Subject: Re: IBJ ISDA MASTER AGREEMENT - 1. Credit matrix and 2. Threshold amount
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Mon, 27 Nov 2000 04:39:00 -0800 (PST)

Jane:  Sorry for the delay.  I'm preparing a "cash only, two-way" section for 
the ISDA.  I will try to get it to you this week.  Sara

	Jane McBride@ENRON
	11/27/2000 03:54 AM
		
		 To: Sara Shackleton/HOU/ECT@ECT
		 cc: 
		 Subject: Re: IBJ ISDA MASTER AGREEMENT - 1. Credit matrix and 2. Threshold 
amount 

Hi Sara,

How are you going - did you have a good Thanksgiving?  Coincidentally 
Thursday was also a holiday here - we were celebrating Respect for the Aged 
Day though.

Actually, Sara, I was wondering how we are going in getting some drafting 
together for the credit provisions discussed recently with John Suttle and 
Jonathan Whitehead.

Thanks and sorry for the trouble.

Jane 

	Sara Shackleton@ECT
	11/09/2000 12:48 AM
		
		 To: Jane McBride/AP/Enron@ENRON
		 cc: John Suttle/HOU/ECT@ECT, Alan Aronowitz/HOU/ECT@ECT, Mark 
Taylor/HOU/ECT@ECT, John Viverito/Corp/Enron@Enron, Jonathan 
Whitehead/AP/Enron@Enron
		 Subject: Re: IBJ ISDA MASTER AGREEMENT - 1. Credit matrix and 2. Threshold 
amount 

Jane:

If you have time in the morning (Nov. 9 Tokyo), I would like to discuss ENA's 
view of the CSA/Schedule relationship.  In a nutshell, we provide that a 
ratings downgrade is an Additional Event of Default in the Schedule (normally 
a MAC in the CSA).  John's preferance, of course, would be a unilateral event 
triggering an IBJ default (which I am sure would be difficult to negotiate).

I am not certain of the time difference but perhaps you could call me at the 
office after 4 pm (Nov.8 in Houston) and I could then conference in John.  
Alternatively, please feel free to contact me at home (after 7 pm Houston 
time on Nov. 8) at 713-664-3207.

I look forward to hearing from you.  Regards.  Sara

	Jane McBride@ENRON
	11/07/2000 04:03 AM
		
		 To: John Suttle/HOU/ECT@ECT, Alan Aronowitz/HOU/ECT@ECT
		 cc: John Viverito/Corp/Enron@Enron, Jonathan Whitehead/AP/Enron@Enron, Mark 
Taylor/HOU/ECT@ECT, Sara Shackleton/HOU/ECT@ECT
		 Subject: IBJ ISDA MASTER AGREEMENT - 1. Credit matrix and 2. Threshold 
amount 

Dear John,

Jonathan and I met with IBJ today to try and push our negotiations through to 
the end.  They are still unwilling to do a CSA with us but very significantly 
their back / mid office is currently looking at getting systems support in 
place which would permit them to do a CSA with us in due course.  They 
acknowledged to us of their own volition that the market trend is towards 
CSAs even in transactions where the counter party is not a bank.  They did 
say though that it would be a few months before they would be set up to do 
so. Pls note that they did not agree to do a CSA with us as soon as they are 
set up to do so but they now know we will come knocking at some stage to ask 
them to do it so I think we have gone as far as we can on this for now.

We will therefore move forward on the credit matrix in the meantime, if you 
are still willing to do so.  The bank has a credit rating of A, so I guess 
this means US$15 million credit limit.  

On the assumption that it is possible to draft these terms into a contract 
without a full CSA, I wonder who is best to do this drafting.  I should be 
able to do the negotiations but I am not sure that I am able to do the 
drafting .... Alan, do you have any suggestions?     

Most of the other issues are sorted now but they still want to change the 
"Threshold Amount" definition to US$10 million.  Is there any flexibility on 
this?

Thanks.

