Subject: Re: Frito-Lay
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Mon, 6 Mar 2000 05:15:00 -0800 (PST)

Bob,

With regard to cross commodity netting, I think we need to address the 
concept of not netting across commodities.  While many commodities do not 
settle on the same day, and do not present a problem, we need to rethink the 
issue when the settlement day is the same.  I have concerns in two areas:  
the first is from a credit perspective, that we are sending out funds the 
same day we expect to receive them.  Obviously, there is  a risk that we pay 
and the counterpart does not.  Can we quantify when this happens, the 
counterparts and the dollars involved?  We may just need to put some 
guidelines in place as to when this is acceptable and when a credit approval 
is required.  My second concern is a legal one:  are we compromising our 
position on termination netting if we have not been practicing settlement 
netting?  Mark Taylor is the best person to address this issue.  This is more 
likely to be a problem I would imagine for those transactions where we do not 
separate the termination and settlement netting concepts within the contract 
(see below).  Once I get legal feedback from Mark, let's sit down and discuss.

Thanks,
Tanya

---------------------- Forwarded by Tanya Rohauer/HOU/ECT on 03/06/2000 01:12 
PM ---------------------------

Tanya Rohauer
03/06/2000 01:11 PM
To: Ed Quinn/HOU/ECT@ECT
cc: Shari Stack/HOU/ECT@ECT, Sara Shackleton/HOU/ECT@ECT 
Subject: Re: Frito-Lay

Please bear in mind that this suggestion is contingent upon legal approval.  
I do not want our settlement netting position to compromise our termination 
netting position.
---------------------- Forwarded by Tanya Rohauer/HOU/ECT on 03/06/2000 01:08 
PM ---------------------------

Tanya Rohauer
03/06/2000 01:02 PM
To: Ed Quinn/HOU/ECT@ECT
cc: Shari Stack/HOU/ECT@ECT, Sara Shackleton/HOU/ECT@ECT 
Subject: Re: Frito-Lay  

One of the remaining open items in the ISDA being negotiated is netting.  I 
have spoken with Bob Klein and he has indicated that his group can 
accommodate not netting across commodity lines. Due to Pepsico's (credit 
support provider) strong credit profile, I am comfortable agreeing to Frito 
Lay's request.  However, netting across commodities for termination is not 
negotiable.  I would suggest we present Frito Lay with the compromise that we 
will agree to settlement netting within commodity lines only, but retain 
termination cross commodity netting.  Please call me if you have questions.

Thanks,
Tanya