Jonathan,

One thing we might be able to propose is a "Credit Matrix" which prescribes a 
Credit Line under which each counterparty can transact - with collateral 
rights and collateral thresholds tied to the credit rating of each 
counterparty.  We have used credit matrixes in several contracts here and 
they are appealing in that there are no Material Adverse Change (MAC) 
clauses.  This is appealing to the counterparty in that we cannot 
automatically drop their collateral threshold to zero when a MAC occurs.  We 
are comfortable because as the counterparty's credit quality deteriorates, 
the amount of exposure to which we are subject decreases.  I would propose to 
IBJ something like the following in lieu of a full CSA.  Jane and John - is 
it possible to draft these collateral/credit terms into the contract without 
using a full CSA?  (I think every matrix I have used here has been part of a 
CSA).

Rating (S&P)     Credit Line
AA or above    $20MM
BBB+ to AA-    $15MM
BBB     $10MM
BBB-     $7MM
BB- to BB+    $5MM
Below BB-    $1MM

These terms are subject to negotiation.  Once again, the matrix removes MAC 
clauses and the stress counterparties associate with such, but effectively 
reduces the potential exposure we have (or THEY have) to a counterparty with 
diminishing credit quality.

What do you all think?

John




Jonathan Whitehead @ ENRON   09/25/2000 08:18 PM

To: John Suttle/HOU/ECT@ECT
cc: Jane McBride/AP/Enron@Enron, John Viverito/Corp/Enron@Enron, Kevin 
Cordesman/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Morten E 
Pettersen/AP/Enron@Enron, Steven Kleege/HOU/ECT@ECT, Tom 
Bruce-Jones/LON/ECT@ECT 
Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT  

Sorry, Pressed send too early:

John, Have had a conversation with IBJ re the CSA, and they have asked us to 
consider proposing a solution that does not involve a CSA. I propose to meet 
with them again to try and explore why, but I would like to be prepared to 
offer them a solution whereby we don't enter into a CSA, and we would limit 
the types of trades that we could enter into with IBJ. My feeling is that we 
would be unlikely to enter into any long term transactions (over 2 years) at 
this stage anyway, and would prefer to get the relationship going, as I am 
not sure they are going to budge on this issue yet. They appear to be quite 
willing to discuss all the other points. We can always press for a 
renegotiation at a later stage if we do want to enter into longer term deals. 
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 
trades if we do not have a CSA?

Thanks,
Jonathan




	John Viverito
	09/22/2000 12:04 PM
		
		 To: John Suttle/HOU/ECT@ECT
		 cc: Jane McBride/AP/Enron@Enron@ECT, John Viverito/Corp/Enron@ENRON@ECT, 
Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Mark 
Taylor/HOU/ECT@ECT, Morten E Pettersen/AP/Enron@Enron@ECT, Steven 
Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

John-

During our last meeting with IBJ, we pushed hard for the implementation of 
the CSA.  I believe that they have the systems capability to handle the 
requisite activities relating to the CSA, as we understand that they utilize 
same with certain financial institution counterparties.  We expressed our 
view on these matters and also raised other issues that we had discussed in 
our recent conference call.  

IBJ informed us that they have never entered into a CSA with a non-financial 
institution counterparty and my response was that Enron can then be the 
first.  We requested that they raise this issue with their respective 
superiors.  As you know, their response to our discussions relating to this 
issue was "In terms of CSA, as we are not ready for running collateral 
operations, we still do not prefer to use the CSA."  The legitimacy of this 
statement is certainly debatable and the underlying reason may actually be 
something entirely different, including the possibility that they merely do 
not want to enter into a CSA with a non-financial institution.  

We will continue to attempt to persuade IBJ to enter into the CSA with Enron, 
however it is uncertain if this is achievable.





	John Suttle@ECT
	09/21/2000 08:52 AM
		
		 To: John Viverito/Corp/Enron@ENRON
		 cc: Jane McBride/AP/Enron@Enron, Jonathan.Whitehead@enron.com@ENRON, Kevin 
Cordesman/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Morten E 
Pettersen/AP/Enron@Enron, Steven Kleege/HOU/ECT@ECT, Tom 
Bruce-Jones/LON/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

To clarify, and also getting back to Mark Taylor's argument that IBJ is one 
of the more sophisticated financial enterprises on the planet, and 
considering the fact that they have agreed to Enron being the Calculation 
Agent, is their argument that they are incapable of mark to market 
verification?  We calculate - we call for margin - they verify.

I am certain that they calculate mark to market positions with their other 
trading entities, and their argument that they can't do so for Enron is 
weak.  If they simply refuse a CSA, then we can deal with this as discussed 
in our phone conversation last week, but this argument of theirs should be 
something we can get around don't you think?
 


