. - Investment management firm.
(Formerly known as AIG International Asset Management Inc. DKR is no longer an affiliate of AIG.)
11.
Bank of England - Central bank 12.
Swiss National Bank - Central bank
| Member Applications |
The Post Petition Lead Meeting will occur every Tuesday and Thursday through the end of December (excluding 12/25).
Please note, going forward, all meetings will take place in EB49c1.
The agenda for Tuesday, December 18 will be proposed retention plan.
Please call me only if you are unable to attend.
Many thanks, Lucy
| Meeting Reminder |
At the right time, it would be helpful to discuss what we may want to consider as "Core" Assets (unrelated to trading activities) for purposes of emerging from bankruptcy as a going concern.
As you know, we are in the process of organizing and formatting in an asset matrix the assets/businesses we currently own (or otherwise have an interest in) that may be potentially for sale; separating out potential core assets will be instructive as part of this process.
Please let me know your thoughts/suggestions over the next few weeks.
Thanks.
| Restructuring (Confidential Communications) |
Just wanted to let you know that Congress is expected to adjourn this afternoon until the end of January.
Unfortunately, the netting provisions will not be considered as stand alone legislation or as a part of a bigger package.
Please call if you have any questions.
Many thanks!
-- Stacy
| Netting Legislation |
Only 2 days left??.
A Superior Datamonitor offer in association with Terrapinn Receive a 10% discount on key company, industry and country data.
Terrapinn, in association with Datamonitor -The industry analysis experts are pleased to offer you this special introductory discount, giving you the chance to save money when subscribing to the brand new online information service - Datamonitor Dashboard.
| Save 10% on Datamonitors Dashboard! |
2001 was a year full of surprises and challenges.
Thanks for your confidence, friendship, cooperation and support.
Merry Christmas and Happy New Year to all of you.
"Abra?os", Sami Arap
| greetings |
Julia: The EGM group is delivering to you this afternoon completed matrices for all of our material physical trading contract forms and selected counterparty-specific contracts, in each case organized by commodity traded.
Just a few things to note: (i) we have not included in our review the EGM trading contract forms for Japan, Australia and Singapore due to the time constraints (please advise if you would like matrices done for those offices); (ii) we have not included a review of trading contract forms used by EGM-related entities in Europe as we assumed that Justin Boyd's team (I left a message for Justin this morning, but I did not get a confirmation back) would handle; and (iii) finally, we are not attaching the templates to the matrices, but we can certainly provide them if and when needed.
Please let me know if there is anything else you need.
Alan
| EGM Contract Matrices |
ISDA PRESS REPORT - DECEMBER 26, 2001 CREDIT DERIVATIVES ISDA publishes credit survey - Risk ENERGY Enron's Success Story - The Wall Street Journal The International Swaps and Derivatives Association released its first survey of the global over-the-counter credit derivatives market last month, showing a total notional outstanding volume of credit derivative transactions of $631.5 billion as of the end of the first half of this year.
ISDA, which compiled information from 83 firms, hopes the survey will provide a benchmark from which to chart future growth in the credit derivatives market.
This survey, and the others that have been done by Risk, the British Bankers' Association (BBA), the US Office of the Comptroller of the Currency (0CC) and the Bank for International Settlements (BIS) have all used different methodologies on different samples, and have generated varying results.
Risk's survey last year showed significantly higher total notional volumes $810 billion.
The BBA survey released in July 2000 also gave a higher figure, forecasting $893 billion for the end of 2000.
The BJS plans to publish its triennial figures on the credit derivatives market later this year.
Upward trend According to ISDA, while still modest in relation to interest rate products, the credit derivatives market is expected to remain on a strong upward trend compared to more mature derivatives product areas.
Most major dealers say there has been a big increase in their credit derivatives volumes.
Mike Brosnan, deputy comptroller of risk evaluation at the 0CC, pointed to a challenge in assembling these surveys: "When you conduct a survey, some people may or may not respond, hence the data could be incomplete.
A problem with a survey is: who is the enforcer?'
The OCC.
which carries out its own quarterly review of the US derivatives market, showed a decline in the credit derivatives market, from $426 billion at the end of 2000 to $351 billion at the end of second-quarter 2001.
Brosnan attributes the decline in the credit derivatives market to uncertainty among users, relating to restructuring issues sparked off by the US life insurer Conseco's debt restructuring last year.
However, according to Tim Frost, head of JP Morgan's credit derivatives business in London, the decline evidenced in the OCC's figures really comes down to a change in reporting methods that occurred in 2000 from gross-to-net notional figures on outstanding credit derivatives contracts.
Enron's Success Story The Wall Street Journal - December 26, 2001 The collapse of Enron was many things -- a gratifying slap in the face to
| ISDA PRESS REPORT - DECEMBER 26, 2001 |
ISDA PRESS REPORT - DECEMBER 27, 2001 RISK MANAGEMENT * A spanner in the works - Risk TRADING PRACTICE * ISDA and FpML.org to merge - Risk A spanner in the works Risk - December 2001 When the Basel Committee issued its second consultative document proposals (CP2) for a new regulatory capital Accord in January, it prompted fierce opposition from banks, academics and lobbying groups over its treatment of loans to small- to medium-sized enterprises (SMEs).
This sector is the backbone and growth engine of many major economies.
Now, nearly a year later, the issue has come to a head.
The US and Germany - which is fiercely protective of its SME sector, the mittelstand - are engaged in brinkmanship over the capital treatment of loans to SMEs that could cause the entire Basel II capital Accord to unravel.
SME lenders' initial concerns included the steepness of Basel's credit risk weighting curve for the internal ratings-based (IRB) approach, its insistence that expected loss provisions should be made in addition to typical unexpected loss provisions, confusion over which SME loans could be included under the retail approach, and the extent to which physical collateral could be used as a risk mitigant.
The Committee has moved to address many of these concerns, although some, like the risk weighting curve, remain prickly.
But a critical issue, the use of maturity adjustments in the calculation of capital charges for corporate and SME lending, which requires banks to put aside more capital for longer-dated loans, is far from being settled.
The German banking industry in particular is worried that overly harsh SME treatment would push up lending costs, thereby stifling capital to a vital source of the country's economic growth.
While German banks have several concerns, the country's lack of flexibility on the maturity issue threatens to derail the entire Basel II process, which in turn would throw the European Directive based on Basel II into disarray.
While most Basel lobbying has been carried out via traditional banking channels - with national banking associations petitioning their regulators that sit on the Basel Committee and its working groups - the debate in Germany, Europe's largest economy, involves the highest levels of government.
German chancellor Gerhard Schr?der and economics minister Werner M?ller said in late October that German funding to the mittelstand must not be impaired by Basel II.
"Basel II is not acceptable to Germany in its present form.
Everyone must reckon with our opposition to a European Union guideline based on Basel II," said Schr?der, referring specifically to treatment of SMEs.
The Basel Committee has since issued a paper, 'Potential modifications to the Committee's proposals', which outlines current thinking within the Committee and indicates that it will make key concessions to SME lenders.
The most important aspect of the paper, released November 5, is the Committee's move to lower and flatten the IRB risk weighting capital curve - which is a function of a firm's probability of default.
This significantly lowers capital requirements for SME lending.
The move is based on evidence that small companies are less likely than large corporates to default during economic downturns.
But the paper failed to touch on the maturity debate.
"[It] says nothing about maturity, just about the risk weights without any maturity adjustments," says Tobias Winkler, head of international banking issues in the department for banking supervision at the Bundesverband deutscher Banken (Association of German Commercial Banks).
"This a right step, but certain additional things have to be done to take account of special circumstances of SME lending [in Germany]," he adds.
"The maturity adjustment has to be abolished in the advanced approach," he argues.
The German side claims the terms of loans to the mittelstand are significantly longer than those to their SME counterparts in the US or the UK.
"We have got very long maturities, this would put German banks at an enormous competitive disadvantage compared with other countries," says Winkler.
Evidence to support this argument is hard to come by, especially since the Basel Committee refuses to disclose cross-country comparisons for factors like average loan maturities from its second quantitative impact study (QIS 2).
But several officials with access to QIS 2 data say the average maturity of loans made by domestic financial institutions to businesses in Germany is 4.28 years, a figure that falls to 2.95 years for Germany's internationally active banks.
Average maturities for business loans in other G-10 countries were said to lie between two and 2.5 years.
The CP2 proposals for Basel II contained two maturity approaches in IRB treatment, one called the 'default model', ironically said to be a German proposal, and the other a US 'mark-to-market' approach strongly backed by the British.
Under these two approaches, it is assumed that the risk of default on a loan is higher if it is longer-dated, an assertion that has been supported by several studies of historic data.
The 'mark-to-market' approach also takes into account the economic deterioration of the position and not just final default.
This Anglo model heavily penalises longer-term loans.
According to the Zentraler Kreditausschus (ZKA), a central banking association which represents the interests of German commercial banks, savings banks, regional state banks and co-operatives, long-term exposures of seven years could require up to six times as much capital as one year exposures - although one German banking official said a cap had now been placed on maturities at five years, reducing this figure to 400%.
"Capital add-ons for long-term loans would therefore seriously affect the international competitiveness of the German banking industry and result in higher interest rates for borrowers that would not be justified by the risk exposure," said the ZKA in a statement during the comment period.
But Germany stands virtually alone in its refusal to accept the US-led maturity proposals.
"The data analysed by the Committee clearly shows that you have these upward-sloping curves for maturities.
What kills a bank is deterioration of value, and it has got to provide for a lot of things on the books, so you can't wait for final default," said a Basel Committee member.
"But you can argue about the steepness, and that is a matter for debate."
The fact that Germany's other key allies in the wider SME debate - namely Japan, Italy and Spain - are in favour of maturity adjustments, has prompted a number of non-German regulators, albeit veiled behind the protection of anonymity, to play down the importance of the maturity impasse to Basel II's implementation.
But such views fail to take into account the depth of feeling that German banks, banking associations, the Bundesbank, parliament and the general public have in protecting funding to the mittlestand.
This unusual level of pressure has left the German negotiators with very little room for manoeuvre.
Gerhard Hofmann, director of banking supervision at the Deutsche Bundesbank, was one of the few regulators prepared to speak publicly on the issue.
He said his hands were all but tied on the maturity debate, and confirmed that the German side would be prepared to scupper Basel II's timetable should a deal fail to be reached.
"If this does not come to an end, then the European effort will be postponed too.
I have difficulties imagining that we would introduce Basel II in Europe and not have a level playing field on a G-10 basis."
While Hofmann said the matter was "very serious", he remained confident that all sides could reach a solution.
Compromise Risk was told by one European banking representative who claims to be closely involved in the talks that a current compromise suggestion is to halve the US mark-to-market maturity adjustments.
This would mean the 600% figure mentioned in the ZKA paper for a 'AAA'-rated, seven-year loan would be reduced to 200%.
But a US representative distanced himself from this being a US proposal.
"I would not describe the negotiating position that way," he said.
Asked if the US team would agree such a concession, he added, "I couldn't say that we would, but it would depend on the whole package.
Fifty per cent on the mark-to-market adjustment seems an obvious point to try and compromise on, but I'm not sure the US side would agree to that."
Hofmann was also cautious, saying "I would rather hesitate to comment on that, but yes, it is a direction we are heading.
This is a critical point and I hesitate to comment in public because we are in the midst of this rather difficult negotiating process and I really don't want to jeopardise anything.
It will be quite tough."
While almost every country that supports maturity adjustments believes a 50% mark-down would be an acceptable compromise, Germany may still hold out.
Another German bank executive says it may find a 50% mark-down unsatisfactory.
Another area of potential compromise is to allow banks with loan maturities of less than three years to gain a downward capital allocation adjustment, while banks with loans of more than three years would be capped at the three-year level - as factored into the current proposed standardised credit approach.
But German bankers appear set to resist even this level of compromise, claiming that German internationally active banks (with average maturities of 2.95 years) would be on an unfair playing field with other internationally active banks, which have average maturities closer to the two years.
But German banking officials could not come up with hard data to support the claims.
While maturity is the largest single SME-related issue for the Basel Committee to resolve, there are a number of other matters that also need clearing up, and, once again, the Germans are digging in their heels.
For example, the IRB credit risk-weighting curve proposed by the Committee on November 5 fails to completely assuage concern about higher SME lending charges.
While Basel's current approach would mean that banks would have to set aside significantly less capital against SMEs, which typically fall in the 1% to 3% probability of default range, compared with CP2 proposals, charges are still higher than under the present rules.
For example, a bank lending to an SME with a 2% probability of default would now have to set aside 10.3% of the capital, compared with 15.4% under the January proposals.
Collateral mitigation could reduce this to 9.3%, and receivables mitigation might further reduce the amount to 8.3%.
But Hofmann believes this risk-weighting curve does not go far enough.
"When you look at the curve, the typical probability of default range for an SME, which is around 2%, still triggers a capital charge of above 10% - 2 percentage points above the current treatment," he says.
This will translate into the pricing of these loans.
"How big will the interest rate effect be on SMEs?
According to our calculations it is still significant," Hofmann says.
As a result, the Bank of Italy and the Deutsche Bundesbank drafted a confidential joint paper, released October 19, which was submitted to the Committee's working group on overall capital.
The paper proposes that a function based on the relationship between asset correlation and size should be added to the IRB risk-weight curve methodology based on the relationship between asset correlation and probability of default.
The paper, 'Calibration of benchmark risk weights in the IRB approach to regulatory capital requirements', contends that joint treatment of probability of default and a firm-size effects on asset correlation could produce a risk weighting function that addresses both procyclicality issues produced by the new framework and concerns related to the treatment of lending to SMEs.
The Committee is now investigating the matter as part of an additional quantitative impact study, QIS 2.5.
But many banks, including German financial institutions, are strongly opposed to the introduction of additional parameters, such as number of employees, assets and turnover functions into the risk-weighting curve.
They see a size function as an unnecessary complication.
"Segmentation on the grounds of turnover is unsatisfactory to us.
Retail businesses and wholesale businesses may have similar turnover, but the characteristics and the way you would manage them in risk terms would be quite different," says Colin Jennings, senior manager, non-retail related risk at Lloyds TSB, the UK's third largest bank.
"If that was imposed on us we would have to change our systems considerably to do what we think would achieve no real benefit," adds Simon Baker, Lloyds TSB's head of risk policy, overseeing about ?6 billion in commercial portfolios (above ?2 million in turnover) and an equal amount in small business portfolios, plus retail loans to its 16 million retail customers base.
Further effects Bankers are also opposed to another key aspect of Basel II that affects SME lending.
The Committee believes banks should put aside capital for expected losses in addition to the current practice of making capital charges against unexpected losses - credit risk.
From a theoretical view of capital, such requirements should be fulfilled by future margin income and not by regulatory capital allocations.
The Germans favour this 'pure' approach.
"Expected losses are covered by future margin income.
We don't need any double counting by using regulatory capital to cover expected losses," says a German banker.
Although Basel has made some concessions in this area, saying it would scrap expected loss provisions for retail loans - excluding mortgages - and allow deductions from special and general loan loss reserves against expected losses, the Committee's 'inelegant solution' has again run into German opposition.
"The German Ministry of Finance restricts the amount of loan-loss reserves due to fears that banks would attempt to reduce their income figures to avoid tax payments," says one German banker.
"We fear that this could lead to a severe international competitive disadvantage for German banks because of tax regulations, so we are very much against covering expected losses with regulatory capital."
A potential solution is to include expected losses under Pillar II of Basel II, leaving it up to the discretion of national supervisors to ensure expected losses are fully covered, while ensuring a level playing field among nations.
