---------------------- Forwarded by Pushkar Shahi/HOU/ECT on 05/23/2000 04:52 
PM ---------------------------


Clint Freeland@ENRON
05/23/2000 08:56 AM
To: Pushkar Shahi/HOU/ECT@ECT
cc:  
Subject: Pre-Hedge of STG PATS

FYI - please review before our meeting around 11;30.


---------------------- Forwarded by Clint Freeland/Corp/Enron on 05/23/2000 
08:51 AM ---------------------------


Michael.Davidson@ubsw.com on 05/19/2000 04:45:40 PM
To: clint.freeland@enron.com
cc: Timothy.Steele@ubsw.com, Scott.Giese@ubsw.com, Michael.Davidson@ubsw.com 

Subject: Pre-Hedge of STG PATS


     Clint -

     As per your conversation with Tim, attached is a draft confirmation
     for a "pre-hedge" of the STG PATS option.  Below is an example that
     describes the mechanics of this proposal using hypothetical dates
     and rates:

     1. On May 19, 2000 Enron will sell to UBS a 3yr call option on the
     UKT 6.00% due 12/28.  The call option will have an expiry date and
     cash settlement date of May 19, 2003 and the strike will equal
     4.90%.  The upfront premium owed by UBS to Enron is STG 14,000,000.
      The upfront premium will be paid on July 19, 2000 (2 months from
     trade date).  Enron will have the right to change the cash-settle
     date to any Business Day between May 19 and July 19, 2003.

     2. We assume that on June 19, 2000 the STG PATS bond is priced and
     we look to unwind the existing option with Enron and enter into the
     real STG PATS option with the trust.  The new STG PATS option will
     have an expiry date and cash settlement date of June 19, 2003 and a
     strike of 4.90%.  The upfront premium payable by UBS to the Trust
     is STG 10,000,000.

     3. Enron will exercise a clause in the original trade that allows
     the Company to change the cash settlement date of the option to
     June 19, 2003 such that it matches the date on the STG PATS option.
     Now the two options will have an identical STG 10,000,000 value.

     4. Enron and UBS will unwind the existing option for STG
     10,000,000.  That amount will be netted against the STG 14,000,000
     UBS owes as upfront premium, resulting in a net payment by UBS to
     Enron of STG 4,000,000.

     5. Enron will receive the STG 4,000,000 from UBS for the unwind of
     the original option and STG 10,000,000 from the Trust (by way of
     UBS) from the sale of the STG PATS note for a total amount of STG
     14,000,000.

 - draftc~1.doc

This message contains confidential information and is intended only
for the individual named.  If you are not the named addressee you
should not disseminate, distribute or copy this e-mail.  Please
notify the sender immediately by e-mail if you have received this
e-mail by mistake and delete this e-mail from your system.

E-mail transmission cannot be guaranteed to be secure or error-free
as information could be intercepted, corrupted, lost, destroyed,
arrive late or incomplete, or contain viruses.  The sender therefore
does not accept liability for any errors or omissions in the contents
of this message which arise as a result of e-mail transmission.  If
verification is required please request a hard-copy version.  This
message is provided for informational purposes and should not be
construed as a solicitation or offer to buy or sell any securities or
related financial instruments.