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, 
Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Mark 
Taylor/HOU/ECT@ECT, Morten E Pettersen/AP/Enron@Enron@ECT, Steven 
Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT 
Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT  

John-

You are correct that Enron is the "Calculation Agent", however I believe that 
IBJ would also be making their own calculations as well, to monitor/double 
check our calculations.

John



	John Suttle@ECT
	09/20/2000 01:53 PM
		
		 To: John Viverito/Corp/Enron@ENRON
		 cc: Mark Taylor/HOU/ECT@ECT, Jonathan.Whitehead@enron.com@ENRON, Kevin 
Cordesman/HOU/ECT@ECT, Steven Kleege/HOU/ECT@ECT, Tom 
Bruce-Jones/LON/ECT@ECT, Morten E Pettersen/AP/Enron@Enron, Jane 
McBride/AP/Enron@Enron
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

Isn't Enron the "Calculation Agent" - leaving IBJ only to confirm our marks 
if we are to make a margin call?  


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 
Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT, Morten E 
Pettersen/AP/Enron@Enron, Jane McBride/AP/Enron@Enron, John 
Suttle/HOU/ECT@ECT 
Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

Mark-

Today, we received IBJ's responsive comments to the points that have been 
raised, which are set forth below for your review.

IBJ has stated "In terms of CSA, as we are not ready for running collateral 
operations, we still do not prefer to use the CSA."  During our recent 
meeting they did not deny that IBJ had entered into CSAs with financial 
institutions.  I note that IBJ also raised the point that Enron had a loan 
from IBJ of roughly US$ 100,000,000.
Jonathan Whitehead has raised this issue with John Suttle to receive his 
input.  

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 
for a party, a surviving party of such becomes materially weaker than before.

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 
payments with respect to the same Transaction.   Due to our system 
incapability, we are not able to net the payments with respect to two or more 
Transactions in the same currency.

(h) Agreed.

Part 5

(a)  If your suggested language is included, a Non-defaulting Party has to 
continue to make payment to a Defaulting Party with no payment obligation, 
which does not seem realistic.  We prefer to terminate Transactions when an 
Event of Default occurs.  We do not like to include the provision which 
releases a technical error.

(c)  Agreed.

(e)  We propose 5 business days instead.

(g)  We do not think the definition of the Affiliate includes a party's 
branch offices. If our branch have a deal with Enron Japan, we will amend 
this Master Agreement to include such branch as Multibranch Office.  We heard 
that in most jurisdictions of the world,  it is not effective to set-off the 
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 obligations 
without the other party's consent to even its Affiliates. We might not get 
approval of the transfer from our Credit Department or such transfer might 
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 
Transactions in the respective Confirmations."

I look forward to receiving your input.  I note that Jane McBride has started 
here at Enron Japan, therefore I have copied her on this correspondence.  
Looking forward to seeing you in Houston soon.

Best regards,

John 
----- Forwarded by John Viverito/Corp/Enron on 09/19/2000 04:15 AM -----

	John Viverito
	09/07/2000 04:54 AM
		
		 To: Mark Taylor/HOU/ECT@ECT
		 cc: Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Steven 
Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

Mark-

Thanks for your input.  I agree with all of the comments you have raised.  As 
to Part 5 (n), the use of the English language is not uncommon in Japan with 
regard to these types of arrangements and should be insisted upon for 
transactions under the ISDA documentation.

I think that it will be useful to better understand Japanese market practice 
relating to the use of the Credit Support Annex. Therefore, I have asked 
Baker & McKenzie to provide a clear picture as to the situation in Japan and 
will provide this information upon receipt.

Following receipt of John Suttle's comments, I will prepare the response to 
IBJ based on the points that have been raised by both you and John.

Thanks,

John



	Mark Taylor@ECT
	09/06/2000 09:00 PM
		
		 To: John Viverito/Corp/Enron@ENRON
		 cc: Jonathan.Whitehead@enron.com, Kevin Cordesman/HOU/ECT@ECT, Steven 
Kleege/HOU/ECT@ECT, Tom Bruce-Jones/LON/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

 I had a brief conversation this morning with John Suttle (Credit) and it 
looks like he's going to insist on the CSA.  We are going to talk tomorrow 
and go through the whole agreement to get the rest of his comments.  While we 
have documentation for transactions entered into prior to execution of a 
master agreement, the extent of their revisions makes me very uneasy.  Many 
of these points are very serious and if they can not agree we will have 
trouble coming to agreement even on the short form documents.  It would be 
helpful if they could explain the changes rather than just sending us a 
mark-up.

Following are my points responsive to their revisions:

Part 1 (a)  The addition of our affiliates has the affect of expanding the 
possible defaults too broadly and we cannot agree to these changes (for 
example, this would mean that if any Enron affiliate went into bankruptcy 
this agreement would be in default).

(g)  This provision provides additional flexibility without any credit risk 
to the other party.  It should remain in place unless IBJ can articulate a 
reason to remove it.

