Seems to me that L/C's are the way to go then, rather than asking for cash or 
another asset as collateral.  (Another option would be to mix and match - 
taking cash up to $10 mil. and L/C's beyond that.)   Lenders frequently set 
up the facilities available to the borrower this way so they keep control 
over how much "debt" is supported by the asset base while still giving the 
borrower some flexibility.  As you can imagine, most other extenders of 
credit are willing to take the bank's L/C in lieu of a lien on a hard asset.



	Russell Diamond
	01/08/2001 06:42 PM
		
		 To: Mark Taylor/HOU/ECT@ECT
		 cc: 
		 Subject: Re: ISDA Collateral Question

Mark, 

Letters of Credit are available under this Credit Facility.

Please let me know your thoughts and if you need any additional information 
as the originator in EES is calling for me.

Thanks
Russell.




From: Mark Taylor on 01/08/2001 05:39 PM
To: Russell Diamond/HOU/ECT@ECT
cc:  
Subject: Re: ISDA Collateral Question  

Any chance this language came from a credit facility that provides for the 
issuance of letters of credit?



	Russell Diamond
	01/05/2001 05:20 PM
		 
		 To: Mark Taylor/HOU/ECT@ECT
		 cc: Tana Jones/HOU/ECT@ECT, Tanya Rohauer/HOU/ECT@ECT
		 Subject: ISDA Collateral Question

Mark,

I copied a section of a counterparty's Bank Credit Agreement relating to 
certain 
negative pledges.  The counteparty is IMC Global whom we have some financial 
transactions with (actuall their sub IMC-Canada) at ECC, and now an EES 
person is looking to 
enter into a long term EES transaction.  We sent them a draft ISDA for future 
transactions 
out of ECC and we are now being told by the EES person that if a Credit 
Support Annex (CSA) 
is required in this ISDA it will kill her deal.  She has stated that they are 
not able 
to fulfil the obligations of the CSA because of the covenants tied to their 
Credit 
support agreement.  As highlighted in red below, it seems that they cannot 
have any liens that
secure derivative obligations, although cash is acceptable up to $10 
million.  Can you 
please clarify if collateral as it is stated in the ISDA is considered a 
lien, and if this type 
collateral would be a breach of their credit agreement.  If this is a breach 
can you suggest 
other methods that we might use so the CSA would be acceptable.

Thanks
Russell





Negative Pledge.   Neither  any Borrower nor  any  Subsidiary  of  any
Borrower  will create, assume or suffer to exist any Lien on any  asset
now owned or hereafter acquired by it, except:

Liens  existing on the date of this Agreement securing Debt outstanding
on  the date of this Agreement in an aggregate principal or face amount
not exceeding $135,000,000;

any  Lien  existing on any asset of any Person at the time such  Person
becomes a Subsidiary of a Borrower and not created in contemplation  of
such event;

any Lien on any asset securing Debt incurred or assumed for the purpose
of  financing  all or any part of the cost of acquiring or constructing
such asset, provided that such Lien attaches to such asset concurrently
with  or  within  90  days  after  the  acquisition  or  completion  of
construction thereof;

any Lien on any asset of any Person existing at the time such Person is
merged  or  consolidated with or into a Borrower or a Subsidiary  of  a
Borrower and not created in contemplation of such event;

any  Lien existing on any asset prior to the acquisition thereof  by  a
Borrower or a Subsidiary of a Borrower and not created in contemplation
of such acquisition;

any  Lien  arising  out  of  the  refinancing,  extension,  renewal  or
refunding  of  any Debt secured by any Lien permitted  by  any  of  the
foregoing clauses of this Section, provided that the proceeds  of  such
Debt  are  used  solely for the foregoing purpose and to pay  financing
costs and such Debt is not secured by any additional assets;

Liens  arising in the ordinary course of its business which (i) do  not
secure  Debt  or  Derivatives  Obligations,  (ii)  do  not  secure  any
obligation in an amount exceeding $100,000,000 and (iii) do not in  the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;

Liens  on  cash and cash equivalents securing Derivatives  Obligations,
provided that the aggregate amount of cash and cash equivalents subject
to such Liens may at no time exceed $10,000,000; and

Liens  not otherwise permitted by the foregoing clauses of this Section
securing  Debt in an aggregate principal or face amount, together  with
all  other Debt secured by Liens permitted under this Section  5.09(i),
not  to  exceed  an  amount  equal to 10%  of  Consolidated  Net  Worth
(calculated  as  of  the last day of the fiscal quarter  most  recently
ended  on  or prior to the date of the most recent incurrence  of  such
Debt).