The structure for the Mahonia is changing.  Please call and let's discuss.

Thanks.

Teresa




Teresa G. Bushman
Enron North America Corp.
1400 Smith Street, EB 3835A
Houston, TX  77002
(713) 853-7895
fax (713) 646-3393
teresa.g.bushman@enron.com


----- Forwarded by Teresa G Bushman/HOU/ECT on 12/07/2000 01:39 PM -----

	Joseph Deffner
	12/06/2000 11:00 PM
		 
		 To: William S Bradford/HOU/ECT@ECT, Cris Sherman/HOU/ECT@ECT, Teresa G 
Bushman/HOU/ECT@ECT, Morris Richard Clark/HOU/ECT@ECT
		 cc: 
		 Subject: New Prepay with Chase

Here is an update on the current prepay we are structuring with Chase for 
$500mm prior to year end.

In the prior transactions, we have received a prepayment from Mahonia on a 
forward delivery schedule of fixed volumes. We have hedged ourselves by 
buying fixed price physical commodity from Chase Manhattan. There is a 
fundamental difference in this transaction than prior deals though. In prior 
transactions, Chase provided the funding to Mahonia entirely from its own 
blance sheet. This year end, Chase is balance sheet constrained and must 
bring in additional lenders.

Having additional lenders provide financing to Mahonia is a concern to Chase 
from a securities perspective. Consider the alternative structure and give me 
your thoughts. I am expecting Chase to provide a term sheet on this by 
tomorrow.

ENA enters into a prepaid fixed volume gas supply contract with Chase 
Manhattan, not Mahonia. Chase sells participations in the contract to the 
additional two banks. Essentially, our contract has been split into three 
equal parts. While the purchaser of record is still Chase, 2/3rds of the 
beneificial interests have been sold to the other lenders. The bank group 
engages Chase as its agent to remarket the gas at delivery.

ENA hedges itself by entering into a fixed price forward purchase contrat 
with Mahonia.

This is essentially a reversal of the historical transaction.

Specific issue for Bill: ENA now has an at the money 5-year trade with 
Mahonia with substantial mark-to-mark exposure. We would need to arrange 
margining capability through Mahonia to make Enron comfortable. My initial 
thought is to rely on the rehypothecation agreement as our form of protection.

Thoughts? I will follow up with the draft term sheet as soon as I receive it. 

Thanks. Joe