The special protection under the Bankruptcy Code is not limited to
swaps. Section 546(e) protects "margin payments" and "settlement payments"
which are "made by or to a commodity broker, forward contract merchant,
stockbroker, financial institution or securities clearing agency...." and
the definition of "swap agreement" for purposes of section 546(g) includes
commodity swaps.  But your point is well taken, because there
seems to be no special protection for agreements that involve transactions
covered by different subsections or that involve some transactions that are
covered by the special protection, and some that are not.
This issue may be even more important outside the letter of credit context.
There are  special exemptions from the automatic stay in section 362 of the
Bankruptcy Code for setoffs under swap agreements and commodity contracts.
But, like section 546, these exemptions are in separate subsections, and do
not clearly provide for setting off transactions covered by one subsection
against transactions covered by one of the other subsections, or against
transactions not covered by the exemptions at all.
I can imagine setting up netting arrangements with several stages of
netting, both to take maximum advantage of the exemptions in the Bankruptcy
Code and to get a clear picture of the credit exposure with a particular
counterparty.  First, you would net all the transactions covered by each
subsection. Then you might net the transactions covered by the different
subsections. Then you would net the resulting number against transactions
not covered by any of the exemptions. Perhaps you do that already.
 Please let me know if you would like to discuss this subject in more
detail.
-----Original Message-----
From: Mark.Taylor@enron.com [mailto:Mark.Taylor@enron.com]
Sent: Friday, May 25, 2001 5:47 PM
To: eireland@foleylaw.com
Cc: Julia.Murray@enron.com; Carol.St.Clair@enron.com
Subject: Letters of Credit; Preference; Swap Transactions


Julia sent me a copy of your memo following up on one of the questions
asked at the session earlier this week.  I would like to ask a follow-up
question:

Do we lose the benefit of the special treatment under the bankruptcy code
when we enter into cross-product (i.e. physical and financial products)
netting and joint credit support arrangements.  If we agree with a
counterparty to net all of our trading exposures under multiple agreements
(swap agreements and gas, power, steel, coal, etc. trading agreements) to
determine how much credit support should be posted and then only ask for a
single LC that supports the whole shebang, do we lose this protection since
arguably we are no longer just "under a swap agreement?"