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Enron Mail |
Mark:
As I mentioned in my voice mail to you last Saturday, in addition to the choice of Mexican law, there is another outstanding issue that may result in increased risk to Enron Corp. I did not go into detail on this issue this morning when we spoke because discussions are still ongoing relative to the issue and I sensed that you had a very limited amount of time available. The issue has not yet been resolved and I want to assure that you are aware of the issue before I leave the office for the holiday. Enron Corp. will provide a letter of credit to Pemex as required under the Fuel Supply Agreement. The letter of credit will be in an amount equal to 150% of two months of estimated gas purchases under the Fuel Supply Agreement. The lenders have required that Enron Corp. evidence in writing its commitment to provide such letter of credit and, therefore, a FSA Credit Support Agreement (the "FSA Support") is currently under negotiation. The following issue arises under the repayment mechanism currently set forth in FSA Support and, therefore, it is possible that it may become moot when the negotiations relative to the FSA Support are concluded. The repayment mechanism for the fuel supply letter of credit states that Enron Energia Industrial de Mexico, S. de R.L. de C.V. ("EEIM") will reimburse Enron Corp. for any disbursements made under the letter of credit. This mechanism may subject Enron Corp. to the risk that, after repayment by EEIM to Enron Corp. of an outstanding debt resulting from EEIM's reimbursement obligation and the resulting reinstatement of the letter of credit, the repayment by EEIM could be withdrawn as a preferential payment if EEIM went into bankruptcy. In such event, Enron Corp. would be in the situation of having an outstanding letter of credit and an unpaid reimbursement obligation. To reiterate, the FSA Support is still under negotiation but such negotiations must be concluded before the lenders will close. I will request that Robert Stephens, the Bracewell Patterson attorney working on the FSA Support, keep you updated on the status of this issue in my absence. Robert will be in Washington, D.C., through Wednesday. Should you have any questions, please do not hesitate to contact me.
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