Part 3 The language inserted is much to vague.  Our original version spells 
out exactly what is expected of the parties.  If the documents we listed are 
not acceptable, IBJ should tell us now what would be acceptable and if we 
agree we will put it in the agreement.

Part 4 (f)  By deleting the word "not" in this provision, IBJ is saying that 
payments due to each other with respect to the same transaction will not net 
(i.e. if we are paying fixed and they are paying floating, we each have to 
make the full payment to the other rather than netting the two amounts to one 
payment).  This is not acceptable.

(h) If IBJ will use their NY branch as agent, we should use Enron Corp or ENA.

Part 5 (a) Our suggested language allows the purchaser of an option to 
receive payments due even though technically in default under another 
provision of the agreement.  Our position is that if there are no other 
possible payment requirements due from the purchaser, the option should be 
honored.

(c)  The section we delete requires that the market makers be in the same 
city.  For many markets in which we participate, it is very difficult, if not 
impossible, to find multiple market makers in the same city. 

(e)  The change to 10 business days is much too long.  This means we can not 
have certainty as to the terms of the transaction for two weeks!  We can go 
as high as three days if necessary but even that is beyond common market 
practice.

(g)  Their changes remove the ability to set off against obligations owed to 
multiple Enron companies if they default and only allows set-off with each 
IBJ branch as a separate entity.  This may not be an issue if we will never 
trade or otherwise transact with them in any other Enron company and if we 
will never do business with any other branch of IBJ.  We usually don't like 
to restrict ourselves that way.

(i)  We absolutely insist on the confidentiality of our transactions.  If 
there is some revision to this section they would like we can discuss it but 
wholesale deletion is out of the question.

(j)  As with Part 1 (g) this section adds flexibility to both parties while 
maintaining flexibility within the corporate family.  Given the frequency 
with which Enron moves businesses around within the family, this section is 
important to us.

(k)  This section results from an experience we had with a counterparty that 
went into bankruptcy (and therefore default) while they were in the money.  
We disputed the amount owed and under the terms of the agreement (without our 
revision) we would have owed them interest at their cost of funds - a rather 
high rate given their status as a bankrupt.  We feel the non-default rate is 
more appropriate.

(m)  I can't imagine why they wouldn't want this section included - it 
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 
individually if they object for some articulated reason.  If these provisions 
are not included here they will need to be included in each confirmation (a 
significant burden for our back office systems which are not set up for it) 
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 
hope this is helpful and sorry to have run on so long.  I'm happy to discuss 
any of these issues at greater length if you want.  It sounds to me like 
IBJ's expectations regarding execution of documents are a bit high given the 
volume and nature of their comments.






	John Viverito@ENRON
	09/05/2000 09:06 PM
		
		 To: Tom Bruce-Jones/LON/ECT@ECT
		 cc: Jonathan.Whitehead@enron.com@ECT, Kevin Cordesman/HOU/ECT@ECT, Steven 
Kleege/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

Tom-

As far as the progress on the ISDA documentation, I am awaiting feedback from 
both legal and credit in Houston.  

Could you provide me with the details of the proposed transaction(s).  I note 
that I have copied Mark Taylor on this correspondence, as I will need to get 
his input regarding our most efficient going forward strategy.

Thanks,

John



	Tom Bruce-Jones@ECT
	09/05/2000 09:36 AM
		
		 To: John Viverito/Corp/Enron@ENRON
		 cc: Jonathan.Whitehead@enron.com, Steven Kleege/HOU/ECT@ECT, Kevin 
Cordesman/HOU/ECT@ECT
		 Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT

John
I have just had IBJ on the phone again asking for a progress report on the 
ISDA docs.  Have we managed to move this forward, bearing in mind Labour Day, 
since he is very keen to commence trading on Monday next.  He suggested that 
he would be comfortable in trading prior to the implementation of the docs 
for these initial trades as per Jonathon's previous comments in past mails.  
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 
(Steve, I have just heard from Rob in the vid conf that the proposed volumes 
may prove difficult to take on the books??).  Please advise as to our 
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, 
kazunobu.maeda@ibjbank.co.jp, teruyo.suzuki@ibjbank.co.jp, 
Tom.Bruce-Jones@enron.com 

Subject: Re: Fw: IBJ ISDA MASTER AGREEMENT  

Dear Mr. Konishi-

Thank you for your comments.  We will attempt to respond to you prior to the 
holiday in the US, but if we are unable to do so, we will respond shortly 
thereafter.

Best regards,

John Viverito



	"Yamato Konishi" <yamato.konishi@ibjbank.co.jp>
	09/01/2000 02:31 AM
		 
		 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>, "hirohide.yabuki" 
<hirohide.yabuki@ibjbank.co.jp>
		 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I_X"?,d`-t,?,?,?,?,?_B-?-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 this
> > 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 near
> > 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 these
> > > 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