|
|
Enron Mail |
Sorry, Pressed send too early:
John, Have had a conversation with IBJ re the CSA, and they have asked us t= o=20 consider proposing a solution that does not involve a CSA. I propose to mee= t=20 with them again to try and explore why, but I would like to be prepared to= =20 offer them a solution whereby we don't enter into a CSA, and we would limit= =20 the types of trades that we could enter into with IBJ. My feeling is that w= e=20 would be unlikely to enter into any long term transactions (over 2 years) a= t=20 this stage anyway, and would prefer to get the relationship going, as I am= =20 not sure they are going to budge on this issue yet. They appear to be quite= =20 willing to discuss all the other points. We can always press for a=20 renegotiation at a later stage if we do want to enter into longer term deal= s.=20 I also want to keep the loan facility completely separate. What are your thoughts on this, and what limitations would you want to put = on=20 trades if we do not have a CSA? Thanks, Jonathan =09John Viverito =0909/22/2000 12:04 PM =09=09 =09=09 To: John Suttle/HOU/ECT@ECT =09=09 cc: Jane McBride/AP/Enron@Enron@ECT, John Viverito/Corp/Enron@ENRON@= ECT,=20 Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Mark=20 Taylor/HOU/ECT@ECT, Morten E Pettersen/AP/Enron@Enron@ECT, Steven=20 Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT =09=09 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT John- During our last meeting with IBJ, we pushed hard for the implementation of= =20 the CSA. I believe that they have the systems capability to handle the=20 requisite activities relating to the CSA, as we understand that they utiliz= e=20 same with certain financial institution counterparties. We expressed our= =20 view on these matters and also raised other issues that we had discussed in= =20 our recent conference call. =20 IBJ informed us that they have never entered into a CSA with a non-financia= l=20 institution counterparty and my response was that Enron can then be the=20 first. We requested that they raise this issue with their respective=20 superiors. As you know, their response to our discussions relating to this= =20 issue was "In terms of CSA, as we are not ready for running collateral=20 operations, we still do not prefer to use the CSA." The legitimacy of this= =20 statement is certainly debatable and the underlying reason may actually be= =20 something entirely different, including the possibility that they merely do= =20 not want to enter into a CSA with a non-financial institution. =20 We will continue to attempt to persuade IBJ to enter into the CSA with Enro= n,=20 however it is uncertain if this is achievable. =09John Suttle@ECT =0909/21/2000 08:52 AM =09=09 =09=09 To: John Viverito/Corp/Enron@ENRON =09=09 cc: Jane McBride/AP/Enron@Enron, Jonathan.Whitehead@enron.com@ENRON,= Kevin=20 Cordesman/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Morten E=20 Pettersen/AP/Enron@Enron, Steven Kleege/HOU/ECT@ECT, Tom=20 Bruce-Jones/LON/ECT@ECT =09=09 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT To clarify, and also getting back to Mark Taylor's argument that IBJ is one= =20 of the more sophisticated financial enterprises on the planet, and=20 considering the fact that they have agreed to Enron being the Calculation= =20 Agent, is their argument that they are incapable of mark to market=20 verification? We calculate - we call for margin - they verify. I am certain that they calculate mark to market positions with their other= =20 trading entities, and their argument that they can't do so for Enron is=20 weak. If they simply refuse a CSA, then we can deal with this as discussed= =20 in our phone conversation last week, but this argument of theirs should be= =20 something we can get around don't you think? =20 From: John Viverito@ENRON on 09/21/2000 04:21 AM To: John Suttle/HOU/ECT@ECT cc: Jane McBride/AP/Enron@Enron@ECT, John Viverito/Corp/Enron@ENRON@ECT,=20 Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Mark=20 Taylor/HOU/ECT@ECT, Morten E Pettersen/AP/Enron@Enron@ECT, Steven=20 Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT=20 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT =20 John- You are correct that Enron is the "Calculation Agent", however I believe th= at=20 IBJ would also be making their own calculations as well, to monitor/double= =20 check our calculations. John =09John Suttle@ECT =0909/20/2000 01:53 PM =09=09 =09=09 To: John Viverito/Corp/Enron@ENRON =09=09 cc: Mark Taylor/HOU/ECT@ECT, Jonathan.Whitehead@enron.com@ENRON, Kev= in=20 Cordesman/HOU/ECT@ECT, Steven Kleege/HOU/ECT@ECT, Tom=20 Bruce-Jones/LON/ECT@ECT, Morten E Pettersen/AP/Enron@Enron, Jane=20 McBride/AP/Enron@Enron =09=09 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT Isn't Enron the "Calculation Agent" - leaving IBJ only to confirm our marks= =20 if we are to make a margin call? =20 From: