Message-ID: <27756177.1075855424391.JavaMail.evans@thyme> Date: Tue, 16 Oct 2001 12:32:15 -0700 (PDT) From: tim.despain@enron.com To: kenneth.lay@enron.com, greg.whalley@enron.com, andrew.fastow@enron.com, mark.koenig@enron.com, j..kean@enron.com, pr <.palmer@enron.com>, paula.rieker@enron.com, ben.glisan@enron.com Subject: Moody's Basis for Placing Enron Securities on "Review for Downgrade" Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Despain, Tim X-To: Lay, Kenneth , Whalley, Greg , Fastow, Andrew , Koenig, Mark , Kean, Steven J. , Palmer, Mark A. (PR) , Rieker, Paula , Glisan, Ben X-cc: X-bcc: X-Folder: \Steven_Kean_Jan2002\Kean, Steven J.\PR-Crisis Management X-Origin: Kean-S X-FileName: skean (Non-Privileged).pst In order to ensure that our communications with the investment community are consistent, Stephen Moore of Moody's and I have agreed to publicly state the following as it pertains to the Moody's rating action taken today: Full Review To Occur - The action is intended to be the catalyst for a full review of our business operations to occur in the coming months. The company's appropriate rating will be determined during this time frame; Primary Areas of Concern - Moody's will be focusing on the following items during the review: Potential Future Equity Write downs: Dhabol California Broadband Fiber Network Wessex/Azurix Slow Progress in Asset Sales - we have been discussing sales for the past 18 months with limited closings Material Working Capital/Margin Expansion - has resulting in negative cash flow from operations The Equity Adjustment - Moody's was unaware of the potential of an equity adjustment of this magnitude Please let me know if you would like to discuss any of the points in detail. Regards: Tim DeSpain x31770