Subject: Alleghney Update
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Fri, 3 Aug 2001 09:46:04 -0700 (PDT)

Louise,
 
Instead of sending us a 1-paragraph extension letter Wed night, Allegheny sent a one-sided 4-pager yesterday afternoon.
 
The tone of the letter was inappropriate (Las Vegas agreeing it was in default, but AESC being kind enough to give us a chance).  Also, the business points were overeaching and/or vague.
 
The team turned the draft last night to clarify the business points and tone.  Comments from Legal (commercial, litigation, finance), Finance, Credit, Orig.
 
Parquet spoke with Dan Gordon to share our major comments.  Gordon was non-commital but said that "sounds like we are pretty close".
 
Basic deal we have put in the letter:
 
- AESC believes they can terminate
- LVCII believes we have complied with tolling agreement
- Parties will work for 5 business days to execute Pledge agreement, Security agreement, Deed of Trust, Subordination and Non-Disturbance Agreement
- AESC gets subordinated lien on ground lease
- Ground lease has non-disturbance provisions (LVCI can not break lease for LVCII)
- AESC gets subordinated lien on LM6000 and Transformer contracts
- Natwest loan agreement gets prepaid
- AESC acknowledges that LVCII is in compliance with security provisions of tolling agreement if we complete the above
- Increase collateral threshold to $50MM for both parties in Master Power Agreement
- No additional margin calls made prior to December 31, 2001
- $16MM Margin call made July 31 is withdrawn
- AESC keeps the $160MM+ L/C in place to cover existing exposure
- Enron Corp guarantess EPMI for $60MM
 
We are waiting to hear back from Allegheny.  Plan is to have both teams with legal and commercial have conf call to review document today. 
 
DASH has been circulated to the group for comment and will be finalized today.
 
Parquet is reviewing all of their previous comments on the security agreements so we are prepared to dig inot them over the next 5 business days if we get this letter executed.
 
Finance is preparing necessary documentation to execute plan.
 
Parquet is in his office and is obviously available to discuss - 415-782-7820.
 
I am around and will participate when our next meeting is scheduled.
 
Regards,
 
Chris