But some claim the Committee is unconvinced that expected losses are fully accounted for by national regulators in specific product areas or nations like Japan, and have pushed for specific Pillar I treatment to alleviate their concerns.
"The current envisioned compromise is that this will not be done across the board.
While it is not an elegant solution, it addresses the most important substantive concerns the industry has raised about the inclusion of expected loss," says a Basel Committee member.
The strong German opposition to so many SME-related treatments will make a speedy resolution difficult, with much said to be hinging on sideline discussions between the German and American contingents ahead of the Capital Task Force and Basel Committee meetings, scheduled for December 6 and 7 in New York, and the December 12 and 13 in Basel, respectively.
With the timing tight in terms of enshrining a European Directive in European Union and European national legislation, the industry needs a major breakthrough based on sound banking supervision practices, rather than an appeasement in response to political sabre-rattling, which risks weighing down the entire Basel II process.
ISDA and FpML.org to merge Risk - December 2001 By Rob Dwyer The International Swaps and Derivatives Association plans to integrate FpML.org the not-for-profit company set up to develop Financial products Markup Language (FpML) - into its organisational structure by the end of the year.
The merger of the two organisations is aimed at facilitating the development of FpML by allowing FpML.orgs members to concentrate on technical issues.
Mart Meinel, co-chair of FpML's standards committee and head of fixed-income IT at UBS Warburg, says becoming part of ISDA will remove the burden of administration from the technical team.
We will be able to use ISDA resources which will speed up the implementation of version 2.0 and the development of version 3.0,' he says.
'The standards committee ended up doing a lot of the administration work to run the FpML symposiums, and we hope to leverage off ISDA conferences (for future symposiums)."
FpML based on the flexible extensible markup language' (XML), is designed to create an industry standard for electronic trading.
FpML 1.0, launched in July 2000, covers interest rate swaps and forward rate agreements.
FpML is presently working on version 2.0, which will include swaptions, caps, floors, collars and straddles, as well as several other instruments, as well as those covered in 1.0.
Implementation is slated for the end of December.
The committee is also planning to publish a draft of 3.0, which will extend FpML coverage to foreign exchange and equity derivatives, by the end of this year.
Meinel says FpML's integration with ISDA was part of the standards committee's strategy from the organisation's inception.
'Since we have been working on ISDA documentation then converting that into XML, our work has a natural fit with ISDA," says Meinel, Operating from inside ISDA will help the development of FpML be better aligned with the documentation of new products as it comes along."
Strain Robert Pickel, ISDA's chief executive officer, says the merger will allow members of FpML to focus on technical development.
But will it prove a strain on often-stretched ISDA resources?
We envision adding some extra staff, and we project that we will be able to find the extra funding needed through due-based revenues' says Pickel.
"As a volunteer organization, it was an issue for FpML members to find time aside from their day jobs.
And yet they have still managed to establish FpML as a brand that is the basis for OTC derivatives transactions in the future," he adds.
FpML users welcomed the announcement.
Mark Brickell, chief executive officer of online swaps trading platform Blackbird, and chairman of lSDA between 1988 and 1992, says: "We actively encouraged ISDA to take on this project.
Creating FpML is as important as the ISDA Master Swap Agreement, because it will strengthen the framework for the swap negotiation."
Brickell says Blackbird was the first company to offer FpML confirmations to its customers, and he believes ISDA will accelerate the adoption of 2.0 and expand FpML further to cover more kinds of transactions more quickly.
Observers say the success of the project depends on recruiting.
An official at an FpML-affiliated company says: "ISDA hasn't had this level of technology project before, so the key will he whether it hires someone with the requisite level of technological expertise."
ISDA officials say details about FpML recruitment have yet to be finalised.
**End of ISDA Press Report for December 27, 2001** THE ISDA PRESS REPORT IS PREPARED FOR THE LIMITED USE OF ISDA STAFF, ISDA'S BOARD OF DIRECTORS AND SPECIFIED CONSULTANTS TO ISDA ONLY.
THIS PRESS REPORT IS NOT FOR DISTRIBUTION (EITHER WITHIN OR WITHOUT AN ORGANIZATION), AND ISDA IS NOT RESPONSIBLE FOR ANY USE TO WHICH THESE MATERIALS MAY BE PUT.
| ISDA PRESS REPORT - DECEMBER 27, 2001 |
The following Delaware limited liability companies were cancelled/dissolved on December 13, 2001.
Evidence of the following cancellations to be filed in the 48th floor vault, Enron Building Please notify all interested parties within your group.
Chiricahua I LLC (Company #1382-CHRI) Chiricahua II LLC (Company #1383-CHR2) Chiricahua III LLC (Company #1384-CHR3) Chiricahua IV LLC (Company #1385-CHR4) Chiricahua V LLC (Company #1386-CHR5) Chiricahua VI LLC (Company #1387-CHR6) Chiricahua VII LLC (Company #1388-CHR7) Chiricahua VIII LLC (Company #1389-CHR8) Chiricahua IX LLC (Company #1390-CHR9) Chiricahua X LLC (Company #1391-CHR10) Chiricahua XI LLC (Company #1392-CHR11) Chiricahua XII LLC (Company #1393-CHR12) Chiricahua XIII LLC (Company #1394-CHR13) Chiricahua XIV LLC (Company #1395-CHR14)
| Notice of Dissolution of Chiricahau I LLC through Chiricahau XIV LLC |
We are going to have to retain Kyle to work out Canada.
To date he has not received any retention money.
I believe - although I am not sure - that we have more flexibility since Kyle is an employee of Enron Canada (solvent).
Let me know your thoughts.
Kyle would like $500,000 US.
| Kyle Kitagawa |
I would like to set up a meeting to resolve the status of the Enron NA / Enron Canada contracts.
If Enron NA is not going to perform - nor is in a position to perform - shouldn't we formally cancel these contracts?
At your convenience, please call Lucy Marshall @ 713-853-4525 to indicate a convenient time.
Wednesday PM may work well for the group.
Regards,
| Intercompany contracts - US / Canada |
I am out of the office on vacation from December 24- 28.
I will be back in the office on Monday, December 31st.
Therefore, if you require immediate attention, please contact my assistant, Twanda Sweet, at 713-853-9402.
Otherwise, I'll respond upon my return.
| Out of Office AutoReply: Enron/Moran/employee issues |
The PGA Tour Championship will be held at the Champions Golf Club on October 29 - November 4, 2001.
This year, EES and EWS have joined together to provide a unique customer entertainment option at this event.
Instead of the normal hospitality tent at the course, we have obtained a house that overlooks the 18th fairway and 17th tee box.
Food, beverages and shuttle service will be provided daily.
Due to security issues, no personal cars will be allowed to park at the house.
Attached is the preliminary program agenda and shuttle service information.
EWS has access to 25 tickets daily.
To order tickets, please send an E-Mail Request to Laura Pena including the following information: Name, title and location of requestor Company name Department name Number of tickets (No charge will be allocated to individual cost centers)
| PGA TOUR CHAMPIONSHIP |
Attached is a revised version of the CA with Goldman.
The remaining issue is in Section 1 regarding restrictions on Goldman's "use" of the Confidential Information.
Goldman believes that they will have to bring a lot of their personnel, including traders, "over the wall" in order to perform this engagement, and that such personnel will by necessity see some of our Confidential Information.
While they agree that their personnel shouldn't be able to use our specific information against us in future transactions, they are worried that the restriction on their use of our info that is set out in Section 1 could limit the future activities of those folks simply because they "saw" some of our Confidential Information and are carrying it around in their heads, and at any time could be accused of "using" our info.
Initially, Goldman insisted on removing the restriction on use.
We have suggested the language at the end of Section , which would generally restrict use of the information to the engagement, but would allow Goldman's non-IB's to work on the deal but perform their other jobs without worrying about violating the CA as long as they weren't using the notes that they took while they were in our shop.
Admittedly, it is not as clean as I would like, but I think this adequately addresses both parties' concerns.
Goldman was initially receptive to this language, and will call tomorrow morning with any other comments.
| Goldman CA |
Based upon my review of the files and discussions with other lawyers and other business people: Ameritex Ventures II, Ltd.- No further funding commitment exists.
Nutech Energy Alliance, Ltd. - A DASH has been approved for funding $2,627,000 million.
$592,000 has been funded.
There is no known legal documentation of a commitment to fund any additional amount.
It is unclear what expectations other partners may have regarding future fundings by the Enron entity.
Texland Limited Partnership - An AFE for $4 million has been approved but funding will not be required until next year.
Approximately $1 million/month for the first four months of 2002 will most likely be required.
Andex Credit Facility - Fundings are in the sole discretion of ECTMI as the agent.
Tri-C Resources - ENA is committed to fund $30,000-40,000 of general and administrative expenses this year.
Westwin Energy I Limited Partnership - Additional capital contributions require unanimous consent of the partners.
A Dash has been approved for $7,400,000 contingent upon certain levels of success and an engineer's report.
Hanson - No further funding obligations exists.
| Energy Capital Resources Funding Commitments |
Please note a correction regarding the Alternative Dispute Resolution November 28th meeting listed in the November Bar Bulletin Calendar.
The correct program and speaker information for the November 28th meeting is: Arnold T. Shienvold, Ph.D., BCFE, Attorney, Mediator and Trainer, will present "Mediation With High Conflict Parties."
ADR Section
| ADR Nov. 28th Bulletin Calendar Correction |
In September I sent you all a summary of the facts at issue in the above-referenced lawsuit.
Since that time, several developments have occurred.
First, the trial date was moved from October 11, 2001 to November 13, 2001.
We have no reason to believe that we will not go to trial on the 13th.
We expect the trial to last from 10 days to 2 weeks.
Judge Ira Gammerman will try the case.
There is no jury.
The second development deals with the proposed summary judgment motions mentioned in my last e-mail.
Summary judgments on liability and damages have been filed and the plaintiffs have responded.
We have filed replies to their opposition papers.
In addition, the plaintiffs filed a cross-motion for summary judgment as to liability.
We filed opposition papers to this motion.
New York practice differs somewhat from Texas practice to the extent that we have no firm date for a hearing on these motions.
Although we are attempting to get a hearing before the trial date, the judge has complete discretion as to whether to hear the parties' motions for summary judgment before the start of trial.
The third development relates to the plaintiffs' theory of the case.
It seems clear from the papers filed in response to our motions for summary judgment that the plaintiffs are fine-tuning their case to focus on the contracts' size distribution requirement arguing that the type of coal supplied by Enron, whether crushed or not, could never meet the contracts' size distribution requirement.
The plaintiffs make this argument in simple terms and, when argued as such, it has some appeal.
However, it is Enron's position that the contracts' language is ambiguous and the better (and much more complicated) approach advanced by the defendants is that the subject coal could and would have met the size distribution requirements.
Issues of whether the contracts are installment contracts also play heavily in this analysis.
Fourth, since the last e-mail on this matter, we have learned that the plaintiffs are seeking $71 million in damages from Enron.
This is approximately half of the amount of the contracts' damage cap.
Lastly, we finally received a response from the plaintiffs to the settlement proposal we made in June.
The plaintiffs have offered to resolve this matter for a cash payment by Enron of $45 million.
In the alternative, the plaintiffs have proposed a business alternative which is currently being investigated.
Additionally, there is some discussion of mediation in the limited time remaining before trial.
Should you have any questions about this case or should you need any further information, please call me.
| Sempra v. Enron |
Yesterday we received a supplement to the plaintiffs' discovery that contained a damage report from the plaintiffs' damage experts.
Plaintiffs are claiming $71 million.
This number takes into account the amounts allegedly lost from breach through March 2002, the date the plaintiffs claim they will have both machines up and running.
More specifically, this number is based on: 1.
The alleged actual costs associated with moving, operating and using the machine that was moved back to Somerset.
($12 million for 2001/ $5 million for 1/02-3/02- Total $17million) 2.
Lost tax credits "grossed-up" for the machine that remained at Pier IX but, according to plaintiffs, was unable to make any synfuel because the plaintiffs purportedly could not get the coal to operate it.
($54 million) By only using the period from breach through March 2002, the plaintiffs have avoided having to make any assumptions about the spread and also have avoided having to take into account any long-term cost-savings that Enron's alleged breach provided which, we argue, they would have to apply to offset their early damages.
We are analyzing the plaintiffs' numbers and will get back to you.
| Sempra Damages |
Please let me know if you are working on any netting or collateral arrangements in support of our European trading businesses, so that we can maintain a consistent approach.
Similarly, please also be sure to contact Mary Cook who is the lawyer in Houston co-ordinating our netting and collateral arrangements with trading counterparties, many of whom trade in both Europe and the US.
Thanks
| Netting Agreements & Collateral Agreements |
CONFIDENTIAL AND LEGALLY PRIVILEGED Vicki Many thanks for your assistance yesterday.
Clinton Energy Management Services, Inc. because it holds a current power marketing certificate is an entity which we would like to move to being a direct subsidiary of Enron Corp. to take effect today.
This is considered to be an essential part of restructuring to meet our current and future needs.
While the day to day control will remain where it is and all the efforts assign contracts and other work should progress as planned, since the value to Enron Corp. is the power marketing certificate nothing should be done to jeopardize this.
In addition we will be changing the charter and will need copies of the existing charter to effect those changes required.
Please call me if you need to discuss this further.
Kind regards,
| CONFIDENTIAL AND LEGALLY PRIVILEGED |
Mark, Rob My apologies for adding to your burden at this difficult time.
However hopefully this might clarify our discussions of yesterday and enable us all to move on quickly.
Enron Europe and its directors are facing two related issues: 1.
Continuing to trade The directors of EEL and its subsids have to be satisfied that there is a reasonable prospect of avoiding an insolvent liquidation.
This is a fairly low hurdle to pass and, in our situation, calls made on Corp. for cash have been promptly met and we have read the news today of a new confirmed facility so we already have a fair degree of comfort.
The directors meet with independent counsel tomorrow but I believe that they will probably come out of that session asking for nothing more than a confirmation, by email to say Michael Brown, but from the top - Jeff or Greg, of where they currently see things, ie a positive prognosis for the future.
That piece of electronic paper should be enough to enable the directors to reasonably conclude that we are not hurtling into Chapt 11 and to continue to trade.
It would also be very helpful if that email could confirm that Michael would be promptly informed if things took a downward turn.
I would be happy to draft a note but wonder whether the best way of quickly putting this to bed might be for a conversation to be had with Jeff/Greg to see what they would be prepared to say.
That could then be drafted up and sent over.
2.
Filing accounts The directors of Enron Europe and its subsids cannot file accounts on a going concern basis unless they are comfortable they will have adequate funds in the medium term to run their businesses.
The hurdle here is higher than in point 1 above as prospective cash shortages would require the accounts to be qualified long before the directors would have to stop trading under point 1 above.
So more comfort will probably be required here, which could include further details of the new facility (drawdown conditions and maturity periods) and prospects for further facilities being signed.
This would back up the usual support letter.
I should add that we have not actually received this year the usual support letter from Corp. addressed to Enron Europe and its subsids.
I don't know if it has been formally requested but we will definitely need to see that document this time around.
Could you please point me in the right direction for that?
We now have until the end of January to file the accounts so point 1 above is definitely the immediately crucial issue.
We would however like to resolve the accounts issue as soon as possible.
Perhaps we could liaise with Joel to get a letter drafted and then signed by Jeff or Greg?
That's it.
It really boils down to requiring a bit more information from Corp.
There is absolutely no desire to cause problems here, just a desire to put in place the right pieces of information (which we are sure are out there but we need to collect them in) which will safeguard the European directors personally and enable them to move on from these concerns to the more pressing business of Q4.
Many thanks.