John Viverito@ENRON on 09/19/2000 04:40 AM To: Mark Taylor/HOU/ECT@ECT cc: Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Steven=20 Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT, Morten E=20 Pettersen/AP/Enron@Enron, Jane McBride/AP/Enron@Enron, John=20 Suttle/HOU/ECT@ECT=20 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT Mark- Today, we received IBJ's responsive comments to the points that have been= =20 raised, which are set forth below for your review. IBJ has stated "In terms of CSA, as we are not ready for running collateral= =20 operations, we still do not prefer to use the CSA." During our recent=20 meeting they did not deny that IBJ had entered into CSAs with financial=20 institutions. I note that IBJ also raised the point that Enron had a loan= =20 from IBJ of roughly US$ 100,000,000. Jonathan Whitehead has raised this issue with John Suttle to receive his=20 input. =20 IBJ's specific responses are quoted below as follows:- "Part 1 (a) Agreed not include Affiliates of PartyA. (g) We prefer to terminate the Transactions when as a result of merger as= =20 for a party, a surviving party of such becomes materially weaker than befor= e. Part 3 We usually accept to deliver a copy the list of authorized signatures only. Part 4 (f)Even though deleting the word "not" in this provision, we can net the=20 payments with respect to the same Transaction. Due to our system=20 incapability, we are not able to net the payments with respect to two or mo= re=20 Transactions in the same currency. (h) Agreed. Part 5 (a) If your suggested language is included, a Non-defaulting Party has to= =20 continue to make payment to a Defaulting Party with no payment obligation,= =20 which does not seem realistic. We prefer to terminate Transactions when an= =20 Event of Default occurs. We do not like to include the provision which=20 releases a technical error. © Agreed. (e) We propose 5 business days instead. (g) We do not think the definition of the Affiliate includes a party's=20 branch offices. If our branch have a deal with Enron Japan, we will amend= =20 this Master Agreement to include such branch as Multibranch Office. We hea= rd=20 that in most jurisdictions of the world, it is not effective to set-off th= e=20 obligations between a party and the other party's Affiliate. (i) Agreed to include this provision. (j) We do not prefer that a party could transfer its rights and obligation= s=20 without the other party's consent to even its Affiliates. We might not get= =20 approval of the transfer from our Credit Department or such transfer might= =20 cause an additional payment of tax or other cost. (k) We will revert to you later. (m) Agreed. (n) Agreed to include this provision. Part 6 We still prefer to include the provisions relating to the Commodity=20 Transactions in the respective Confirmations." I look forward to receiving your input. I note that Jane McBride has start= ed=20 here at Enron Japan, therefore I have copied her on this correspondence. = =20 Looking forward to seeing you in Houston soon. Best regards, John=20 ----- Forwarded by John Viverito/Corp/Enron on 09/19/2000 04:15 AM ----- =09John Viverito =0909/07/2000 04:54 AM =09=09 =09=09 To: Mark Taylor/HOU/ECT@ECT =09=09 cc: Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Steve= n=20 Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT =09=09 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT Mark- Thanks for your input. I agree with all of the comments you have raised. = As=20 to Part 5 (n), the use of the English language is not uncommon in Japan wit= h=20 regard to these types of arrangements and should be insisted upon for=20 transactions under the ISDA documentation. I think that it will be useful to better understand Japanese market practic= e=20 relating to the use of the Credit Support Annex. Therefore, I have asked=20 Baker & McKenzie to provide a clear picture as to the situation in Japan an= d=20 will provide this information upon receipt. Following receipt of John Suttle's comments, I will prepare the response to= =20 IBJ based on the points that have been raised by both you and John. Thanks, John =09Mark Taylor@ECT =0909/06/2000 09:00 PM =09=09 =09=09 To: John Viverito/Corp/Enron@ENRON =09=09 cc: Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Steve= n=20 Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT =09=09 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT I had a brief conversation this morning with John Suttle (Credit) and it= =20 looks like he's going to insist on the CSA. We are going to talk tomorrow= =20 and go through the whole agreement to get the rest of his comments. While = we=20 have documentation for transactions entered into prior to execution of a=20 master agreement, the extent of their revisions makes me very uneasy. Many= =20 of these points are very serious and if they can not agree we will have=20 trouble coming to agreement