Jane McBride

	John Suttle@ECT
	09/27/2000 12:39 AM
		
		 To: Jonathan Whitehead/AP/Enron@ENRON
		 cc: Jane McBride/AP/Enron@Enron, John Viverito/Corp/Enron@Enron, Kevin 
Cordesman/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Morten E 
Pettersen/AP/Enron@Enron, Steven Kleege/HOU/ECT@ECT, Tom 
Bruce-Jones/LON/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

Jonathan,

One thing we might be able to propose is a "Credit Matrix" which prescribes a 
Credit Line under which each counterparty can transact - with collateral 
rights and collateral thresholds tied to the credit rating of each 
counterparty.  We have used credit matrixes in several contracts here and 
they are appealing in that there are no Material Adverse Change (MAC) 
clauses.  This is appealing to the counterparty in that we cannot 
automatically drop their collateral threshold to zero when a MAC occurs.  We 
are comfortable because as the counterparty's credit quality deteriorates, 
the amount of exposure to which we are subject decreases.  I would propose to 
IBJ something like the following in lieu of a full CSA.  Jane and John - is 
it possible to draft these collateral/credit terms into the contract without 
using a full CSA?  (I think every matrix I have used here has been part of a 
CSA).

Rating (S&P)     Credit Line
AA or above    $20MM
BBB+ to AA-    $15MM
BBB     $10MM
BBB-     $7MM
BB- to BB+    $5MM
Below BB-    $1MM

These terms are subject to negotiation.  Once again, the matrix removes MAC 
clauses and the stress counterparties associate with such, but effectively 
reduces the potential exposure we have (or THEY have) to a counterparty with 
diminishing credit quality.

What do you all think?

John

Jonathan Whitehead @ ENRON   09/25/2000 08:18 PM

To: John Suttle/HOU/ECT@ECT
cc: Jane McBride/AP/Enron@Enron, John Viverito/Corp/Enron@Enron, Kevin 
Cordesman/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Morten E 
Pettersen/AP/Enron@Enron, Steven Kleege/HOU/ECT@ECT, Tom 
Bruce-Jones/LON/ECT@ECT 
Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT  

Sorry, Pressed send too early:

John, Have had a conversation with IBJ re the CSA, and they have asked us to 
consider proposing a solution that does not involve a CSA. I propose to meet 
with them again to try and explore why, but I would like to be prepared to 
offer them a solution whereby we don't enter into a CSA, and we would limit 
the types of trades that we could enter into with IBJ. My feeling is that we 
would be unlikely to enter into any long term transactions (over 2 years) at 
this stage anyway, and would prefer to get the relationship going, as I am 
not sure they are going to budge on this issue yet. They appear to be quite 
willing to discuss all the other points. We can always press for a 
renegotiation at a later stage if we do want to enter into longer term deals. 
I also want to keep the loan facility completely separate.

What are your thoughts on this, and what limitations would you want to put on 
trades if we do not have a CSA?

Thanks,
Jonathan

	John Viverito
	09/22/2000 12:04 PM
		
		 To: John Suttle/HOU/ECT@ECT
		 cc: Jane McBride/AP/Enron@Enron@ECT, John Viverito/Corp/Enron@ENRON@ECT, 
[email-masked], Kevin Cordesman/HOU/ECT@ECT, Mark 
Taylor/HOU/ECT@ECT, Morten E Pettersen/AP/Enron@Enron@ECT, Steven 
Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

John-

During our last meeting with IBJ, we pushed hard for the implementation of 
the CSA.  I believe that they have the systems capability to handle the 
requisite activities relating to the CSA, as we understand that they utilize 
same with certain financial institution counterparties.  We expressed our 
view on these matters and also raised other issues that we had discussed in 
our recent conference call.  

IBJ informed us that they have never entered into a CSA with a non-financial 
institution counterparty and my response was that Enron can then be the 
first.  We requested that they raise this issue with their respective 
superiors.  As you know, their response to our discussions relating to this 
issue was "In terms of CSA, as we are not ready for running collateral 
operations, we still do not prefer to use the CSA."  The legitimacy of this 
statement is certainly debatable and the underlying reason may actually be 
something entirely different, including the possibility that they merely do 
not want to enter into a CSA with a non-financial institution.  

We will continue to attempt to persuade IBJ to enter into the CSA with Enron, 
however it is uncertain if this is achievable.