Mark
| ENRON EUROPE |
Attached is a revised checklist, which incorporates comments from Lance.
<<Project Notre Dame Checklist.DOC>> ++++++CONFIDENTIALITY NOTICE+++++ The information in this email may be confidential and/or privileged.
This email is intended to be reviewed by only the individual or organization named above.
If you are not the intended recipient or an authorized representative of the intended recipient, you are hereby notified that any review, dissemination or copying of this email and its attachments, if any, or the information contained herein is prohibited.
If you have received this email in error, please immediately notify the sender by return email and delete this email from your system.
Thank You
| Project Notre Dame Checklist.DOC |
During this critical time, it is imperative that our management team remain focused on our business and continue to address the challenges currently facing our company.
For that reason, I have decided to postpone the Enron Management Conference.
The Conference will now be held Friday, February 22 - Saturday, February 23, 2002 at the Westin La Cantera Resort in San Antonio.
While the Saturday meeting allows some Enron executives who cannot be away from the office during business hours to attend the Management Conference for the first time, I also recognize that it requires many of you to forfeit additional personal time on behalf of Enron.
I truly appreciate your sacrifice and I sincerely encourage your attendance.
The new agenda, while still being finalized, will be abbreviated but every bit as informative and worthwhile as previously planned.
We'll be in touch soon with more details.
Regards,
| 2001 Management Conference |
Dear Invitees: Mitch Daniels, Director of OMB, will be our guest speaker for the Tuesday, November 13, luncheon.
Mr. Daniels will discuss the Administration's overall budget priorities, as well as tax and funding issues related to energy.
Details are attached.
For reservations, please email or call me at 202-824-7121 by noon, Friday, November 9.
You do not need to be a member of the Roundtable to attend.
See you there!
| Natural Gas Roundtable Luncheon, Tuesday, November 13 |
I wanted to encourage your institutions to consider adhering to the 2001 Euro Protocol.
The adherence period ends on November 30.
Details can be found on our website, www.isda.org, under the Protocols page.
Please feel free to contact me with any questions you might have.
A Commentary has also been prepared to assist in answering frequently asked questions.
Thank you for your consideration.
| Euro Protocol |
ISDA PRESS REPORT - NOVEMBER 6, 2001 EURO * Italy rebuts claims over swap contract - Financial Times (North American Edition) * Rome 'did not cheat over deficit' - Financial Times (European Edition) EMERGING MARKETS * Cavallo defends Argentina's plan for debt swap - Financial Times OPERATIONS * After Liffe - The Economist TRADING PRACTICE * Cut Short - The Economist Italy rebuts claims over swap contract Financial Times (North American Edition) - November 5, 2001 By James Blitz The Italian Treasury firmly rebutted allegations on Monday that it had structured a complicated swaps contract with the aim of deflating its 1997 budget deficit figure and qualifying for the single European currency.
In a formal statement, the Treasury said that swap contracts - in which a bond issuer can trade his obligation to make payments in one currency rather than another - were a regular method of "improving management of public debt".
Privately, meanwhile, Treasury officials sought to explain why Italy had undertaken a swap contract highlighted over the weekend by a report for the International Securities Market Association.
On May 15 1995 the Italian government issued a bond for Y200bn.
At the time, after the dramatic 1992 devaluation of the lira, the Italian Treasury was gradually seeking to regain credibility in international markets, and did so by issuing bonds in a range of currencies.
When the Y200bn bond was issued, the yen-lira exchange rate was at L19.3.
By December 1996, however, the yen had depreciated by 30 per cent to a level of L13.4 to the yen.
The Treasury then sought to lock in its currency gains over this period.
Treasury officials say they could have undertaken to start buying back the Y200bn bond issue, but given its sheer size, this was unrealistic.
They therefore decided to undertake a cross-currency swap in which the Treasury could convert its yen liabilities into lira.
The Treasury faced a serious technical problem, however.
Under European Union statistical rules pertaining at the time, the debt of all EU countries could only be reported in the original currency in which the bonds had been issued, in this case yen.
Any swap contract agreed by the Treasury in order to close its foreign exchange risk would thus be irrelevant when it came to calculating the overall debt figure.
This was highly pertinent to how the swap agreement had to be structured.
The Italian Treasury could have simply closed the swap transaction when the Y200bn bond matured in September 1998, realising all its exchange rate gains at that date.
But a strong appreciation of the yen during the course of 1997 might have left Italy's official debt looking higher at the end of that year than it did at the end of 1996.
This could have seriously undermined the country's bid to enter the eurozone.
The Treasury therefore needed to keep the formal calculation of its debt consistent by realising their exchange rate gain during the lifetime of the bond.
Both the exchange rate and the interest rate of the swap contract were structured to allow this.
Treasury officials say the 30 per cent foreign exchange gain from the Y200bn bond was highly unusual.
They dismissed any notion that this could be a regular phenomenon in debt management as absurd.
Nor, say officials, could the swap be judged as a way of "window dressing" the deficit figure.
If window dressing had taken place, Italy would have seen its deficit and debt shoot up after it had successfully entered the single currency.
The fact remains that Italy's deficit and debt have both been on a steadily downward path since 1996.
Rome 'did not cheat over deficit' Financial Times - November 6, 2001 (European Edition) By Peter Norman The European Commission and Eurostat, the European Union's statistical agency, yesterday rejected suggestions that Italy had used the over-the-counter derivatives market to camouflage the true size of its budget deficit and so help its admission to the European single currency.
Gerassimos Thomas, spokesman for Pedro Solbes, the economic and monetary affairs commissioner, said the Commission's preliminary evaluation was that the use of interest rate swap transactions by one member state in 1997, as highlighted in an International Securities Market Association (ISMA) report, did not amount to cheating on the budget deficit figures.
Mr. Thomas said the purpose of such swap transactions was to save money for governments and they were therefore not discouraged by regulators.
Although the ISMA report referred only to an unnamed member state, it was understood to be Italy.
Yves Franchet, the director-general of Eurostat, said his agency knew in 1997 about the Y200bn Italian bond issue and swap transaction mentioned anonymously in the report.
The effect of that deal was to reduce Italy's deficit of around 2.7 per cent of gross domestic product in 1997 by a marginal 0.02 percentage points.
The swap deal was therefore not of a size to influence significantly Italy's ability to produce a deficit well below the 3 per cent ceiling set in the Maastricht Treaty.
Mr. Franchet said Eurostat consulted widely on how to treat swaps before defining the deficit of Italy and other member states.
The agency had to work out the public deficits of member states for economic and monetary union at a time of statistical transition between national accounts based on a standard known as ESA79, which took no account of swaps, and before formal adoption of the ESA95 system, which recognised swaps.
After consulting with expert committees, Eurostat decided to apply the ESA95 standard in calculating member states' suitability for Emu.
Aware that swaps could have a positive or negative effect on deficits, Eurostat also conducted a survey of swap use by member states.
According to Mr. Franchet, the practice was not widespread.
Cavallo defends Argentina's plan for debt swap Financial Times - November 6, 2001 By Thomas Catan Domingo Cavallo, Argentina's economy minister, yesterday mounted a defence of his country's controversial debt swap plan, saying investors must accept lower interest payments if his country was to avoid an outright default on its Dollars 132bn debt.
"Any reasonable person knows that Argentina cannot grow if it has to pay interest on its debt that ranges between 11 per cent to 25 per cent - and in the case of some provinces, up to 30 per cent a year," he told an audience of businessmen.
"We .
.
.
seek to ensure payment on the basis that Argentina is viable and to stop trying to pay (interest rates) that only reflect the march of Argentina towards default.
It's a question of telling the truth."
Starting today, Argentina will offer private creditors new bonds backed by future tax revenues that will pay a maximum of 7 per cent.
Repayment on bonds coming due in the next 10 years will also be pushed forward by three years, Mr. Cavallo said.
This leg of the debt restructuring appears to be aimed mainly at domestic investors - local pension funds, insurance companies and banks - that hold at least a third of Argentina's Dollars 95bn in bonds.
These local institutions, often units of international banks, are heavily exposed to Argentine debt and are seen as more susceptible to government pressure.
A second "global exchange" for all of Argentina's bonds should be ready within 2-4 months, Mr. Cavallo said.
By then, Argentine officials hope to have additional guarantees from multilateral lending agencies to offer foreign investors in return for accepting lower-interest bonds.
Argentina hopes this will enable it to avoid an outright default on its debt.
Investors entering the first, mainly local, exchange will be entitled to enter any subsequent deal, Mr. Cavallo said.
Pension fund managers had feared being taken to court by future retirees for having acted against their interests.
"Those who have confidence in Argentina are going to have two opportunities because no one knows if the global exchange will have better or worse terms," Mr. Cavallo said.
Argentina is attempting to cut its annual interest bill by at least Dollars 4bn to free up resources to restart its ailing economy, now in its fourth year of recession.
To do so, the government is implementing a range of tax cuts and other measures to spark spending, such as cutting employees' private pension contributions.
Investors remain concerned that Argentina's debt proposal effectively constitutes a default.
However, Mr. Cavallo is now putting them on notice that they must accept lower interest payments if the country is to continue to service its debt.
The government is also pressing the 23 provinces to accept a cut in their guaranteed monthly tax transfers.
After Liffe The Economist - November 1, 2001 JEAN-FRANCOIS THEODORE, the head of Euronext, is a surprise winner.
The London Stock Exchange (LSE) was widely expected to triumph in the bidding for Liffe, London's derivatives exchange.
Yet on October 29th the board of Liffe recommended that its shareholders accept a ?555m ($806m) offer from Euronext, the three-way merger between the Paris, Amsterdam and Brussels stock exchanges.
Although Euronext's offer was less than the LSE's, it was all in cash (not in combination with shares).
It also promised to retain Liffe's management, and to shift all of Euronext's derivatives business to London to trade on Connect, Liffe's trading system.
That combination made it unbeatable.
Euronext's coup is a blow for the LSE, which had hoped that buying Liffe would strengthen its position in the forthcoming consolidation of European stock exchanges.
But the LSE misplayed its hand, advertising its interest for too long in advance and then quibbling over too many details with Liffe's management.
It will now have to find some other strategic option if it is not to become prey to one of its rivals.
Setting up its own derivatives business will be hard: it might instead seek to buy one of the American exchanges, perhaps the Chicago Mercantile.
The third big European stock exchange, Deutsche B?rse, which had also bid for Liffe, will also have to find an alternative.
Yet one obvious idea, to resurrect last year's abortive marriage between it and the LSE, will be hard to do under the two exchanges' present management, because the bust-up was so acrimonious.
That may put Euronext in the best position to become the dominant European exchange.
Europe's investors may not care so long as trading becomes cheaper and easier.
Anyway, most of them fret more about improving clearing and settlement in Europe, which is much more expensive than in America and so offers greater scope for savings.
The Liffe/Euronext deal immediately triggered speculation about which European clearing houses might now merge.
The London Clearing House (LCH), which clears trades on Liffe, had inconclusive talks last year with Clearnet, which clears Euronext trades.
A merger would now be logical.
Less obvious is which way the Luxembourg-based Clearstream will jump.
On October 31st it received offers from Deutsche B?rse (which already owns 50%) and Brussels-based Euroclear, the biggest clearer of international bonds.
Deutsche B?rse is keen to own all of Clearstream.
This would create the first big European "silo", in which trading, clearing and settlement have a single owner.
Werner Seifert, chairman of Deutsche B?rse, has long championed silos, which he thinks provide the reliability required by the market.
Critics reckon vertical silos distort competition.
Benn Steil at the Council on Foreign Relations in New York says that Deutsche B?rse might impose discriminatory tariffs on non-German-based traders in German shares if it were to own all of Clearstream.
Others point to possible cross-subsidy from the monopolised settlement arm to the trading platform.
One alternative is the horizontal integration of settlement agencies and clearing-houses, to create large central counterparties-maybe two or three for the whole of Europe.
Traders would then be able to net their cash and derivatives positions on several exchanges with a single clearing house, saving capital.
Don Cruickshank, chairman of the LSE, thinks the European Commission in Brussels should go further and impose a single European clearing and settlement system like America's.
That is a very long shot.
It took the intervention of Congress and the Securities and Exchange Commission to set up the Depository Trust and Clearing Corporation-which moved American non-government securities markets from seven settlement agencies to one settlement organisation and one central counterparty.
Besides the defenders of silos, the European Commission would have to contend with a different regulatory and legal system in each member country.
More realistically, market forces will drive clearing and settlement houses to join forces, because it is more cost-efficient when buyer, seller and security are linked.
Cut short The Economist - November 1, 2001 The American Treasury's announcement that it will issue no more 30-year bonds should delight corporate treasurers and depress fund managers.
Cynics also suggest that Peter Fisher, under-secretary at the Treasury, made this move to help Alan Greenspan, chairman of the Federal Reserve Board, bring down long-term interest rates, in a fair imitation of a bull market.
The 30-year Treasury bond has been illiquid for some time because until recently America had been retiring debt.
Now that the country is a net borrower again, it is the wrong time to take long-term debt off the menu, say Mr. Fisher's critics.
Many have a vested interest, however.
The Chicago Board of Trade, which usually carries great clout in Washington, immediately protested that economic uncertainty since September 11th obliges the Treasury to keep all its funding options open, including at the long end.
It is worried about losing its flagship 30-year-bond futures market.
Bond traders, as well as inter-dealer brokers, such as Cantor Fitzgerald, will now have to satisfy themselves with shorter maturities-these are more liquid, but with less of the volatility that dealers love.
Those traders and investment banks that cover their 30-year trading positions with repos (bond sales and repurchases) will find life more expensive-they will ultimately have to buy and sell corporate bonds, which carry credit risk, rather than supposedly risk-free government bonds.
Perhaps they will use British 30-year gilts instead.
There are winners.
Swap dealers and long-term bond issuers, notably two government agencies, Fannie Mae and Freddie Mac, should find more demand for their 30-year bonds.
It will please, too, those who think interest-rate swap rates a better benchmark than Treasuries for pricing fixed-income securities.
The biggest gripe will come from insurance companies and pension funds with long-term liabilities-especially defined-benefit pension plans.
Long-term rates may be lower but will now come with credit risk attached.
Surely Mr. Fisher read a paper published in July by the American Academy of Actuaries entitled "The Impact of Inordinately Low 30-year Treasury Rates on Defined Benefit Plans"?
If he did, this plea to spare the life of 30-year Treasuries failed to move the man of steel.
**End of ISDA Press Report for November 6, 2001** THE ISDA PRESS REPORT IS PREPARED FOR THE LIMITED USE OF ISDA STAFF, ISDA'S BOARD OF DIRECTORS AND SPECIFIED CONSULTANTS TO ISDA ONLY.
THIS PRESS REPORT IS NOT FOR DISTRIBUTION (EITHER WITHIN OR WITHOUT AN ORGANIZATION), AND ISDA IS NOT RESPONSIBLE FOR ANY USE TO WHICH THESE MATERIALS MAY BE PUT.
| ISDA PRESS REPORT - NOVEMBER 6, 2001 |
For Enron Canada Corp. and Enron Canada Power Corp., the following is a summary of change in control provisions: 1.
Current Precedent Form of Master Firm Physical Gas Agreement - there is no change in control provision (individual contracts would ahve to be checked) 2.
Current Precedent Form of Guarantee supporting the Gas Master - no change in control provision (individual contracts would ahve to be checked) 3.
Current Precedent Form of Master Firm Physical Power Agreement - although there is no change in control provision, there is an "Event of Default" where a party reorganizes (including by asset transfer) into another entity and, at the time of such reorganization, the resulting entity fails to assume all the obligations of the predecessor party under that agreement (individual contracts would ahve to be checked) 4.