even on the short form documents. It would be= =20 helpful if they could explain the changes rather than just sending us a=20 mark-up. Following are my points responsive to their revisions: Part 1 (a) The addition of our affiliates has the affect of expanding the= =20 possible defaults too broadly and we cannot agree to these changes (for=20 example, this would mean that if any Enron affiliate went into bankruptcy= =20 this agreement would be in default). (g) This provision provides additional flexibility without any credit risk= =20 to the other party. It should remain in place unless IBJ can articulate a= =20 reason to remove it. Part 3 The language inserted is much to vague. Our original version spells= =20 out exactly what is expected of the parties. If the documents we listed ar= e=20 not acceptable, IBJ should tell us now what would be acceptable and if we= =20 agree we will put it in the agreement. Part 4 (f) By deleting the word "not" in this provision, IBJ is saying tha= t=20 payments due to each other with respect to the same transaction will not ne= t=20 (i.e. if we are paying fixed and they are paying floating, we each have to= =20 make the full payment to the other rather than netting the two amounts to o= ne=20 payment). This is not acceptable. (h) If IBJ will use their NY branch as agent, we should use Enron Corp or E= NA. Part 5 (a) Our suggested language allows the purchaser of an option to=20 receive payments due even though technically in default under another=20 provision of the agreement. Our position is that if there are no other=20 possible payment requirements due from the purchaser, the option should be= =20 honored. © The section we delete requires that the market makers be in the same= =20 city. For many markets in which we participate, it is very difficult, if n= ot=20 impossible, to find multiple market makers in the same city.=20 (e) The change to 10 business days is much too long. This means we can no= t=20 have certainty as to the terms of the transaction for two weeks! We can go= =20 as high as three days if necessary but even that is beyond common market=20 practice. (g) Their changes remove the ability to set off against obligations owed t= o=20 multiple Enron companies if they default and only allows set-off with each= =20 IBJ branch as a separate entity. This may not be an issue if we will never= =20 trade or otherwise transact with them in any other Enron company and if we= =20 will never do business with any other branch of IBJ. We usually don't like= =20 to restrict ourselves that way. (i) We absolutely insist on the confidentiality of our transactions. If= =20 there is some revision to this section they would like we can discuss it bu= t=20 wholesale deletion is out of the question. (j) As with Part 1 (g) this section adds flexibility to both parties while= =20 maintaining flexibility within the corporate family. Given the frequency= =20 with which Enron moves businesses around within the family, this section is= =20 important to us. (k) This section results from an experience we had with a counterparty tha= t=20 went into bankruptcy (and therefore default) while they were in the money. = =20 We disputed the amount owed and under the terms of the agreement (without o= ur=20 revision) we would have owed them interest at their cost of funds - a rathe= r=20 high rate given their status as a bankrupt. We feel the non-default rate i= s=20 more appropriate. (m) I can't imagine why they wouldn't want this section included - it=20 protects us both. (n) You know more about this than I. Part 6 These are all important issues for us and we can discuss them=20 individually if they object for some articulated reason. If these provisio= ns=20 are not included here they will need to be included in each confirmation (a= =20 significant burden for our back office systems which are not set up for it)= =20 and we need to know now if they object to any of them. Other revisions that they have made are acceptable unless Credit objects. = I=20 hope this is helpful and sorry to have run on so long. I'm happy to discus= s=20 any of these issues at greater length if you want. It sounds to me like=20 IBJ's expectations regarding execution of documents are a bit high given th= e=20 volume and nature of their comments. =09John Viverito@ENRON =0909/05/2000 09:06 PM =09=09 =09=09 To: Tom Bruce-Jones/LON/ECT@ECT =09=09 cc: Jonathan.Whitehead@enron.com@ECT, Kevin Cordesman/HOU/ECT@ECT, S= teven=20 Kleege/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT =09=09 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT Tom- As far as the progress on the ISDA documentation, I am awaiting feedback fr= om=20 both legal and credit in Houston. =20 Could you provide me with the details of the proposed transaction(s). I no= te=20 that I have copied Mark Taylor on this correspondence, as I will need to ge= t=20 his input regarding our most efficient going forward strategy. Thanks, John =09Tom Bruce-Jones@ECT =0909/05/2000 09:36 AM =09=09 =09=09 To: John Viverito/Corp/Enron@ENRON =09=09 cc: Jonathan.Whitehead@enron.com, Steven Kleege/HOU/ECT@ECT, Kevin= =20 Cordesman/HOU/ECT@ECT =09=09 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT John I have just had IBJ on the phone again asking for a progress report on the= =20 ISDA docs. Have we managed to move this forward, bearing in mind Labour Da= y,=20 since he is very keen to commence trading on Monday next. He suggested tha= t=20 he would be comfortable in trading prior to the implementation of the docs= =20 for these initial trades as per Jonathon's previous comments in past mails.