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Enron Mail |
The Bank's counsel has raised the following issues:
1. X-default of a generic nature referencing any Enron swap transaction over a certain threshold amount. As it is essentiaIly an Enron Corp. credit, I would fiercely oppose this, but it is a commercial issue. If it is to be included, the issue is not the occurrence of the event of default, but exercise of termination as a result of an event of default, and then only if the exercise of the right of termination is finally determined to have been validly exercised. But as I say, I would tell the Bank to get stuffed. 2. X-default to Enron Corp. Credit Agreement. Again this is a commercial issue, but if the Bank is getting the longer form Guarantee this is not necessary. This could however fix to the requirement for the longer form Guarantee, if the Bank will take a plain vanilla short form Enron Corp. Guarantee with the x-default. In any event, if this concept is to be included, it similarly would need to be qualified to acceleration as a result of an event of default under the Enron Corp. Credit Facilities. Frankly, if Clement is prepared on the longer form Enron Corp. Guarantee, I would tell the Bank to get stuffed. 3. X-Default if the Enron Corp. Credit Agreement is determined to be unenforceable. Unless I am missing something, this is ridiculous. 4. The Bank wants to "syndicate" the exposure which might include Schedule II Canadian Chartered Banks, and which might increase the Bank's cost of funding. Therefore they want to build a price escalator into the swaps. Again, this is a business issue, but if it is to be included it will be a difficult concept in the context of the swaps, as opposed to a syndicated loan. The price escalator will be complicated enough, as well as incorporating syndication rights and obligations on terms satisfactory to Enron, such as to which financial institutions, % of permitted syndication, least cost alternatives, exercise of agent and majority rights, and recourse for defaults by the Bank (i.e. unlike a loan we are taking credit risk of the Bank as counterparty on the swaps). The Bank's counsel did not seem to want to give a legal opinion on the Bank but was willing on Swapco. I would insist on getting it from the Bank, as again this is not a loan but a swap on which we are taking the Bank's credit exposure. I am not sure of the status of the requirement for a Bank guarantee if RBC DS is the counterparty rather then Bank. Please let me know.
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