Current Precedent Form of Guarantee supporting the Power Master - no change in control provision (individual contracts would ahve to be checked) 5.
Physical GTCs (Gas and Power) - no change in control provision (individual contracts would ahve to be checked) 6.
ISDA - there is an "Event of Default" where one party reorganizes (including by asset transfer) and the resulting entity does not assume the obligations of the preceding entity under the ISDA.
There is also a "Credit Event upon Merger" when one party or its Credit Support Provider reorganizes and the creditworthiness of the resulting entity is "materially weaker" than the predecessor entity.
A Credit Event upon Merger allows the non-affected party to terminate.
(individual contracts would ahve to be checked) 7.
Financial Omnibus - in the financial terms and conditions (Annex A) there is an "Event of Default" where a party reorganizes (including by asset transfer) into another entity and, at the time of such reorganization, either the resulting entity fails to assume all of the obligations of the Defaulting Party under the Confirmation or the resulting entity's creditworthiness is materially weaker than that of the Defaulting Party (mirroring the ISDA "Merger without Assumption" and "Credit Event upon Merger").
(individual contracts would ahve to be checked) 8.
Impact Energy Subscription Agreement - no change in control provisions 9.
Petro Canada Services Agreement - Section 11.4 indicates that Enron Canada ceasing to be an affiliate of Enron North America Corp. is a material breach of the agreement entitling PC to terminate the agreement in accordance with its terms.
10.
Suncor Services Agreement - Article 18 allows for the termination of the agreement by Suncor if (i) there is a change in shareholding of either ECC or ENA that results in either or both ceasing to be an affiliate of Enron Corp. or (ii) ECC or ENA disposes of all or substantially all of its or their assets or (iii) ECC, ENA or Enron Corp. amalgamate, merge or consolidate into another entity other than an affiliate and such transaction would have a material adverse impact on the business on Suncor.
11.
Sundance B Power Purchase Arangement - no change in control provision 12.
British Energy Power Purchase Agreement - no change in control provision 13.
OEFC Services Agreement - no change in control provision 14.
ENERconnect Services Agreement - no change in control provision 15.
SYNCRUDE Services Agreement - no change in control provision 16.
CASCO Services Agreement - no change in control provision 17.
Papier Masson Agreements - these were all transferred to Houston and should be checked by someone in EIM As far as trading agreements go, I believe that most if not all inter-company contracts (ie.
between ECC and Enron Direct, ENA, EES, etc.)
have a MAC clause relating to ownership by Enron Corp. but I am not aware of any third party trading agreements that would contain the same provision with respect to Enron Canada.
| Material Contract Review |
Hi Mark, Although I suspect that you have been quite busy lately given the situation at Enron, I would like to follow up on our conversation of a few weeks back.
Is there a time that is convenient for me to call?
Otherwise, I will give you a call later this week and try to set something up.
As always, I appreciate your willingness to give some time to me.
And if your schedule is too hectic now, please suggest some future dates that might work better for you.
I hope you saw the Spartans beat Michigan Saturday.
What a great game!
And to top it off, Tom Izzo signed another blue chip basketball recruit from Flint.
There are many smiling faces here on campus.
I assume you received my information packet and look forward to talking to you.
Thanks again for your time.
Best regards,
| Follow up from MSU |
Attached is your S&P Market scope for Wednesday, November 7.
Please feel free to contcat us if there is anything we can help you with.
Thank You,
| S&P Marketscope |
Doyle I, L.L.C., ENA, NEPCO, EE&CC and Power Generation Investco, L.L.P., as insureds/assignees under a policy of insurance issued by Factory Mutual Insurance Co. ("FM"), may file suit on Friday, November 9, 2001, against FM for a breach of contract and bad faith with regard to payment of a claim of approximately $6,200,000 for an insured loss that occurred on or about June 14, 2000, when the Unit #1 engine at the Doyle I, L.L.C.
facility located at Monroe, Georgia, failed.
If you are aware of any reason that suit should not be filed , please call Britt Davis at (713) 853-6307 or email him at britt.davis@enron.com <mailto:britt.davis@enron.com>.
If he does not hear from you by Thursday, November 8 at 5:00 p.m., he will assume you have no objection to the filing of this suit.
Sent on behalf of Britt Davis
| In re Doyle Claim Against Underwriters |
I understand that AA may not provide the review of interim financial information that the SEC requires to be obtained in respect of Form 10-Q filings ( Article 10 of Regulation SX).
Jordan asked me to give an update in an hour about the impact of this on covenants in ENE credit and other instruments requiring delivery of ENE's 10Qs.
(1) I have not yet been able to ascertain whether (i) the AA review or any statement in respect thereof is required to be filed with the SEC, or (ii) if not so required, ENE would file the 10-Q without having obtained the review.
(2) ENE's 364-day corporate revolver (and most other ENE instruments containing the subject covenant) requires ENE to make available either on "EDGAR" or ENE's home page on World Wide Web, or otherwise make available to the Banks promptly after the filing or sending thereof, and in any event within 75 days after the end of each of the first three fiscal quarters, a copy of ENE's report on Form 10-Q.
If ENE does not file the 10-Q, it arguably could nevertheless send it to the banks as confidential information (to comply with Regulation FD) within the required time period and satisfy the covenant.
The revolver contains a confidentiality provision.
Failure to deliver the 10-Q constitutes an Event of Default under the revolver if the failure continues for more than 30 days after ENE has received notice thereof by the Paying Agent.
I will continue to pursue information from the accountants.
Regards, NJD
| ENE Form 10-Q Accounting Matter -- Initial Report |
ISDA PRESS REPORT - NOVEMBER 7, 2001 CREDIT DERIVATIVES * Credit Derivatives - FOW DOCUMENTATION * ISDA publishes amendments to master agreements - IFR EMERGING MARKETS * Emerging market issuers press ahead - Financial Times RISK MANAGEMENT * Dumping "W" - FOW * Basel Committee, IOSCO, IAIS Publish Cross-Sector Reports - Dow Jones Credit Derivatives FOW - November 7, 2001 By Jane Douglas-Jones In the weeks following the terrorist attacks in the US, credit derivative traders reported record levels of activity.
"In the immediate aftermath of the events of 11 September trade ticket size went down," says one broker.
"A lot of people were prepared to make markets in $5m or euros where previously the average ticket size was $10-15m.
The nominal size of the trade went down as a result of the level of uncertainty and volatility in the markets."
Traders report that credit default swap trade volume soared to three times the normal level.
"If nominal ticket value went down by half and trade volume went up three-fold, overall volumes were up by 5 00/0 in terms of the actual business being written," explains the broker.
After the initial shock of the devastating attacks, the market recovered its poise and analysts and traders soon realised the credits that would be most affected.
"Clearly, airline stocks took a pummelling," says one trader.
"Prior to the event, British Airways was trading around 100 basis points for five year default swaps.
After the attacks, BA widened dramatically to 350/SOObp.
Spreads on this credit did come in from this level, but they have since gone back out again and are currently trading around 380/450bp.
Meanwhile, we saw a credit event on Swiss Air, and German airline Lufthansa also went out, with all the European airlines following suit."
Insurance sector As was expected, the credit derivatives market also saw heightened activity in the insurance and reinsurance sector.
"There has been a lot of activity around companies such as Zurich Re," says the trader.
"Zurich spreads moved out from around 20/40bp to 50/100bp.
The credit did trade towards the offered side once or twice.
Zurich spreads have stayed in this range despite the fact that the company has downsized its profits and upsized its predicted loss (effectively doubling the amount of provision) as a result of the terrorist attacks."
Similarly, names such as AXA, Agon, and Aliance have all been actively quoted in the aftermath of 11 September and spreads have widened considerably on these names.
For example, as FOW went to press Aliance spreads went out to 7Obp before tracking back in to 35/55bp.
In addition, sectors that have not been considered directly affected by the attacks, such as the auto sector, also moved out as a result of the potential slowdown in the US.
"We have seen principle investors in the credit derivatives market trading either with a view or going by what the spot markets are doing," says one dealer.
"We have also seen quite a few investors gaining synthetic exposure to bonds by selling default swaps.
Recent weeks have proved a significant test of the liquidity in the default swaps market.
In some areas, the bond market was extremely thin and it was difficult to trade.
However, with default swaps there was always a price in no more than five minutes.
The market was both traded and tradable."
Europe The European credit derivatives market has also had to contend with the demise of the UK's train operator, Railtrack.
"Railtrack is going to be a credit event on bankruptcy rather than restructuring," says one structurer.
"There was a thought initially that it would go via restructuring and that would have been an interesting test of the modified ISDA restructuring supplement.
This is still very much an issue in the market.
While the US has adopted the new version, by far the majority of business being done in Europe and Asia uses the original ISDA 1999 definition of restructuring.
The new restructuring Z supplement has simply not been accepted and I do not think it ever will be accepted.
I expect that we will soon move back along the lines of the original ISDA wording with perhaps one or two tweaks.
Overall, traders say that the market has survived the seismic shock of the events of 11 September extremely well.
"There was no mad panic," says one broker.
"The credit derivatives market made a fair and measured response in the face of tragedy."
ISDA publishes amendments to master agreements IFR - November 3, 2001 As part of its effort to improve counter-party risk management practices, the International Swaps and Derivatives Association last week released nine amendments that can be added as attachments to ISDA master agreements.
Many of the changes included in the document were inspired by the market turbulence in 1998, ISDA said.
Ultimately, the amendments will form the basis of an initial draft of a new master agreement.
Using one amendment, a failure to pay becomes a default one local delivery day after notice of such failure is given to the relevant party.
"Many market participants found three local business days after notice to be too long a period during times of market stress in 1998" ISDA noted in a commentary on the amendments.
A local delivery day is a day on which settlement systems are generally open for business.
Under a second amendment, market participants can use a replacement value method of valuing transactions after early termination of a master agreement.
The replacement method combines elements of the market quotation and loss methods into one valuation provision, 1SDA said, noting that the quotation or loss methods are still valid.
Because the inability to communicate notices via email or fax proved unduly restrictive in 1998, an amendment was added allowing market participants to use these channels to give notices.
An amendment stating that the occurrence of termination events should be treated in a manner similar to an event of default also featured on ISDA's new list of amendments that may be tacked on to master agreements.
According to ISDA, this option was added because a number of members hold the view that most termination events are credit-related.
ISDA initiated a review of its master agreements' provisions in 1999.
The process took into account recommendations by the counter-party risk management policy group's 1999 report "Improving Counter-Party Risk Management".
Emerging market issuers press ahead Financial Times - November 7, 2001 By Arkady Ostrovsky Emerging market borrowers are pressing ahead with planned international bond issues, despite a deepening debt crisis in Argentina.
Fitch, the credit rating agency, yesterday said Argentina's planned debt swap would amount to a default.
Fitch cut Argentina's credit rating from CC to C, indicating an imminent default, and left it on rating watch negative.
"Although the proposed debt exchange has been described as voluntary, public statements by Argentine officials imply that in the absence of such an exchange, public debt held by domestic investors is unlikely to be serviced," Fitch said.
Fitch also said the terms of the new instruments would be inferior to those of existing debt, including lower coupons and longer maturities.
However, despite all this, emerging markets remained surprisingly calm with no visible signs of contagion developing.
Emerging markets bond spreads had hardly moved since last Friday's announcement and the yield spread of some countries, including Brazil, had even tightened.
This is because there is little leverage in the system, compared with the 1998 Russian crisis, and because most market participants were prepared for an Argentine default.
Several emerging market issuers said they were pressing ahead with bonds despite Argentina's troubles.
Bulgaria is likely to launch its debut euro-denominated international bond next week.
Its finance minister said yesterday the country would not launch the bond if it had to pay a coupon above 8.5 per cent.
But bankers close to the deal were confident Bulgaria could borrow at between 7 and 8 per cent, or between 380 and 420 basis points over the eurozone benchmark, depending on the maturity.
Bulgaria is considering a three-year or five-year issue of up to Euros 255m.
Emerging market analysts said Bulgaria's economy was in good shape, despite eurozone economic slowdown and falling export revenues.
The country, rated B2 by Moody's and B+ by Standard & Poor's, has attracted healthy levels of foreign direct investment by selling its banks to foreign banks, has pegged its currency to the euro and has met several Maastricht criteria.
"Bulgaria is the final country to offer extra value as an EU convergence play.
It is unrecognisable as the state engulfed by crisis five years ago," said Charles Robertson, emerging markets analyst at ING Barings.
Latvia, which is on a roadshow in London today, is also pushing ahead with a bond issue.
Sibneft, Russia's oil company, said it would also go ahead with a three-year Dollars 250m bond issue this month, although other oil companies have chosen to postpone their issues until next year.
If successful, Sibneft could become the first Russian corporate to issue international bonds since the 1998 crisis.
Moody's yesterday assigned Sibneft a rating of B1, a notch above Russia's sovereign credit rating.
Dumping "W" FOW - November 2001 By Jane Douglas-Jones Basel Committee for Banking Supervision has been busy in recent weeks.
The Committee has issued guidance to banks on customer due diligence processes, reviewed its Internal Ratings Based Approach (EBB) to specialised lending exposures, and published crucial papers on operational risk and market discipline.
In addition, the credit derivatives market breathed a sign of relief at the Committee's decision to dump 'w'.
In the first of a series of updates on the proposed new Basel Capital Accord, the Basel Committee's Capital Group has decided to incorporate the 'w' factor (a residual risk charge for credit derivatives) into pillar two of the Accord's framework, which deals with the supervisory review process.
This move was welcomed by the banking industry and the International Swaps & Derivatives Association (ISDA), neither of which has been backward in expressing disapproval of 'w'.
The news that the charge is to be assimilated elsewhere in the Accord came as no surprise given the uproar since w's birth in the January 2001 Basel consultative paper.
As FOW reported (see May issue, It's the end of as we know it, page 21), the charge was derided, at ISDA's AGM, by the very regulators one would expect to defend it and the future of the 'w' factor has looked bleak since then.
However, some market participants were worried that the Committee would stand by the charge both because of the immaturity of the credit derivatives market and also because of the worry that credit risk management instruments could be used for regulatory arbitrage.
"Any sign of traders using a derivative to 'get around' a capital charge or regulation has been, in the past, punished by conservative and complex rules," says one source.
"Recent evidence of this can be found in the securitisation market."
The demise of 'w' has not meant the end of regulator concern about credit derivatives.
The Capital Group states: "One of the Basel Committee's objectives in considering the treatment of credit derivatives in the trading book is to minimise the possibility of regulatory arbitrage... the Capital Group is planning to specify a rule that is already implemented by many supervisors.
This rule provides that when a bank conducts an internal hedge of a banking book exposure using a credit derivative in its own trading book, in order to receive any regulatory capital benefit it must transfer the credit risk to an outside third party (ie an eligible credit protection provider)."
Meanwhile, the Accord's add-on matrix for potential future exposure calculations does not explicitly cover credit derivatives and rules differ across countries.
'The Capital Group is working ~to provide proposals that will harmonise this treatment.
Op risk The Risk Management Group (RMG) of the Basel Committee has also been hard at work.
The Group has made a number of significant changes to the January proposals including: * Refinement of the definition of operational risk * Proposed reduction in the overall level of the operational risk capital charge from 200/0 to 120/0 * Introduction of a new regulatory capital approach that is based on banks' internal risk estimates (the "Advanced Measurement Approaches" [AMA]) * Consideration of the role of insurance as a risk mitigant in the regulatory capital calculations.
The Group now defines op risk as "the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events".
Due diligence In the aftermath of the terrorist attacks on the US in September, the Basel Committee has issued guidance and minimum standards to banks on customer due diligence processes.
