Re: Enron Turns Internal Credit-Risk Tool Into New Product

Very interesting - thanks! Do you know any folks involved in this? It
might be very interesting to write a mini-case for next year about it.

At 05:01 PM 4/4/2001 -0500, you wrote:
<Thought that you might find this interesting.
<
<Best,
<Jeff
<
<Enron Turns Internal Credit-Risk Tool Into New Product
<2001-04-04 17:19 (New York)
<
<
<
< By Christina Cheddar
< Of DOW JONES NEWSWIRES
<
< NEW YORK (Dow Jones)--With the number of corporate bankruptcies on the
<rise,
<knowing the creditworthiness of one's customers is becoming more and more
<important.
< For Enron Corp. (ENE), the world's largest energy trading company,
<keeping
<track of credit risk has always been part of doing business. That became
<even
<more true with the company's launch of EnronOnline, its Internet-based
<commodities trading network.
< In order to deal with the accelerated volume and speed of transactions on
<EnronOnline, the company developed a tool to help its own commercial
<traders
<manage the credit risk.
< Early last year, Enron rolled out this tool, Enron Credit, on a limited
<basis. Gradually, the company expanded its use and scope. Last month, the
<company re-launched Enron Credit in its current format.
< Enron Credit tracks more than 10,000 companies, giving each a rating
<known as
<the "Enron cost of credit." The rating is expressed as an interest rate.
< The Web site also provides news, a company's expected chance of
<bankruptcy
<and other related information.
< While much of this information is free to registered users, Enron also
<has
<turned the product into a new revenue stream.
< Users may download data into a spreadsheet and receive periodic updates
<for a
<fee.
< The site also can sell a user a "digital bankruptcy swap," which is a way
<to
<hedge against credit exposure.
< The price of the swap is determined by a rating Enron's staff assigns to
<a
<company and the amount of credit exposure a company needs to protect
<against.
< For a supplier, the main advantage of a swap is that if a customer is
<unable
<to pay due to bankruptcy, the supplier will be paid immediately.
< According to Enron Europe President John Sherriff, the goal of Enron
<Credit
<is to create a more efficient credit market by increasing trading
<liquidity.
< The tool is important because "in just a short amount of time, a
<company's
<credit can go from stellar to bad literally overnight."
< At present, some analysts haven't factored in revenue from Enron Credit
<into
<their earnings models. However, as the commodity markets Enron trades in
<mature, it is possible the need for products such as Enron Credit could
<increase.
< -By Christina Cheddar, Dow Jones Newswires; 201-938-5166
<
<
<