Message-ID: <14939895.1075853271854.JavaMail.evans@thyme>
Date: Thu, 15 Feb 2001 05:44:00 -0800 (PST)
From: richard.sanders@enron.com
To: andrew.edison@enron.com
Subject: Can Fibre Lackawanna
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----- Forwarded by Richard B Sanders/HOU/ECT on 02/15/2001 01:44 PM -----

	John Enerson
	02/14/2001 02:16 PM
		 
		 To: Richard B Sanders/HOU/ECT@ECT
		 cc: Richard Lydecker/Corp/Enron@Enron
		 Subject: Can Fibre Lackawanna

I have received notice from Can Fibre Lackawanna that there are in default 
under the payment obligation under the Subordinated Loan Agreement.  The 
Subordination provisions state that until the Senior Debt is paid off in 
full, the Subordinated Lenders (thats us) can not accelerate, foreclose, 
etc.  There is not 180 day period.  There is nothing.  Nonetheless, this does 
highlight the need to get these documents reviewed by counsel and start to 
weigh our options and strategy.  This is specially true for matters with 
respect to the Construction Completion and the additional $4.5 million that 
remains unfunded.  The letter of credit backing the $4.5 million obligation 
expires on June 30, 2001.  At that time we have an argument that we will not 
replace the letter of credit and because they are in default, we are not 
going to fund.

I think we should start having outside counsel get up to speed on this now.   
Can Fibre knows we do not want to fund and so it is better to be prepared.  
An analysis would include.

1.  Review of the applicable conditions to fund the $4.5 million and make 
sure that all steps are taking to hold them to the letter of the agreement.  
In particular, since they tests are under the terminated EPC contract, we 
want to make certain that no rights have been waived.  Also, we want to put 
them on notice that they have to follow everything to the letter and we need 
to develop any strategy or experts to contest any certifications.

2.  Review the documents to see if there is any wiggle room based on the 
current default.

3.  Understand our obligations.  The loan agreement requires us to fund $4.5 
million upon completion (regardless of the posting of the letter of credit).  
By being in default, does that provide us a defense to funding.  Can they 
cure the default and make us fund.  What does bankruptcy do to this scenario.

Let me know your thoughts and who we can talk to regarding these issues.