"Systemic customer due diligence is an essential element of banks' risk management,' says William McDonough, chairman of the Basel Committee.
"It is critical 'to safeguarding confidence and the integrity of the banking system.
The importance of a rigorous approach has been underscored by the recent terrorist attacks in the US."
Basel Committee, IOSCO, IAIS Publish Cross-Sector Reports Dow Jones Newswires - November 7, 2001 LONDON -- Two cross-sector reports aimed at supervisors in the banking,
| ISDA PRESS REPORT - NOVEMBER 7, 2001 |
Steve, Rob asked me to send the following suggested Q & A to you: Q: From a business standpoint are Gipper and Rockne now one company?
A: Not until closing, which may not occur for several months.
Until that time the law [antitrust law] requires that we continue to deal with one another on a commercial level as competitors, just as we have in the past.
In general, this means that we cannot share commercial information, coordinate commercial behavior, agree on prices, etc.
We should act towards Rockne the same way that we would act toward any other competitor.
I trust this is what you needed.
If not just let me know.
Thanks.
| Q&A re Antitrust Issues |
We have just obtained from the court the citation that we need to serve on MSN.
We now have to take it to Austin to serve on MSN's registered agent.
Because of the time of day, we will not be able to do it today.
I have instructed the process server to go to Austin and serve it first thing in the morning.
Once that happens, I will let you know and we can give MSN a call.
Until then, no mention of the lawsuit.
As I said before, as negotiations proceed, please let me know if any commercial reason arises such that you believe service should be delayed.
Andy
| MSN |
Authors - Thanks for your continued support in making Energy Law and Transactions the most comprehensive energy treatise available!
1.
Please send your updates to us by December 31, 2001.
Send chapters 1-72 to Dave and 73 and higher to Bill.
If your chapter has not been updated in the past year, it needs a review and update.
Other details are in the attached in the Update Memo.
2.
Please print, sign and mail to Dave Muchow, Attorney at Law, 4449 N. 38th.
Street, Arlington, VA 22207, the following Contributor copyright agreement.
Matthew Bender needs this.
| Energy Law and Transactions: Next Update Due December 31, 2001 |
Katherine Tew Darras joins the ISDA New York office on November 12 as Assistant General Counsel, reporting to Kimberly Summe.
Katherine, a Canadian, has worked for four years as an associate with Salans Hertzfield Heilbronn Christy & Viener in New York, as part of the Corporate and Financial Institutions group.
Before that, she worked at Canadian Imperial Bank of Commerce in Toronto.
Please join me in welcoming Katherine to our staff.
| New Assistant General Counsel |
Jordan, in response to your questions concerning the issuance of letters of credit starting today, I think that the response needs to address two situations: the committed lc facilities [Chase and West LB] and the uncommitted facilities.
Since the uncommitted facilities involve minimal representations, they are not typically an issue [although we still need to review each circumstance individually], and unless there is a specific representation to Enron Corp.'s audited financials for the period 97-00 being prepared in accordance with GAAP, we should be able to issue letters of credit from an uncommitted facility.
However, sections 4.1(d) of each of the West LB Facility and the Chase Facility contain a representation that Enron Corp.'s financial statements were prepared in accordance with GAAP.
This representation was false when made, and will always be false.
Thus, there is an issue with an officer being able to make the representations and warranties necessary for an issuance of a letter of credit under one of these facilities [or for an extension of an existing letter of credit].
In order to utilize the committed facilities, it will be necessary to obtain an amendment or waiver of this representation, since simply adjusting the representation on an officer's certificate gives the agent a defense to issuance on the face of the certificate.
[An amendment is preferable from Enron's perspective.]
[Note that as we previously discussed, there is not an event of default under the facilities, since that provision has a materiality qualifier.]
| Issuance of Letters of Credit |
Thought you could use some good news!
CUIABA (not typically associated with "good news") 1.
GT12 is repaired and running: Commissioning on gas is complete for purposes of the PPA which avoids a default (yippee!).
GT11 is still on schedule to be repaired by December 3, 2001.
2.
Consent signed: Both Furnas and Electrobras (the guarantor) have now signed the consent, and aditivo #5 whereby Furnas will take on the risk associated with new regulatory issues and pass those costs through to end users.
ANEEL has approved but still must formally ratify this plan.
Thus, we are getting closer to financial close by year end.
The issues of political force majeure and the survival of the Electrobras guaranty are still under negotiation with the Brazilian government.
It is unclear at this time how the recent turn of events at Enron will impact the financing.
3.
Shell: The mediation was temporarily suspended a day early.
The parties will consider Shell swapping its interest in Cuiaba for Enron assets GTB, TBG and Transredes.
The parties are determining whether this swap makes sense and, depending on the outcome, will reconvene either to negotiate the swap or continue the mediation.
This dispute must be settled to close financing.
4.
Insurance: Reservation of rights letter to be issued as a result of Siemens report that the row 3 cracks first appeared in 1999, but Siemens advised the Owner they were "normal" and thus the plant should continue to run.
We are covered for our own negligence but still no final word on coverage.
All information requested by underwriters has been provided, including Siemens' correspondence advising the Owner that the cracks were not material.
ANNEX V Orlando Gonzales met with Brazilian officials again last week and advised that he is very close to negotiating a satisfactory agreement on Annex V. He requested that we not file any suits at this time.
Regards,
| Good news from Brazil |
Mark:.
We're slogging through all of this--it was apretty brutle weekend but progress is being made.
There are still open issues on both the NNG and TW credit facilities--but the goal is to have the TW credit agreement signed sometime today and get it funded by Wednesday, while NNG will probably close later in the week -- likely Friday--once the Dynegy issues are melded with those of the bank.
| Pipeline Financings |
Mark Haedicke will hold a floor meeting for EWS Legal in Houston this afternoon, Monday, November 12, at 2:00 p.m.
The location will be outside of conference room EB3824.
Please plan to attend.
Thank you.
| Floor Meeting for EWS Legal |
As you might recall, York filed two summonses against Enron and Eric Holzer in two separate lawsuits' connected with the parties' dealings in the paper market.
The two summonses (as allowed by Pennsylvania law) lacked any information about York's claims against Enron or Mr. Holzer.
The Enron defendants removed their suits to federal court.
Dechert is the Enron defendants' outside counsel.
We have finally received York's complaint detailing its claims against Enron and Mr. Holzer.
In a nutshell, York claims that Enron hired Holzer away from York in an effort to steal York's customer base and then, contrary to the parties' agreement and custom in the industry, proceeded to steal customers from York.
Specifically, York claims that the only reason it let Holzer out of his non-compete agreement with York is because both Holzer and Enron promised: that they would honor the allegedly established practice in the paper industry preventing competitors from usurping each other's client relationships by selling paper directly to each other's clients, and that York would get new business from Enron.
It is York's position that Holzer took confidential and proprietary information from York when he left that company, gave this information to Enron and that Enron and Holzer used this information to wrongfully steal York's customers.
York has alleged causes of action against Enron and Holzer for: 1.
Theft of trade secrets, 2.
Breach of contract (several counts), 3.
Tortuous interference with contractual relations, 4.
Tortuous interference with prospective contractual relations, 5.
Fraudulent inducement, 6.
Unfair competition, and 7.
Civil conspiracy.
My initial impression is that York should be more worried about having agreements with its competitors preventing business solicitation then Enron should be worried about a predatory pricing claim; however, I don't know enough about the facts to have a firm view of the case.
We are in the process of getting more information about these claims and I'll update you again after we have talked to our folks about this.
In the meantime, please call with any questions or comments.
| York Paper Litigation |
I know there is lots going on but I would like to resign from the Board of Mariner asap.
I am having trouble devoting enough time to this function and feel it would be better if I turned it over to someone else.
Dave Gorte in my group would be my recommendation as a replacement.
If Dave does not have an interest, Brad Larson could also fill in.
Any thoughts?
If you have no issues I will proceed.
Thanks, Rick
| Mariner Board Seat |
Hey Mark, I spoke to Susan the other day and don't want to chase anyone out of your condo for Thanksgiving weekend but could you supply me with the name of the person that manages your condo?
Perhaps he has some other deals in Breck.
Bryan and I are going to go on Friday through Sunday of T.G.
weekend.
If you could supply me with an 800 number or regular if no 800 and what you think the lowest they would go for that time based on the fact that if someone has not booked by now the condo will probably sit empty.
Hope to see you in December.
I am sure you are going to spend some time chilling out (no pun intended) Larry p.s.
I will be in Orlando from Tuesday afternoon through Sunday but I will call from Orlando.
| (no subject) |
Attached is a draft of a letter of intent between ISDA and FpML.org regarding the acquisition by ISDA of the FpML language and process.
We will discuss this at the Board meeting.
<<BOD FpML 112001.doc>> <<BOD FpML 112001-confiden.DOC>> Proposed Media Efforts <<BD MTG Media 1113.doc>>
| BOD Materials 2 |
ISDA PRESS REPORT - NOVEMBER 12, 2001 CREDIT DERIVATIVES * ISDA survey reveals strong upward trend - IFR * ISDA's new supplement includes converts in default swaps - Dow Jones RISK MANAGEMENT * The Basle perplex - The Economist * Supervisors review cross-sectoral practice - IFR ISDA survey reveals strong upward trend IFR - November 10, 2001 The global notional outstanding volume of credit derivatives transactions hit US$631.497bn for the first half of 2001, according to the International Swaps and Derivatives Association's first survey of credit derivatives transactions.
"While still modest in relation to interest rate products, this figure is expected to remain on a strong upward trend compared to more mature derivative product areas," ISDA said.
ISDA surveyed total notional outstanding volumes for single name credit default swaps, default swaps on baskets of up to 10 credits, and portfolio transactions of 10 credits and more.
Eighty-three member firms supplied data for the survey.
Interest rate and currency derivatives growth clocked in at just above 3.5% in the first half of the year among members that also reported at year-end 2000, ISDA said.
For these firms, total notional outstanding volumes increased to about US$55.2trn from roughly US$53.3trn.
Total notional principal of interest rate swaps, interest rate options and currency swaps for all surveyed firms slid to US$57.3trn from US$G3trn at year-end last year.
Among the top 10 dealers, a minor decrease in volume from US$35.6trn to US$35.Strn was recorded, ISDA noted.
According to Thomas Montag, chair of ISDA's market survey committee, the shifting product use reflected greater uncertainty in the global market environment.
"The market for credit protection has an obvious appeal during times of economic downturn," he added.
ISDA's survey is compiled twice a year by Andersen.
Sixty-seven of the 83 member firms that participated in this survey also participated in the previous survey.
ISDA's new supplement includes converts in default swaps Dow Jones - November 12, 2001 By Joe Niedzielski NEW YORK -(Dow Jones)- The International Swaps and Derivatives Association has published a supplement to its 1999 document for credit derivatives which incorporates convertible bonds and zero-coupon bonds, among others, as deliverable securities in these contracts.
The trade group said late Friday that it had finalized and published its Supplement Relating to Convertible, Exchangeable or Accreting Obligations.
The supplement addresses the treatment under the 1999 ISDA Credit Derivatives Definition of certain types of convertible and exchangeable obligations, as well as the treatment of accreting obligations, such as zero-coupon bonds, low coupon bonds issued at a discount and non-discounted bonds that accrete during their term, ISDA said.
"The Convertibles Supplement represents the consensus of a diverse range of constituents in the credit derivatives markets, including portfolio managers, credit protection sellers and dealers," said Robert G. Pickel, ISDA's executive director and CEO.
Credit default swaps allow buyers to transfer the risk of a default on obligations like bonds or loans, or other types of credit events like a debt restructuring.
They have had a growing influence in the broader fixed-income universe, at times playing a role in the pricing of corporate bonds.
And some convertible-bond investors will lay off the credit risk from the fixed-income portion of a convertible security by buying credit default swap protection.
ISDA's supplement was expected.
A group of U.S.-based dealers submitted a proposal to ISDA a few months ago to include obligations like convertible bonds as deliverable securities in these contracts.
And in mid-October, ISDA told members that convertible bonds were deliverable under standard credit derivatives contracts.
The group's memorandum to members came in response to questions from members following the appointment of a railway administrator for Railtrack PLC (U.RTK).
Holders of convertible bonds issued by Railtrack had complained that some sellers of credit protection weren't paying claims on default swap contracts on the Railtrack credit.
The Basel perplex The Economist - November 8, 2001 The arcane world of banking supervision is not usually the talk of German chancellors on tours of Asia.
Gerhard Schr?der made an exception recently when he threatened that Germany would veto any new European directive based on the latest proposals from the Basel committee of big-country bank supervisors.
In its present form, said Mr Schr?der in Bangalore, Basel 2 (as the proposals are known) is "unacceptable to Germany".
Basel 2 attempts to formulate more precisely than before the levels of "regulatory" capital that banks must hold as a cushion against the credit and other risks that they run.
After more than three years of talks, the Basel boffins have developed rules which are still not acceptable to commercial banks.
That is strange, since they are supposed to mirror the way the world's most sophisticated banks themselves calculate their risks.
The whole exercise has shades of Heath Robinson about it.
The banks are up in arms, this week bearding the Basel committee for its latest draft rules, which get ever more complicated and prescriptive.
By the time they are implemented, in 2005 at the earliest, the rules look likely to burden banks with extra costs (ie, through the need to run parallel reporting systems) and perverse incentives to "game" the system.
Basel 2 could thus aggravate the very thing it set out to correct, a distortion of financial markets.
Germany's grouse has to do with the Mittelstand, the 3m small and medium-sized companies that are the economy's backbone.
The Basel 2 formulae for credit risk are based on credit ratings applied to company debt, either by rating agencies or internally by banks themselves.
But few smaller companies are rated in this way.
Moreover, German companies are more than usually dependent on medium-term bank loans, and the longer the loan the more it is penalised under the proposals.
The Germans-but also the Italians and the Japanese-fear that their medium-sized companies will lose under the new capital regime.
Many of the 2,800 German banks are not equipped to rate the companies to which they lend: equipping them would drive up the cost of lending.
German bank associations plan to help by pooling credit data for their members.
But Mr Schr?der's advice to banks last week was that they should not be overhasty in applying the new Basel principles ahead of time.
Already the committee is working on a fix.
On November 5th it posted a clutch of new suggestions on its website that included new risk weightings for smaller companies, and proposals that physical collateral, receivables and even leased assets be used to lessen a particular company's credit charge.
These were interim ideas, it said, which needed to be tested and even revised.
All well and good.
But the Basel committee is getting into knots trying to address every objection as it arises.
Each time, it seems, the committee adds another layer of complexity for banks and their supervisors to master.
Most recently, after strident objections by banks, there was the shifting of the "w-factor" (the possibly unquantifiable residual risk in a credit derivative) from one supervisory category to another, and also the setting of arbitrary minimum risk weights for unrated securitised assets.
The figure for operational risk (non-market risks such as the loss of data, a rogue trader or the destruction of a bank's headquarters) has been slashed, after objections from banks.
The November 5th pabulum came in response to a "quantitative impact study" (a live study of how the proposed capital charges would affect a sample of 138 banks in 25 countries).
The Basel committee has always said that the scale of charges needs to be properly calibrated.
In fact, it gave itself an extra year to get the calibration right.
It has invited some banks to take part in a fresh impact study using its latest proposed adjustments.
The results should help the Basel committee to tweak its formulae to get results.
Its declared goal is not to increase or decrease the overall capital charge imposed on the banking system, merely to allocate it more efficiently.
But some regulators are worried that the more risk-sensitive the regime is, the more reluctant banks will be to lend in a downturn, aggravating economic cycles.
