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Enron Mail |
FYI
----- Forwarded by Shari Stack/HOU/ECT on 10/19/00 01:03 PM ----- Christian Yoder 10/19/00 12:50 PM To: Tracy Ngo/PDX/ECT@ECT, Shari Stack/HOU/ECT@ECT, Steve C Hall/PDX/ECT@ECT cc: Subject: Cal PX indmentity agreement The CalPX "Credit Redisign" situation is an irritating mess that I am trying to help straighten out. Here is a summary of what is going on. Please keep this summary around and read it every time you get a question from a confused individual and feel free to forward it to whomever out there is confused about things. The CalPX has a Surety bond with a big Surety entity. The gist of the thing is that If the PX ever gets into a situation where one of the players on its exchange defaults, it can pick up the phone and call the Surety and the Surety will rush money to the PX withing 5 minutes, no questions asked. Before the Surety agreed to do this bond with the PX they insisted that all of the players that do business with the PX (called principals) sign indemnity agreements with it. The indemnity agreements basically say that if the Surety ever has to pay a penny to the PX,, it can immediately call the Principal and the principal will rush a penny to the Surety within 5.1 minutes. The indemnity agreement says that the Principal must pay the Surety upon demand for the share of the loss that it caused. It also says a bunch of stuff that makes it very clear that we might also have to pay money in situations that are not our fault too. It is a risky, bad agreement to sign and in the first round of this stuff with the PX a year or so ago we did not sign any indemnity agreement. What happened instead was that Enron Corp stepped in and saved the day. It just so happens that Enron Corp. already had a preexisting Indemnity Agreement with the Surety covering various exposures at the 20,000 foot corporate level. I was able to get the Enron Corp bond people to talk to the Surety and the result was a two sentence letter from the PX saying we were okay to trade. We did not have to sign the indemnity agreement. I did not negotiate any of the terms between Corp and the PX on this. That is the history. Now we come to the PX's new "Credit Redisign." The PX is anxious that it is not covered well enough. So, out they come with exactly the same set of documents demanding that everybody sign another indemnity agreement. Like a trained dog, I have just been trying to do the same thing I did last time. I have called Corp and tried to get them to make the issue go away the same way they did last time. Unfortunately there are different people involved now and I have not been very aggressive about telling the story and getting eveybody to work together. I am now back from a nice littel vacation and promise to push the thing through Corp. as best I can. I have already left two voice mails and will faithfully and doggedly try to take care of this. ----cgy
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