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Date: Mon, 3 Apr 2000 10:05:00 -0700 (PDT)
From: enron.chairman@enron.com
To: distribution@enron.com
Subject: Correction - Lessons Learned in the Restructure Group
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There was an error in the distribution process in the previous memo which 
caused parts of the text to be omitted .  The following is the correct 
message.

The memo below is from our legal group pointing out some lessons we learned 
from our restructure experiences last year.  We fully support the conclusions 
stated in the memo and hope that we can learn from these experiences to 
improve our approach to new transactions.



TO: Cliff Baxter DATE: March 29, 2000

FROM: Mark Haedicke
  Julia Heintz Murray
  Lisa Mellencamp 

RE:  Lessons Learned in the Restructure Group 

 
Establish Benchmarks.  Establish benchmarks for terms and conditions expected 
in debt and security instruments to ensure standard and adequate lender 
protections in the downside case.  The use of non-standard terms and 
conditions negotiated into our documents has made it more difficult to act 
quickly, has increased the legal time and expense involved, has affected the 
liquidity of our investments in the distressed market and has opened the door 
to disagreements with respect to interpretation of provisions in the 
documents.  Non-standard terms and conditions give the other side room to 
argue, where more standard provisions, with more standard and universal 
interpretations, would not.
Approval Process.  Make certain that the approval process highlights and 
justifies deviations from the benchmarks, allows for an examination of the 
pricing of the transaction based on any increased risk as a result of those 
deviations and evaluates any increased legal risk in the downside case.
Hold Firm in Negotiations.  Be tougher in our negotiations of the transaction 
documents after the basic business deal is cut.  We start with a number of 
provisions that get negotiated out when we could hold firm and obtain what we 
need and want.  Deviations from the approved deal should go back through the 
system.
Evaluate for Downside Case.  Evaluate our documents carefully for the 
downside case and price for what controls and options we will have.  What can 
we do if things go south?  See if additional protections or leverage can be 
built into the documentation.  For example, a second lien position gives 
leverage in the downside case.  Also, we should look at preferred equity 
positions with debt-like features.
Prompt Exercise of Remedies.  Be prepared to exercise our remedies quickly 
and to actually do it.  In certain instances verbal waivers have been granted 
without going through any approval process.  Also, we have given waivers too 
easily in some instances which has resulted in other creditors and investors 
receiving more favorable treatment.
Use of Directors.  Consider carefully the use of Enron employees as 
directors.  In some instances having Enron employees as directors on boards 
of companies in which Enron has invested as an equity owner and/or has 
provided financing has hampered our ability to trade our investments and to 
take certain actions that might be in our interest but not the company's 
interest.
Trading Contracts.  Limit the instances when we grant security interests in 
our trading contracts or contractually tie up in any way our ability to 
terminate our trading contracts.  If we do, evaluate carefully the language 
used and have the trading experts involved.  Evaluate carefully the hedging 
strategies employed by the companies in which we invest.  Reevaluate the use 
of master netting agreements.
Use of Proceeds.  Establish tighter use of proceeds provisions.  If we are 
making a significant investment, we need to make sure that the funds are used 
for the designated purposes.  Consider in some instances parceling out the 
dollars as certain hurdles are met.
Proforma Compliance Certificates.  Eliminate disputes about financial 
covenant interpretations and calculations by having proforma compliance 
certificates required as a condition to closing and having the business 
people work through the calculations prior to closing, not after a dispute 
has arisen.
Evaluate Distressed Investments.  Evaluate all the components of our 
distressed investments as a package to see what is in the best interests of 
Enron as a whole and to coordinate strategies.
Pricing.  Evaluate carefully the proposed pricing of a transaction.  Are we 
being adequately paid for our risk?  If the deal does not conform to our 
benchmarks, are we being paid for the deviations?