There are attempts to fix this too.
For example, Spain allows its banks to make a provision at the inception of a loan-putting money aside for a rainy day.
Some countries need to fix their accounting regimes before they can follow suit.
Regulators appear stoically optimistic that all these fixes will work, and that a credible new framework will be established-not without flaws, perhaps, but better than what exists today.
The timetable may slip, but the plan is to produce a final draft framework early next year, allowing consultation until the end of March, which should result in a firm set of rules by the end of 2002.
That, in theory, still allows time for the European Union to draft and finalise a matching directive on capital adequacy for banks and financial firms, to be in force by January 2005.
With Basel 2, bank supervisors are trying to do three main things.
They want to devise formulae that bring capital charges closer to the banks' own measures of risk.
They want to establish continuous review of banks' management, and especially of their risk management, as a factor in adjusting the capital charge.
And they want to create incentives for greater public disclosure of banks' risk exposures.
This is an attempt to let markets take on more of a supervisory role.
Yet, in reality, the supervisors are becoming micro-managers.
A member of the Basel committee insists that most of the world's 36,000 banks will be governed by a regime no more complex than Basel 1, in force today.
The more sophisticated financial groups that aspire to a so-called "advanced" approach will be treated differently.
"We'll be crawling all over them initially," says the supervisor, "because ultimately we're giving them more freedom."
All the same, in between the lowest and the highest, thousands of banks will be graduating from a standardised to a more sophisticated approach, with heavy demands on supervisors' time.
Only America and Britain already have a culture of continuous review by supervisors.
Most other regimes are either less sophisticated, or they are hamstrung by non-adjustable capital charges that are set at a minimum by law.
Then there is the Brussels hurdle.
Whatever the Basel committee decides works for banks must be applied in the European Union to all investment firms, including broker-dealers and asset managers.
The scope is huge for further descent into mind-boggling detail.
Supervisors and financial firms may well end up thanking Mr Schr?der if he vetoed the lot.
Supervisors review cross-sectoral practice IFR - November 10, 2001 The Basle Committee on Banking Supervision, the International Organisation of Securities Commissions and the International Association of Insurance Supervisors last week released, under the banner of the Joint Forum, two reports comparing risk management practices and principles in the sectors they supervise.
Both reports were principally aimed at the supervision of conglomerates that incorporate businesses in banking, securities and insurance, but one also took a close look at risk transfer practices.
The first report, Risk Management Practices and Regulatory Capital, compared the approaches in each sector in an effort to "gain a better understanding of current industry practices in all three sectors".
The main sections of the report focus on: differences in core business activities, similarities and differences in risk management tools, approaches to capital regulation in the three sectors and cross-sectoral risk transfers and investments.
It is in relation to the latter two sections that the report provided what some may regard as its sting.
The Joint Forum suggested that as supervisors evaluate the extent of cross-sectoral activity, in terms of risk transfer using derivatives, securitisation and other techniques: "It may become important for the individual sectoral frameworks to be updated to better reflect the contemporary risk profiles of the firms subject to those frameworks.
It would not be surprising, for example, for some jurisdictions in the near future to consider greater convergence in the frameworks applied to the different sectors."
The report explained that supervisors should consider the potential for existing capital regulations to provide incentives for capital arbitrage.
"To the extent that some firms are engaging in activities that are not addressed through capital requirements, supervisors need to ensure that other measures are in place to ensure that the associated risks are being appropriately managed and are supported by sufficient economic capital," it added.
As a result, the report said, supervisors should continue to evaluate approaches that could be taken to address crosssectoral investments within the various capital frameworks.
The second report, Core Principles, compared the core principles each supervisor has issued to its respective sector as risk management guidelines.
The Joint Forum found that each set of core principles provided an overview of the essential elements of the supervisory regime in that sector at the time they were written (1997-2000).
However, the pace of developments in the financial sector since then has required consideration of the need to keep the core principles updated.
The report found no evidence of underlying conflict or contradiction between the three sets of core principles at the highest levels.
However, in some cases there are significant differences in the application of similar principles.
**End of ISDA Press Report for November 13, 2001** THE ISDA PRESS REPORT IS PREPARED FOR THE LIMITED USE OF ISDA STAFF, ISDA'S BOARD OF DIRECTORS AND SPECIFIED CONSULTANTS TO ISDA ONLY.
THIS PRESS REPORT IS NOT FOR DISTRIBUTION (EITHER WITHIN OR WITHOUT AN ORGANIZATION), AND ISDA IS NOT RESPONSIBLE FOR ANY USE TO WHICH THESE MATERIALS MAY BE PUT.
| ISDA PRESS REPORT - November 13, 2001 |
We reached a conceptual agreement with the government representatives on Sunday night.
The main points are: 1.
Rationing losses: Defined methodology giving distribution companies recovery over the next 36 months of rationing losses realised from June 01 until the end of rationing in 02.
Recovery includes financial compensation.
Immediate funding of 80% through BNDES, with Brazilian government funds.
Loans liquidated over the 3 year period as tariff increases are realised.
Funding scheduled by December 15th.
Elektro Ebitda impact of approximately R$191million or US$ 73 million.
2.
April/May MAE settlement : Market will settle under current rules due to pre-rationing conditions, confirming the procedures used on Elektro's books.
Impact of approximately R$ 18 million or US$ 7 million.
3.
Parcel "A" for the future: All non-controlable costs to which LDC's are subjected to including power purchases, sector charges, are passed through to final tariffs either using a tracking account mechanism or by aligning adjustment dates with the LDC tariff revision date.
Tracking account will be subject to financial compensation from the date costs are incurred until the effective pass through and collection , eliminating a major risk for the distribution sector.
Elektro Ebitda impact 2002 forward of R$ 60 million or US$ 19 million, as had been considered in the 2002 plan.
This methodology represents major risk mitigation going forward, as the initial power supply contracts are renewed starting in 2003.
4.
Parcel A from the past: Min Parente has agreed to the concept recovering non controllable that were not passed through to tariffs since late 1999 using the same methodology agreed to for future recoveries and has a dedicated team from the Federal Attorney General's office targeting a final solution in ten days.
Elektro impact is R$145 million or US$ 55 million in 2001.
The proposed mechanism for recovery is after the 36 months for the rationing losses.
We are currently finalising a memo of understanding and the government team is winding up the settlement with the generators in order to finalize the terms of the overall agreement.
Min Parente has committed to resolving the open issues affecting investors in the power sector.
These agreements represent a major step forward, significantly improving the value of our businesses.
By solving the pending issues for the rationing losses, thus eliminating the Annex 5 controversy the MAE should function normally, allowing us to operate Eletrobolt and settle against the pool.
Total amounts for the sector represent about R$ 10 billion or US$3.8 billion at the current rates.
Our team has led the sector negotiations for months since the rationing, and have been instrumental in convincing the government of the need for implementing these changes.
| ESA government negotiations |
Disegard previous e-mail.
We reached a conceptual agreement with the government representatives on Sunday night.
The main points are: 1.
Rationing losses: Defined methodology giving distribution companies recovery over the next 36 months of rationing losses realised from June 01 until the end of rationing in 02.
Recovery includes financial compensation.
Immediate funding of 80% through BNDES, with Brazilian government funds.
Loans liquidated over the 3 year period as tariff increases are realised.
Funding scheduled by December 15th.
Elektro Ebitda impact of approximately R$163 million or US$ 63 million.
Corrected numbers in second email 2.
April/May MAE settlement : Market will settle under current rules due to pre-rationing conditions, confirming the procedures used on Elektro's books.
Impact of approximately R$ 18 million or US$ 7 million.
3.
Parcel "A" for the future: All non-controlable costs to which LDC's are subjected to including power purchases, sector charges, are passed through to final tariffs either using a tracking account mechanism or by aligning adjustment dates with the LDC tariff revision date.
Tracking account will be subject to financial compensation from the date costs are incurred until the effective pass through and collection , eliminating a major risk for the distribution sector.
Elektro Ebitda impact 2002 forward of R$ 60 million or US$ 19 million, as had been considered in the 2002 plan.
This methodology represents major risk mitigation going forward, as the initial power supply contracts are renewed starting in 2003.
4.
Parcel A from the past: Min Parente has agreed to the concept recovering non controllable that were not passed through to tariffs since late 1999 using the same methodology agreed to for future recoveries and has a dedicated team from the Federal Attorney General's office targeting a final solution in ten days.
Elektro impact is R$145 million or US$ 55 million in 2001.
The proposed mechanism for recovery is after the 36 months for the rationing losses.
We are currently finalising a memo of understanding and the government team is winding up the settlement with the generators in order to finalize the terms of the overall agreement.
Min Parente has committed to resolving the open issues affecting investors in the power sector.
These agreements represent a major step forward, significantly improving the value of our businesses.
By solving the pending issues for the rationing losses, thus eliminating the Annex 5 controversy the MAE should function normally, allowing us to operate Eletrobolt and settle against the pool.
Total amounts for the sector represent about R$ 10 billion or US$3.8 billion at the current rates.
Our team has led the sector negotiations for months since the rationing, and have been instrumental in convincing the government of the need for implementing these changes.
| ESA government negotiations/ corrected |
Mark Although the Xcelerator has been moved to Corp, Jim Derrick asked that I continue to receive legal support from your group.
I and people in my group have worked some with Teresa Bushman and Angela Davis in Lance Schuler's group.
Would you like me to consider Lance or someone in his group as my legal "point person", or is there someone else you'd prefer?
Thanks
| Quick question - Xcelerator legal "point person" |
I gather that Bob will be spending most of his time on the securities litigation.
Is it still possible to get a litigation manager to handle EES matters.
I would hope we could use one of the EWS litigators, as we discussed earlier.
Having someone on the floor would be a definite plus as well.
I had talked to Andy but never finalized because of the crisis situation we are in.
My main concern is that the EES business not be allocated among numerous litigators so that we do have accountability or take a back seat to other assignments.
Thanks.
| Retail litigation |
I am not sure if it is premature and there is an obvious business interest on their part, but Blakes has called a number of times to see if they can be involved in any Canadian matters involving the merger process and approvals.
In fairness, Blakes is the firm that understands and represents our Canadian business the best, and a number of regulatory approvals may be required.
They apparently have cleared all conflicts.
Peter.
| Dynegy Merger - Canadian Counsel |
The day trading systems trade both Nasdaq and S&P futures based on volatility and the indexes correlation with related markets, such as energies and interest rate contracts.
Short-term market exposure is the systems key to limiting drawdowns and unnecessary equity swings while attempting to capture profits in the market.
Want to see how we are doing?
we'll be happy to Email you are results everyday or see our trades LIVE via an instant message FREE for a limited time.
For more information please respond at ie1959@excite.com Thank you,
| S&P and Nasdaq Day Trading Systems |
Pursuant to our discussion yesterday regarding the above, please find below for your consideration a suggested revision to MAC/Credit Rating trigger definition to used in all future master trading agreements or confirmations in which Enron Corp's credit rating is part of a MAC/Credit Rating trigger.
"Material Adverse Change" means (i) with respect to [Enron Trading Entity], Enron Corp. (or its successor or its successor's parent company) shall have long-term, senior, unsecured debt not supported by third party credit enhancement that is rated by S&P below "BBB-" [also insert Moody's as appropriate]; I understood yesterday that we may also need to consider changing the definition of Credit Support Provider in the ISDA's.
I suspect that if "Credit Support Provider" is defined as Enron Corp. in the relevant Master, then the corresponding changes noted above would also need to be made.
Your further thoughts regarding this issue are welcomed.
Please provide me your comments to the above language by tomorrow so we can start implementing a revised definition in our agreement templates.
Regards, Alan
| Draft of revised definition of Material Adverse Change/Credit Rating Trigger |
Dear Lance: As a follow-up to my prior e-mail, please find attached more detailed information about our telecommunications practice, as well as biographical information for several of our telecomm attorneys.
This is an area where we really do have unique expertise and experience, and I hope we can talk to you about being involved in the disposition of Enron Broadband.
Please give me a call if you get the chance.
My direct line is (713) 226-1143.
Bill <<Firm Client Dev Telecom bios for Lance Schuler.DOC>> <<telecommunications.marketing package.DOC>>
| Telecommunications Practice |
Mark - Are we still moving forward with the LegalOnline updating?
At this time, we have completed the background work on the databases (e.g., Confidentiality Agreements, Law Firms/Contacts, etc.)
and created the new look and feel.
We have not yet implemented the text of the new site and continue to have some problems with the streaming video (we cannot get the tape digitized as necessary because of flaws in the tape itself).
In light of current events, please let me know if we are to move forward with the project or not.
Thanks.
| LegalOnline |
Mark: Mark Haedicke and Lance Schuler asked me and Pete del Vecchio to draft a letter to Dynegy to clarify certain of the covenants and to ask for their consent to certain possible transactions.
We would like your input on what we ask for and how we go about asking.
I understand Lance Schuler spoke with you today regarding having a telephone conference tomorrow on this.
Please send me an e-mail or leave me a voice mail (713 345-1549) as to what time is convenient for you.
I'm also sending this to you by fax.
| Dynegy Covenant Issues |
Mark, re.
the above, we are working on a significant number of divestments (very important transactions for cashflow reasons totalling potentially over 500MM US) in Europe that are likely triggers; I urgently need to address this with you guys - Michael Brown wants me to sort out a waiver letter / procedure before the weekend.
Can't get a hold of Lance.
Could you or Lance give me a shout this morning.
Thanks, Marcus
| negative covenants in merger agreement |
Dear All, Please find two attachments for the Central and Eastern European Committee.
If you have any difficulty at all in opening them please send me an e-mail to let me know.
Regards,
| central and Eastern European Committee |
Today's Meetings 1.
Lunch - Financial Services Committee Staff - Noon - Capitiol Hill Club - Upstairs Dining Room 2.
Senate Banking Committee - Friday, November 16 - 1:30 p.m. - 534 Dirksen 3.
Speaker Hastert Staff - Friday, November 16 - 2:30 p.m. - Confiriming w/Jon Dudas.
Meet at Capitol - House Side Visitors Entrance
| Friday Meetings on Netting Provisions - Details |
Attached is your Friday, November 16 edition of the S&P Marketscope.
Please feel free to contact us if there is anything we can help you with.
Thanks,
| S&P Marketscope |
November 16, 2001 Dear Enron Users: Due to a severe storm which hit central Texas last evening CYNET is experiencing a temporary service interruption of the assigned telephone numbers of it's Inbound Fax-2-Email Service.
Our local loop carrier has advised us they are aware of the situation and they are working to restore this connectivity.
While CYNET maintains back-up facilities for its Fax-2-Email services the problem we are faced with is that we can not place the same user telephone number within two different facilities at the same time.
Our technical team is working on future recommendations in the form of having individual back-up numbers in the event of this type of outage.
We sincerely do apologize for any inconvenience this may cause you and your users and expect to have this service restored as soon as possible.
Sincerely,
| Fax-2-Email Temporary Service Interruption |
DEAR SIR, WE ARE SENDING YOU THIS JOINT VENTURE PROPOSAL,TO SEEK YOUR ASSISTANCE IN LIQUIDATING AND TRANSFERING OUR TRAPPED INVESTMENTS IN VARIOUS PLACES.
I AM MAKING YOU THIS OFFER ON BEHALF OF HRH MOBUTU SESE SEKO ( EX PRESIDENT OF REPUBLIC OF ZAIRE) AND MYSELF HIS LOYAL AIDE.
PRESENTLY ASSYLUM SEEKERS IN LONDON UK.
