Re: Credit Comments

Steve:
I have forwarded this to Rod Nelson in our credit group. On the Guaranty
defenses issue, one of our biggest concerns is getting the benefit of ENA's
setoff rights. I'm not sure that your solution protects us but let me give
it some more thought and discuss this with Enron's general counsel. Let's
wait to talk until I am able to address all of the issues that I am
responsible for.
Carol

steven.kessler@db.com
06/01/2000 06:03 PM

To: Carol.St.Clair@enron.com
cc:
Subject: Re: Credit Comments

Hi Carol:

Thanks for the comments.

1. The materiality language in the cross-default is DB policy, which we
cannot change.

2. For CEUM, I will need to get treasury and credit approval.

3. We should be able to work something out for same product netting.

4. Should be ok.

Regarding the guarantee, we need to discuss the demand section. With
respect to the defences, let me propose a compromise--namely that the
Guarantor can raise whatever defences it could have raised had we dealt
directly with the Guarantor as Counterparty. Anything more than that,
would be a subjecting DB to additional risk.

Regards,

Steve

Original Message from Carol.St.Clair@enron.com @ HUB on 05/30:

Steven :
I have finally had a chance to go over the outstanding credit issues with
Rod
Nelson, our credit person, and here are his responses:

1. We cannot agree to the additional language in the cross-default
provision.
We need a trigger that is not subject to interpretation and second-guessing
and
the language that you proposed does just that.

2. On credit event upon merger, we would prefer to define the standard
for
"materially weaker" as below investment grade. Is that a problem for you?

3. With respect to payment netting, we would prefer that netting apply to
Transactions that are of the same product line (i.e. all commodity swaps).
Is
that a problem for you? We thought that your operational issue had to do
more
with netting across product lines.

4. In the Credit Support Annex, we would prefer that the number of days
to
resolve disputes over exposure and/or value be 2 business days instead of
1.

I am in the process of reviewing the new drafts of ISDA and CSA Schedules
and
will get back to you shortly on remaining comments.

Carol