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Enron Mail |
Cc: mark.taylor@enron.com
Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: mark.taylor@enron.com X-From: Sara Shackleton X-To: Carol St Clair, Shari Stack X-cc: Mark Taylor X-bcc: X-Folder: \Sara_Shackleton_Dec2000_June2001_1\Notes Folders\All documents X-Origin: SHACKLETON-S X-FileName: sshackle.nsf I am trying to distinguish these two types of entities both practically (what are we able to negotiate) and legally (what do we really need in our Schedule). I am also interested in your experiences in dealing with these parties. ENA's form of "municipal" Schedule ("the ENA Schedule") was essentially taken from the 1992 ISDA U.S. Municipal Counterparty Schedule ("the ISDA Schedule"). In addition to other provisions, the ISDA Schedule (1) adds reps designed to avoid "an Orange County" type meltdown and (2) incorporates the concept of "Incipient Illegality" (which occurs before the Termination Event of Illegality). The "Incipient Illegality" concept is used in Section 2(a)(iii) (obligations) as well as the Section 3 (reps) of the ISDA Schedule: the concept is added to the Section 3(b) rep ("..absence of Event of Default, Potential Event of Default, Incipient Illegality...), and for purposes of notifying the other party of its occurrence. Interestingly enough, the ENA Schedule does not include the Section 3(b) rep change. I think we need to add this change to ENA's Schedule. With respect to IOUs, we need to clarify our position on "Regulatory Development" (which is actually a watered-down "Incipient Illegality" concept). If such an event occurs, ENA should be advised of the event (Notice). But, does ENA really want the ability to terminate trades at mid-market ("Additional Termination Event") or simply to have this event included as part of a Section 3(b) rep such that the occurrence of the event merely triggers an Event of Default at ENA's side of the curve (for breach of the Section 3(b) rep)? I have found that negotiating with IOUs for the "Notice" provision can be difficult. Extracting the Additional Termination Event is tough. Arguing for a Section 3(b) change may be easier (and would mirror the municipal format). I think ENA really needs the ability to decide when to halt trading with a counterparty experiencing a Regulatory Development (which we may only learn about through notice from the counterparty). Thus, I recommend that for IOUs, we add a notice provision and Section 3(b) rep change incorporating our latest definition of "Regulatory Development." But we really have to negotiate for this protection. Otherwise, why bother to include this additional language? What do you think?
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