THE INVESTMENTS WERE MADE FROM PROCEEDS OF FUNDS ACQUIRED BY US DURING THE LAST DAYS OF OUR ADMINISTRTATION BEFORE THE PRESENT PRESIDENT AND HIS TEAM THREW US OUT AND ALMOST HAD OUR HEADS.
BECAUSE THE FUNDS WERE EMBEZZLED PUBLIC FUNDS, OUR LATE CHINESE ASSOCIATE HAD TO ROUTE IT OUT OF THE COUNTRY IN HIS NAME ,THROUGH HIS CONTACTS IN THE OIL AND GAS SECTOR IN NIGERIA.
SPECIFICALLY {OML 32BRASS}.
THE INVESTMENTS IS WORTH US $21.5M ( TWENTY-ONE MILLION FIVE HUNDRED THOUSAND U.S DOLLARS ONLY).
HOWEVER, BEFORE OUR LATE FRIEND DIED HE WAS ABLE TO SEND US A COPY OF HIS WILL OUTLINING ALL THE INVESTMENTS HE MADE ON OUR BEHALF AND NOMINATING US AS THE BENEFICIARIES.
BUT DUE TO OUR INABILITY TO LEAVE THE UK, COUPLED WITH THE FACT THAT WE ARE UNDER CONSTANT SURVEILANCE, WE WOULD LIKE TO NOMINATE YOU AS THE BENEFICIARY, SO YOU CAN CLAIM OUR INVESTMENTS,TRANSFER TO YOUR ACCOUNT AND SEND US OUR SHARE TO ENABLE US PROSECUTE OUR CASE AS WE ARE COMPLETELY OUT OF FUNDS.
WE ARE OFFERING YOU 30% OF THE PROCEEDS FOR YOUR EFFORTS.
10% IS SET ASIDE FOR EXPENDITURES INCURRED.
60% IS SET ASIDE FOR US, AT OUR DISCRETION.
SHOULD YOU BE INTERESTED IN THIS OFFER YOU CAN REACH ME ON MY MAIL BOX mbadakad@yahoo.com,mbadakad@lycos.com WERE I SHALL BRIEF YOU MORE.
THIS TRANSACTION IS COMPLETELY SAFE AND SECURED AND WE CRAVE YOUR UTMOST CONFIDENTIALITY BEST REGARDS, DAVID MBADAKA
| JOINT VENTURE |
Mark, Lance, Could I please be sent the final version of the Enron Disclosure letter.
I received copies of this during the negotiations but would like to know that the final version I received was what was signed with Dynegy.
Thanks
| ENRON DISCLOSURE LETTER |
GADSDEN RESEARCH SERVICES' FERCwatch November 19, 2001 GRS' mobile phones are out of service temporarily -- service should be restored later this morning.
Please forward all requests by e-mail to grs4ferc@starpower.net <mailto:grs4ferc@starpower.net> or fax to 202-318-4524 until further notice -- both will be checked frequently.
We apologize for the inconvenience.
Thank you.
| GRS/FERCwatch - Telephones |
We currently have $21.4 million in reserve for potential Northwest refunds.
$10 million currently sits in the LTCA book and $11.4 currently sits in the LTNW book.
During the summer, FERC initiated an investigation into the potential of unjust and unreasonable spot prices in the northwest from December of 2000 through June of 2001.
Seatlle City Light, Tacoma City Light, Eugene Water and Electric Board, and Sacramento Municipal Utility District all filed claims at FERC for refunds from EPMI.
The claims totaled close to $100 million.
However, many of these claims were, on their face, spurious.
For example, Eugene Water and Electric Board filed for refund of forward purchases which was clearly outside the scope of FERC's proceeding.
We hired consultants from Charles River Associates (CRA) to help us with this process.
One of their tasks was to apply the CAISO competitive benchmark pricing methodology to the Northwest market.
That is, CRA attempted to reverse engineer the CAISO's methodology in order to estimate our Northwest risk.
I was informed by our litigation team that EPMI's realistic potential exposure using this methodology was roughly $30 million.
We decided to reserve roughly 2/3 of this amount which came to about $21 million.
In September a FERC Adminitrative Law Judge heard the case and submitted a draft decision to the FERC.
The draft decision recommended against any refunds.
This draft decision is supposed to come in front of the FERC commissioners for approval before the end of the year.
If this draft decision is approved, it would be appropriate to remove these reserves.
| Northwest Reserves |
Mark; John can be located at V&E's office in DC (202-639-6600 - ask for Conference Room 625).
He is staying at the Willard Hotel (202-628-9100).
Apparently, he will be in DC until tomorrow.
Rgds, Sami
| John Novak contact numbers |
Nancy; With the current restructuring of our activities, we are taking the necessary actions to dissolve the below listed Brazilian entities: Cone Sul Energia Ltda.
Dutog?s Participa?
?es Ltda.
EBD - Empresa Brasileira Distribuidora Ltda.
Enron Communications do Brasil Ltda.
Enron Communications Holdings Ltda.
Enron Distribuidora de Petr?leo e Derivados Ltda.
Enron Servi?os de Energia Ltda.
EPA - Energia Participa?
?es das Am?ricas Ltda.
MEDOC Empreendimentos Ltda.
Also, we need to update the slates of the respective shareholders (our Cayco's) of other Brazilian entities as well as to replace outside counsel for Enron Delegate Managers (Wiggs, Gonzalez, Novak, Arap).
Please be kind enough to prepare POAs for the Cayco's of the below listed companies ASAP: Brasen - Brasil Energia Ltda.
(currently with Ulh?a Canto) Enersil - Energia do Brasil Ltda.
(currently with Ulh?a Canto) PEP - Plena Energia Participa?
?es Ltda.
Rio Energia Ltda.
(currently with MMSO) Enron Am?rica do Sul Ltda.
(currently with MMSO) Enron Comercializadora de Energia Ltda.
(currently with Ulh?a Canto) Enron G?s do Brasil Ltda.
(currently with Uh?a Canto) Enron Investimentos Energ?ticos Ltda.
EPC - Empresa Paranaense Comercializadora Ltda.
EPP - Energia Pura Participa?
?es Ltda.
IEB - Investimentos Energ?ticos Brasileiros Ltda.
(currently with Ulh?a Canto) RJG - Rio de Janeiro Generation Ltda.
(currently with Ulh?a Canto) I'd greatly appreciate it you could provide a time schedule to have all documents ready for execution.
Please call me should you have questions regarding any of the above.
Rgds, Sami
| POAs |
Mark/Lance, Attached is a legal risk memo concerning the sale of land in Louisiana by the ENA Upstream Group (Jean Mrha - Commerical Contact).
The memo will be attached to a DASH which is being circulated for signature today.
Please review and let me know if you have any questions.
| Land Sale Legal Risk Memo |
Mark As per my voicemail, I am working as part of a team implementing financial trading agreements with our intra group counterparties.
Part of that process involves contacting the directors of each enterprise and clarifying certain pieces of information.
Could I ask that you confirm the following regarding RMTC - Global Markets and Enron Metals and Commodities Corp That you are a director, and therefore authorised signatories of the companies?
Would your signature be required on any new trading agreement for both companies?
Would there need to be a corporate resolution in order to sign the new trading agreement?
Thanking you very much in advance for your time, Best Regards
| RMTC - Global Markets and Enron Metals & Commodities Corp |
Gentlemen, Attached for your review is a draft of the CEG DASH.
David Gorte plans to circulate the final draft of the DASH to Rick Buy, Jeff McMahon, Ray Bowen, Ken Lay, Greg Whalley, and Mark Frevert on or before Monday morning.
We plan to have the DASH executed on Monday (11/26) by all signers.
Preclosing is scheduled for Monday with funding on Tuesday (11/27).
Please let me know if anyone else should review and or sign the DASH.
If you have any question or comments, please call.
Have a happy Thanksgiving.
Regards,
| CEG DASH |
Dear Sirs: In the next few days you will be receiving an envelope from Tozzini, Freire, Teixeira e Silva Advogados containing a CD-Rom prepared on occasion of the firm's 25th anniversary.
We are sending you this message due to the threat of Anthrax in correspondences received by mail and consequent fear spread throughout the world.
Please do not hesitate to contact us should you need further information or any clarification.
Yours very truly, Tozzini, Freire, Teixeira e Silva Advogados Sao Paulo - Brazil
| Tozzini, Freire, Teixeira e Silva s 25th anniversary. |
I am faxing to each of you a copy of a letter dated November 8, 2001 that I received today from Ms. Plitsch regarding the Hong Kong litigation that I believe Matt managed.
Mark Haedicke had a received a copy from Mark Frevert.
I believe that both of you have knowledge of this matter.
Of course, this is written from Ms. Plitsch's point of view.
Please review and indicate what you would recommend as a course of action to reply to her letter.
Regards, Alan
| Letter from Tanya Plitsch |
ISDA PRESS REPORT - NOVEMBER 26, 2001 ASIA * Korean Regulation Change Will Allow Onshore Equity - Derivatives Week CREDIT DERIVATIVES * Condensed default swap confirmation launched - IFR * Banks move to boost credit derivatives liquidity - Risk News * Fitch Plans Credit Hiring Spree - Derivatives Week REGULATORY * Cross-Border Security Transactions Costing More Than Domestic Ones, EC Says - BNA * Enter the FSA - Financial Times * FSA to open securitised derivatives to retail sector - Risk News TAX * Dealers hope for clarity on swap books - IFR Korean Regulation Change Will Allow Onshore Equity Derivatives Week - November 26, 2001 The Financial Supervisory Service in Korea will permit local securities houses to trade over-the-counter equity derivatives next July; a move that players said will bolster the market.
"[The regulations] will strengthen the competitiveness of the securities companies and offer investors a greater range of choices in the financial market," said Lee Young Gi, associate in the securities supervision department of the FSS in Seoul.
"More participants will lead to greater liquidity," said Charles Chiang, equity derivatives trader at Nomura International in Hong Kong.
He continued that offshore flow products such as index options and equity swaps for the Korean market totaled about USD100 million this year.
Chiang added that with the new regulations enacted, the Korean OTC market is set to grow, likely expanding by over 50% in the first year and substantially higher after that.
"We've been waiting for this for a long time," noted one equity derivatives regional head at a global firm in Hong Kong.
"This is good news," he continued, "this will in effect open up the onshore market for international players."
Currently, international firms trade primarily in the offshore market.
Condensed default swap confirmation launched IFR - November 24, 2001 IP Morgan Chase and Morgan Stanley last week introduced a credit default swap master agreement to the European market, which reduces documentation to a one-page confirmation form.
The master agreement is based on the 1999 International Swaps and Derivatives Association credit derivatives definitions, but 22 of the 30 clauses that are typically subject to agreement are standardised under the shorter master agreement, leaving only eight clauses to be agreed for each trade.
The two banks said that use of the new master agreement would allow quicker trade confirmation, reduce operational risk and should eventually improve market liquidity.
They did their first trade using the new master agreement last Tuesday and had closed a total of six deals using the new form by Friday.
The two banks' London offices typically trade credit derivatives with one another five to 10 times a week.
The new agreement had not been adopted by any other dealers by the end of last week, and traders expressed some surprise that the two US banks had launched the document on their own, without consultation under the aegis of trade group ISDA.
"That would have taken quite a long time, and at the end of the day these are bilateral contracts," said Guy America, European head of credit derivatives trading at JP Morgan Chase.
Both banks intend to use the agreement in their default swap trades with other dealers and expect it eventually to prove popular throughout the market.
"I don't see any reason going forward why it would not be rolled out to end users of the product," said Annabel Littlewood, European head of credit derivatives trading at Morgan Stanley.
She added that JP Morgan Chase and Morgan Stanley have agreed to use the new master document in trades between their New York dealing desks, with amendments to be made for local market practice.
US dealers typically use the modified definition of restructuring as a credit event, and two weeks ago they dropped the use of the obligation acceleration clause as a standard feature of default swaps.
Banks move to boost credit derivatives liquidity Risk News - November 23, 2001 By John Ferry JP Morgan Chase and Morgan Stanley have agreed to standardise most of the items on their European credit swap master agreements, in a move designed to increase liquidity in the credit derivatives market.
By cutting the widely used International Swaps and Derivatives Association (ISDA) documentation down from several pages to just one, the banks aim to minimise the time taken to execute and confirm a trade while reducing documentation risk.
"Frequent credit swap traders will be able to increase the volume of confirmed trades, thereby increasing market liquidity and growth of the credit derivatives business," said the banks in a joint statement.
Standard ISDA master agreements for credit swaps have 30 negotiable items.
JP Morgan and Morgan Stanley's shortened version leaves only eight items open to discussion.
The banks said the one-page confirmation form contains only the "key commercial terms", including the name of the underlying company, the notional involved and the price and duration of the trade.
The banks claim this will eliminate the risk of a party missing a modified term or adding terms that were not previously agreed.
Guy America, head of European credit derivatives trading at JP Morgan Chase in London, said the development of the credit derivatives market will receive a boost as a result of the agreement.
"The new agreement now looks very similar to an interest rate swap contract," he said.
Annabel Littlewood, head of European credit derivatives trading at Morgan Stanley in London, said it took around a year to finalise the agreement.
"It's been quite a struggle getting to the point where dealers agree on the major terms in the contracts."
Fitch Plans Credit Hiring Spree Derivatives Week - November 26, 2001 Fitch plans to hire six or seven collateralized debt obligation professionals for its London-based CDO rating team because of the increase in the number of deals coming to the market.
Mitchell Lench, senior director in London, said it has about 15 CDOs in the pipeline this month in comparison to five or six this time last year, approximately one-third of these are synthetic or balance sheet transactions.
Lench expects the new recruits to start in the first half of next year and to come from structuring houses, investment firms or competitors.
The hires will include a lawyer familiar with the International Swaps and Derivatives Association's documentation.
There are currently 10 professionals in the CDO team in London.
Lench said it is becoming easier for rating agencies to hire top personnel because the wage differential between the agencies and the sellside firms has decreased.
He added recruits also join rating agencies for job security and to get a bird's eye view of the market.
Cross-Border Security Transactions Costing More Than Domestic Ones, EC Says BNA - November 26, 2001 Despite an increase in the demand for securities by foreign investors because of the euro, there is a highly fragmented system in the European Union when it comes to cross-border clearing and settlement, concluded a new report published Nov. 23 on behalf of the European Commission.
Moreover, the cost of clearing and settling a foreign security transaction can be 10 times as much as a domestic sale.
"There is no European financial market right now and one has to wake up to this reality," said Alberto Giovannini, the chairman of a group that wrote the report.
Legislative Proposal Planned As a result of the report, the EU executive body said it will begin a legislative process in 2002 to reverse the inefficiencies in the EU system.
At the same time, the commission urged financial markets to find market-based solutions within the framework of the EU competition law.
"The additional cost and risk associated with a fragmented clearing and settlement infrastructure represents a significant limitation on the scope for cross-border securities trading in the EU," said EU Economics Commissioner Pedro Solbes.
"By extension it also represents an important limitation on exploiting the economic benefits of the internal market and the euro."
Three Main Problems Cited The three main problems highlighted in the report are as follows: * national differences in technical requirements and market practice; * national differences in tax procedures; * issues relating to legal certainty.
While the report says financial markets could do much when it comes to convergence and ensuring inter-operability as regards technical requirements and market practices across national systems, it is up to governments and the European Commission to deal with matters related to taxation and legal certainty.
Enter the FSA Financial Times - November 26, 2001 Midnight on Friday will be a historic moment for Britain's financial services industry.
At that hour its new system of regulation under the Financial Services Authority will come fully into effect, more than four years after it was first proposed by the Labour government.