= =20 Are we comfortable doing this if we cannot resolve the issues on the docs? They are also very keen to see the draft confirms for the proposed trade=20 (Steve, I have just heard from Rob in the vid conf that the proposed volume= s=20 may prove difficult to take on the books??). Please advise as to our=20 capability so that I can convey this to him in the morning. Best regards Tom From: John Viverito@ENRON on 01/09/2000 02:48 CDT To: "Yamato Konishi" <yamato.konishi@ibjbank.co.jp< cc: hirohide.yabuki@ibjbank.co.jp, Jonathan.Whitehead@enron.com,=20 kazunobu.maeda@ibjbank.co.jp, teruyo.suzuki@ibjbank.co.jp,=20 Tom.Bruce-Jones@enron.com=20 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT =20 Dear Mr. Konishi- Thank you for your comments. We will attempt to respond to you prior to th= e=20 holiday in the US, but if we are unable to do so, we will respond shortly= =20 thereafter. Best regards, John Viverito =09"Yamato Konishi" <yamato.konishi@ibjbank.co.jp< =0909/01/2000 02:31 AM =09=09=20 =09=09 To: <John.Viverito@enron.com< =09=09 cc: <Jonathan.Whitehead@enron.com<, "Tom Bruce-Jones"=20 <Tom.Bruce-Jones@enron.com<, "teruyo.suzuki" <teruyo.suzuki@ibjbank.co.jp<,= =20 "Maeda san" <kazunobu.maeda@ibjbank.co.jp<, "hirohide.yabuki"=20 <hirohide.yabuki@ibjbank.co.jp< =09=09 Subject: Fw: IBJ ISDA MASTER AGREEMENT Dear Mr.Viverito Attached Word file is ISDA draft amended by our legal desk. (please take the amended points as our comment on your draft) Please check it all and kindly reply ASAP. (CSA is not acceptable as I mentioned you before, and we'll check your LETTER OF CREDIT after the schedule is almost agreed) In your draft, we cannot understand the meaning of "EDGAR" on page4, so please show us what it is. We are very hoping to conclude this process rapidly. So, I very much appreciate it if you could send back your comment before Holiday in U.S.(4th Sep) (it's ok if only the rough prospects of concluding ISDA) Best regards, Konishi IBJ Tokyo 81-3-3214-1008 ----- Original Message ----- From: "Teruyo Suzuki" <teruyo.suzuki@ibjbank.co.jp< To: "Yamato Konishi" <yamato.konishi@ibjbank.co.jp< Sent: Friday, September 01, 2000 3:58 PM Subject: Re: IBJ ISDA MASTER AGREEMENT < ISDA Draft=10=07I=10_X=10"?=10,d=10`-=10=07t=10,?=10,?=10,?=10,?=10,?=10_= B=10-?=10-O < ----- Original Message ----- < From: "Yamato Konishi" <yamato.konishi@ibjbank.co.jp< < To: <John.Viverito@enron.com< < Cc: <Jonathan.Whitehead@enron.com<; "Tom Bruce-Jones" < <Tom.Bruce-Jones@enron.com<; "teruyo.suzuki" <teruyo.suzuki@ibjbank.co.jp<; < "Maeda san" <kazunobu.maeda@ibjbank.co.jp< < Sent: Wednesday, August 30, 2000 9:59 PM < Subject: Re: IBJ ISDA MASTER AGREEMENT < < < < Dear Mr.Viverito < < < < Thank you very much. < < Now we start checking your draft and maybe we can return comment on thi= s < < Friday. < < < < Please be advised following points at this time. < < 1)Part 6 on the schedule is needed to be deleted. < < We think that it's enough if the terms in Part 6 are referred in the < < individual confirmation. < < 2)ISDA Credit support annex is not acceptable < < Unfortunately, we don't have internal system for concluding CSA with < < non-financial entity. < < < < Please keep support us for concluding ISDA ASAP for our business in nea= r < < future. < < If any question, please feel free to contact me. < < < < Best regards, < < Konishi /IBJ Tokyo 81-3-3214-1008 < < ----- Original Message ----- < < From: <John.Viverito@enron.com< < < To: <yamato.konishi@ibjbank.co.jp< < < Cc: <Jonathan.Whitehead@enron.com< < < Sent: Wednesday, August 30, 2000 5:31 PM < < Subject: IBJ ISDA MASTER AGREEMENT < < < < < < < Dear Mr. Konishi, < < < < < < Attached hereto, is the draft ISDA documentation, for your review. < < < Included are the Schedule, the Credit Support Annex and the Enron Corp. < < < Guaranty. < < < < < < I apologize for the delay in the preparation and distribution of thes= e < < < documents. < < < < < < We look forward to receiving your comments. < < < < < < Best regards, < < < < < < John Viverito < < < < < < < < < (See attached file: IBJ Schedule 30.08.00.doc)(See attached file: IBJ < CSA < < < 30.08.00.doc)(See attached file: IBJ EC guarantee 30.08.00.doc) < < < < < - IBJ Schedule 31.08.00.doc
|