Treasa:

Please add "Robert Bruce" to the distribution list (either Bob or I will be 
available to assist from ENA legal).  Also, please keep Cathy Moehlman (ENA 
Treasury - X33353) in the loop as she calls us for information that we may 
not have.  Thanks.  Sara




	Treasa Kirby
	11/28/2000 09:38 AM
		 
		 To: Mark Evans/Legal/LON/ECT@ECT, Marcus Von Bock Und Polach/LON/ECT@ECT, 
Sara Shackleton/HOU/ECT@ECT
		 cc: Paul Chivers/LON/ECT@ECT
		 Subject: Corp Prepay

As you are aware TD were concerned about the basis risk embedded in the 
prepaid swap structure . They plan to hedge their Enron exposure by buying 
credit default swaps in the market. However under credit default swaps, only 
a default on debt as defined by GAAP is  included as a credit event, and 
swaps are excluded from this definition .  This basis risk  therefore occurs 
where  Enron defaults on the oil swap but has not defaulted on any debt. This 
does not trigger a payout to TD under their credit protection, their recourse 
will then be through  the Corp guarantee with time delays. 

To mitigate that risk it was proposed that  in the event of an Enron default 
under the prepaid swap, the MTM termination value of the swap would be 
converted into a loan and Enron would automatically default on that loan. 
TD's counsel came back late on Friday to say that they could not give a clean 
legal opinion on this  structure.

We therefore proposed an alternative structure which involves TD and Enron 
entering into a loan of $10.1m at the same time as the swap is executed. This 
loan will  be in the name of Enron Corp. In the event of an Enron default on 
the prepaid swap, this will cross default into the $10.1m   loan and that 
forms the required trigger for TD's  credit default swaps.   The lawyers 
signed off on this last night and Norton Rose are now preparing the loan 
documentation.
They are basing it on the May 2000, 364 day Enron Corp facility and we are 
expecting first draft tomorrow. I will forward this to you when I receive it.


The deal itself is still undefined as TD have  credit approval subject to 
presyndicating the loan to two other banks and putting a certain level of 
credit protection in place prior to executing the trade.
The confirm/term sheet has not changed from two weeks ago and I have 
forwarded Sara's  comments to TD but their focus has been on getting credit 
approval rather than docs until today.  We have not sent a confirm to Morgan 
Stanley yet as we plan to replicate  whatever  confirm we agree with TD.  

I will keep you informed as to TD's progress.

Regards