How the FSA handles its new powers, such as personal fines for wrongdoing by directors, will have a profound impact on the City of London and its place as a global financial centre.
It will be closely watched by countries considering a similar move.
The legislation that created the FSA - rightly amended to curb its powers to punish - is broadly sensible.
The authority replaces 10 self-governing industry bodies that have not always regulated consistently or with sufficient bite.
The aim is to make regulation more efficient and more alert to the scandals that have regularly plagued the City.
The legislation leaves wide discretion to the authority.
But Sir Howard Davies, its chairman, has promised a new and sensible risk-based approach: resources will be focused on preventing problems where failure is most likely rather than on routine visits to well run companies.
Better businesses should enjoy a lighter regulatory touch.
That is fine in principle but the City awaits the new policeman with apprehension.
There are three main worries.
First, that it will prove heavy-handed.
There are widespread complaints that while senior FSA staff are excellent, more junior ones still suffer from a box-ticking mentality.
Compliance costs, it is said, have been rising - a particular worry for small companies.
Second, there is concern that the authority may stretch itself too thinly.
A recent report on Equit-able Life criticised the FSA's role, including its poor internal co- ordination.
Third, there is a fear the FSA will adopt an excessively aggressive approach in its pursuit of wrong-doing, particularly for the newly created offence of "market abuse", and might go for some early high-profile scalps.
The authority denies this, as well it might.
A reputation for inquisitions would serve it ill.
Some of the City's concerns stem from natural tensions between regulator and regulated.
But the FSA, which can sometimes appear overly sensitive to criticism, needs to be alert to these anxieties if it is to start on the right note.
The main test will be to produce a flexible, low-cost regime that is firm yet fair, while encouraging innovation and London's growth as a global centre.
This will be a difficult balance - but the FSA's short life so far offers hope that it will get it broadly right.
FSA to open securitised derivatives to retail sector Risk News - November 21, 2001 The UK's financial watchdog, Financial Services Authority (FSA), plans to allow retail investors to invest directly in securitised derivatives for the first time by initiating a flexible listing regime.
The proposals, which will be relevant to issuers of listed securities and derivatives, have been released in a consultation paper, 'Proposed Listing and Conduct of Business Rules for Securitised Derivatives', after discussions with market participants and international regulators.
The idea to list retail covered warrants was first raised by the FSA in January this year.
The new proposals offer a wider and more flexible regime that includes other types of derivatives.
The paper details the determination of who can issue securitised derivatives and the information about these products that must be disclosed.
The FSA's proposals focus on establishing the suitability of retail investors to purchase securitised derivatives and the qualification of IFAs (independent financial advisers) and brokers to advise on derivatives.
The listing of securitised derivatives will also include a risk warning with full disclosure of the risks associated with these products, alongside details of the product, how it works and how the investor's return is calculated.
Issuers of securitised derivatives will also need to be regulated by the FSA and permitted to conduct business in derivatives.
Ken Rushton, director of listings at the FSA, said: "Market participants believe there will be a demand for these products, which are very popular in some European countries.
The FSA believes there is the potential for the market in the UK for these products to be substantial if UK investors show a similar appetite for these products as they have for other products such as spread betting and options."
Dealers hope for clarity on swap books IFR - November 24, 2001 Some clarification is expected this week on how the US courts may rule on the Internal Revenue Service's challenge to dealers' methods for valuing income from swaps.
Closing arguments in Bank One Corporation v Commissioner are set to begin on Wednesday.
Although no decision is expected before March or April next year, the nature of the questions asked by the judge during the closing arguments may be telling, industry executives believe.
The IRS's case is that the method for valuing First Chicago's swaps portfolio between 1991 and 1993 included inappropriate downward adjustments for credit risk and administrative costs.
This, the IRS alleges; led the dealer to underestimate the value of its income from derivatives, and thereby reduced its taxable income base.
Bank One acquired First Chicago more than three years ago.
Bank One claims that the method used was common practice at the time.
In a brief filed this summer the bank also said that its numbers were more accurate with the adjustments than without.
It is proposing to use an adjusted mid-market approach to valuing income from swaps.
To the annoyance of some in the derivatives industry, the IRS's 600-page brief submitted in September did not tell dealers what recipe they should use for valuing income from swaps.
"They only put forward a brief saying that the way Bank One did it was wrong," one firm's lawyer said.
"[The government's position] can't be applied somewhere else.
And it doesn't tell an IRS agent how to audit [another dealer]."
The IRS was not under any obligation to come up with a better method, though this would have been helpful, the lawyer said.
The problem with an across-the board use of a mid-market approach of the type used by Bank One is that banks using this approach rarely mark up their valuations because of their own credit risk, said Darrell Duffie, a professor of finance at Stanford University's business school who is one of two court-appointed experts for the case.
One partial way to address this would be to disallow mark-downs from mid-market value when a counterparty has the same or higher credit quality, said Duffie.
Under a slightly more refined guideline, banks would mark down swaps based on the credit quality of its counterparty relative to its own quality.
"For example, if an A rated bank issuing debt at 20bp over Libor signs a swap with an A- counterparty issuing at 50bp over Libor, then the swap could be marked down based on a mean (relative) loss rate of 50-20=30bp per year, per dollar of expected exposure," said Duffie.
"This is not text-book perfect, but would capture the majority of the effect of relative quality.
[Also] it would not require new software, just a shift in model inputs for mean loss rates."
**End of ISDA Press Report for November 26, 2001** THE ISDA PRESS REPORT IS PREPARED FOR THE LIMITED USE OF ISDA STAFF, ISDA'S BOARD OF DIRECTORS AND SPECIFIED CONSULTANTS TO ISDA ONLY.
THIS PRESS REPORT IS NOT FOR DISTRIBUTION (EITHER WITHIN OR WITHOUT AN ORGANIZATION), AND ISDA IS NOT RESPONSIBLE FOR ANY USE TO WHICH THESE MATERIALS MAY BE PUT.
| ISDA PRESS REPORT - NOVEMBER 26, 2001 |
As requested at the 11 October PRC Committee, attached is a comprehensive overview of the proposed PRC process (360 feedback, PRC and bonus compensation) for year-end 2001, by Business Unit and Function.
We look forward to comments, amendments or concurrence.
In addition, as regards employment agreement provisions with target bonus amounts based on performance, we have included the bonus language contained in the majority of such agreements.
Should you have any questions please don't hesitate to contact me, Gina Corteselli
| PRC Year-end 2001 |
Michelle, We have a reconciling item between SAP Account 0530-10220019 Outflow Clearing and the actual bank balance with Citibank New York 40781075 in the amount of $5,346.46.
On 10-26-01 your forwarded to Treasury Wire Transfer Requests as follows: Payee Amount Curr US Amount Denton Wilde Sapte Tokyo $492,120 JPY $4,024.20 Rajah and Tann $2,425.65 SGD $1,332.26 It appears that these two (2) Wire Transfer Requests have not been forwarded to A/P to record the expense.
Please arrange to forward the appropriate documentation to A/P during November 2001.
Stacey Lee Burnett
| Co 0530 CINY 40781075 $5,356.46 FX Funding |
By telefax of November 21, Uriel Dutton of F&J provided a proposed waiver letter agreement for our review.
I will have copies of that proposed agreement circulated by hand-delivery and fax to all those on this list and to Mariner's GC.
At present, I am not sending this e-mail to Mariner's GC.
If there is someone else I need to send this e-mail to, please let me know.
Chuck and I have reviewed the letter, believe it to be overly broad, and hope that F&J is willing to negotiate further, along the following lines: 1.
On page 1, third full paragraph, second line, we suggest inserting "Enron Corp. and " between "representation of" and "Enron's affiliates".
| In re F&J Representation |
Per our discussions yesterday, the Omaha and Enron Center North bldgs.
are owned by trustees and leased to us.
I have always heard these referred to as synthetic leases (and thus off balance sheet) , but I am not expert enough to absolutely confirm that they truly are.
Attached is the summary information on those leases.
Please call if you have any questions.
Obviously, we would consider our landlords to be critical vendors.
| Omaha and Houston headquarters bldg. lease summary |
Gentlemen, Attached is the final form of CEG DASH (along with a copy marked to show the changes made to the 11-21-01 v3 draft previously circulated to you).
Cullen, please print and execute the signature page and send the executed signature page to me.
Jeff and Jordan, I will bring this with me to our 5:00 meeting for your signatures.
David Gorte will obtain all other signatures.
If you have any questions or comments call me or David Gorte.
Regards,
| CEG DASH (Final) |
As a reminder, the 2001 Euro Protocol ends on November 30, 2001(this Friday).
If your firm has not already signed up for the Protocol, we encourage you to do so.
Details can be found on our website, www.isda.org, under the Protocol section.
| Euro Protocol Reminder |
The lawfirm representing the plaintiff in this class action lawsuit is sending document requests to all officers and directors of several Enron related companies.
You may be an officer or director of one of these companies.
If you receive any document requests or other legal papers, please send the document(s) to Bob Williams at EB 861.
Please call me at x35587 or Bob Williams at x52402 if you have any questions.
Richard Sanders EWS Legal Department EB 3827 853-5587
| Greenberg v. Belfer, et al |
Attached please a write up of the transactions/dispositions currently underway that may require consent for completion from Dynegy or, in some cases, consent for continuing discussions.
All of these are very urgent as they give the possibility to raise cash - please call me to discuss (01144 7887 660 817) if you have any questions.
Thanks, Marcus
| deals requiring consent |
ISDA PRESS REPORT - OCTOBER 24, 2001 CREDIT DERIVATIVES * Documentation Into The Future - FOW * The Direction for Derivatives - FOW Documentation Into The Future FOW - October 2001 By Alessandro Cocco and Joe Kohler Credit derivatives are instruments used for buying or selling the risk that an obligor defaults on one or more specific obligations.
In this article, we will examine the foundation stone that underpins the vast majority of credit derivative documentation, the 1999 ISDA Credit Derivatives Definitions, pointing out some of the documentation's key features and where they have already been refined.
The definitions are a set of contractual provisions that can be incorporated by reference into confirmations relating to credit derivatives that take the form of single name default swaps.
This allows parties to a transaction to use a short form of confirmation containing only the economic and deal-specific terms relating to that transaction.
The objective of this structure is to provide market participants with a tool for producing documentation that is sufficiently sophisticated to deal with the majority of issues arising from such transactions, simple enough to facilitate rapid processing, and cost effective.
The definitions achieve this by codifying market practices, but more importantly, the prospect of their generation helped to focus minds on establishing some of these practices in the first place.
As with all ISDA documentation, the definitions allow for numerous elections to be made by the parties, and the parties are also free to make whatever amendments or additions they agree by inclusion in the confirmation of appropriate language.
The definitions also provide for a number of fallbacks to apply in case the parties do not specify otherwise.
Market participants recognise the particularly important role of documentation in the credit derivatives market.
As a consequence of the Russian and Asian financial crises, it became clear that in the case of credit derivatives, more than for other derivative transactions, the payment of large sums of money may depend on the interpretation of the wording of a specific clause.
The 1999 ISDA Credit Derivatives Definitions Scope The definitions apply to credit default swaps relating to obligations for the payment of money by a reference entity.With appropriate modifications, the definitions can also be used to document credit derivative transactions that refer to baskets of reference entities, or to form the basis of documents relating to funded products.
In a transaction, the party buying credit risk protection, or buyer, undertakes to pay the seller of protection a predetermined amount.
In return the seller undertakes to make a payment in favour of the buyer in case the defined credit events occur.
Credit events serve as indicators of the deterioration of the creditworthiness of the reference entity.
One of the main characteristics of a credit derivative is that the buyer does not have to suffer a loss as a result of a credit event in order to qualify for the payment from the seller.
For example, A buys from B the right to receive from B a payment of $10m in case company X is subject to bankruptcy proceedings or does not repay loan Y If company X undergoes bankruptcy proceedings or loan Y is not repaid, a credit event occurs.
The occurrence of one of these events, in circumstances involving the satisfaction of any other condition to payment that the parties may have specified in the transaction, would give A the right to receive from B the agreed payment, irrespective of whether A had any credit exposure to company X or loan Y.
This feature is of crucial importance to the determination of the regulatory environment applicable to credit derivatives.
In the UK if entering into credit derivatives transactions constituted the carrying on of insurance business, there would be a requirement for authorisation under the Insurance Companies Act 1982.
The fact that a buyer of a credit derivative does not have to hold the obligations in question in order to obtain a payment from the seller means that the credit derivative does not fall within the scope of this legislation.
This analysis was set out in full in a legal opinion obtained by ISDA in 1997.
Reference entity It is essential that the reference entity is identified with sufficient precision.
For example, to what extent are successors or affiliates of an entity to be included?
This point is particularly important when dealing with a sovereign.What, if any, governmental agencies or authorities should be included within this definition?
The demerger of National Power last year led to further debate surrounding the definition of successor.
National Power shifted a large number of obligations to a new company called Innogy.
Following the demerger, Innogy became a stronger credit than National Power had been beforehand, and National Power, in its new guise, became weaker.
As a consequence, buyers and sellers of credit protection in relation to National Power had opposing views, from a commercial perspective at least, as to which was the successor.
ISDA is now looking into further refinements to the concept of successor.
Credit events The buyer and seller may buy and sell credit risk defined by reference to different types of credit events.
It is appropriate that both select carefully the type of event on which they wish to trade.
The definitions offer a menu that comprises (1) failure to pay, (2) acceleration or default, (3) repudiation/moratorium, (4) restructuring (in each case in respect of one of the obligations identified in the confirmation) and (5) the bankruptcy of the reference entity.
In the case of all but the last of these the parties can choose to implement a type of materiality threshold by agreeing a payment requirement or default requirement that has to be crossed before the credit event is deemed to have occurred.
The parties may consider the definitions' menu to be in need of amendment or supplement in order to deal with the specific credit risk they wish to trade.
For example, the bankruptcy credit event focuses on events that corporate obligors could experience and would require tailoring if the Reference Entity were to take some other legal form.
The definition of restructuring was one of the most controversial provisions in the drafting process that led to the definitions.
In the forerunner of the definitions, ISDA's 1998 long form of confirmation, restructuring was defined by reference to events that had the effect of making the terms of the relevant obligation materially less favourable from an economic, credit or risk perspective.
This definition was generally considered to be too subjective, and had given rise to a number of disputes.
The new definition now refers to more objective criteria, such as a -reduction in the amount of principal
| ISDA PRESS REPORT - OCTOBER 24, 2001 |
You may recall that I flew in from San Francisco to meet with you last September to interview for an attorney position to work on the commoditization of broadband.
You were interested in me because I had traded futures as a broker prior to my career as a lawyer.
I was sorry to hear through a headhunter that Enron had disbanded the group.
(Robbi, I hope that you recovered from your house fire.)
To cut to the chase, I have read in the news about the SEC investigating Enron and its derivatives trading with two of its LP's, which I gather was extremely profitable.
I wondered if there was an opportunity to finally work for Enron.
I understand how swaps work, have conducted financial investigations and have securities litigation experience, albeit all on a smaller scale than you are operating on.
I have gas swaps experience as a lawyer at TransCanada Energy Ltd.
I worked for the Alberta Securities Commission assisting them in an investigation into a market manipulation.
I also used to sue the major brokerage houses on a contingency basis for outrageous acts committed by their brokers when I had my own practice.
I have been looking for an opportunity to work with swaps and specialize in the law with respect to derivatives.
I am available immediately and would be willing to work on a contract basis.
If you think that I could help, my number is 403-241-7293.
Take care, Garry Henderson Calgary, Alberta, CANADA - Resume of Garry Henderson.doc
| SEC inquiry regarding hedging through limited partnerships |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.