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Enron Mail |
As I mentioned at the Mgmt meeting yesterday 8-9 MTM plus 5 million likely
13-14 million worst case. I have accrued this amount below the line at present and will await further meetings before taking any other actions. Because of our presence in Spain and our role with GM , Vitol ,Veba and KPC are meeting with Chris this week as they would like us to continue to supply to them in Spain. We would also like to do this as it continues to give us the outlet we wanted when we entered the GM deal but with better partners. It also allows us to make money while we sort through the GM situation. ---------------------- Forwarded by John L Nowlan/HOU/ECT on 01/23/2001 07:22 AM --------------------------- Robert Quick 01/22/2001 12:33 PM To: John L Nowlan/HOU/ECT@ECT cc: Chris Mahoney/LON/ECT@ECT, Adam Nye/LON/ECT@ECT, Mark Evans/Legal/LON/ECT@ECT, Justin Boyd/LON/ECT@ECT, Ted Murphy/LON/ECT@ECT Subject: GM - private and confidential - attorney/client privilege ---------------------- Forwarded by Robert Quick/LON/ECT on 22/01/2001 18:36 --------------------------- Robert Quick 22/01/2001 16:13 To: John L Nowlan/HOU/ECT@ECT cc: Chris Mahoney/LON/ECT@ECT, Adam Nye/LON/ECT@ECT, Mark Evans/Legal/LON/ECT@ECT, Justin Boyd/LON/ECT@ECT, Ted Murphy/LON/ECT@ECT Subject: GM Chris, Adam and I met with the Spanish lawyers last Thursday night regarding GM. We then met up with GM on the Friday. Basically GM Petroleos (the main GM company) has entered into the Spanish equivalent of U.S. Ch.11. We have still not seen a copy of the petition presented to the Court, but this shd be forthcoming in the next day or so. The idea behind the petition for suspension of payments is to help companies that are facing liquidity problems. GM wd certainly fit that bill, although it remains doubtful as to whether GM can claim that its assets exceed its liabilities. The effect of the petition is to provide a moratorium on the repayment of any unsecured creditors, and on any judgments which those creditors obtain. The petition does not however prevent any preferred or secured creditors from enforcing their debts (in the latter case, to the extent of their security). The judge to whom the petition is presented appoints 3 administrators. 2 are appointed from a list of accountants that the court maintains, and the third (also appointed by the court) is a representative of one of the top third of the list of creditors. Once the administrators are appointed, the financial control of GMP will be their responsibility. They will authorize any future transactions, draw up the definitive list of creditors, and examine the solvency or otherwise of the company. In due course they will submit a report to the judge advising as to whether the company is insolvent or not. If insolvent, the Court will request that GMP provide a warranty for the difference between the amount owed and the assets. If this is not met within 14 days, subsidiary proceedings may be started to examine any personal liability of the management. Parallel with this, the administrators will be speaking to all the creditors with a view to reaching an inter creditor arrangement on repayment of an agreed level of debt. Even though secured creditors are not precluded in enforcing their security during the suspension of payments procedure, it is usual for them too to take part in these discussions. The outside lawyers seemed to think that the amount contained in the petition is equivalent to USD 85 million. We have no real idea how this is broken down, but the following shd be a rough guide: VAT authority - USD 25 million Veba - USD 15 million Enron - USD 5 million Total - USD 3million Bank debt - USD 22 million ? - balance USD15 million The Spanish lawyers confirmed our suspicion that the mark to market exposure may be difficult to prove as a debt. This exposure arises from the market difference we agreed to sell Dec. shipments to GMP (which then cd not put up the agreed purchase price to ensure delivery) and the current market price. Chris can confirm what these losses are today. We wd have to sue on those agreements (English arbitration), and then present to the administrators the arbitration judgments. However, as the administrators report is usually ready within 2-3months, I suspect that leaving aside any other factors there may be a timing problem here. The Spanish lawyers said that GMP Board may have some personal liability issues. The Board is supposed to call a shareholders meeting if the company is in financial difficulties. Moreover, if there has been stripping out of assets from GMP, then those responsible may face criminal sanction On the issue of preferences, it wd appear that Spanish law is somewhat inconsistent. On the one hand there is old jurisprudence to the effect that any and all transactions entered into by the debtor before its insolvency can be challenged by the administrators, irrespective of whether those transactions wd constitute a preference. On the other hand there is jurisprudence of equivalent weight which states that this is not the case, and that only preferences may be challenged. The Spanish lawyers were not able to say which system wd apply in the current scenario, but their insolvency lawyer made the following points: there was no immediate threat from anyone against Enron or ECTRIC Spain. The whole issue about preferences is not dealt with until the report by the administrators is made to the judge. There is no chance of any nasty shocks like injunctions on Arcos etc. the payment to Enron of USD50 million at the same time as the VAT authorities were not being paid shd not overly worry Enron at the moment, as such payments are unlikely to be seen as a preference. most companies (even those judged insolvent) end up being dissolved voluntarily, probably as a result of the uncertainty of Spanish insolvency law. If a voluntary arrangement is reached it is unlikely to provide for anything but the most obvious preference (and the transfer of the strategic oil from GM to ECTRIC Spain wd not fall within this category) The VAT authorities (probably the main creditor) are not pro active in these sorts of proceedings and tend to take a back seat For what t is worth, GM made the following points: GM's banks' inability to fund further prompted GMP management to make the petition (this despite the fact that GM had previously assured Enron that the GMP bank debt was minimal) petition is for Pta 10 billion GM lawyer said shd have made decision earlier to present the petition GM lawyer also said that GMP had made what he called "third party financing" of Pta 6 billion, and accepted my suggestion that the administrators wd be asking for such funds back GMP wd be willing to put up Don Antonio's assets to secure Enron's continuing supplies to it (we have heard that many times before). Without such supplies GM stated that GMP was insolvent. They were not able to provide a reason as to why such assets cd not be pledged beforehand GMP sees Enron as the "key", namely that the supplies if resumed wd trigger the payment to GM of its outstanding receivables. GM wants Enron to meet with the administrators next week. It is early days but I wd suggest the following: unlikely the old man's assets will be forthcoming likley the company will go into insolvency likley the creditors will reach a voluntary arrangement therefore unlikely there will be any clawback of earlier payments/strategic storage oil equally, unlikely Enron will receive any recognition of its MTM debt Chris, let me know if there is anything you wd like to add/clarify. otherwise once we get the petition we will advise further. tks
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