Dutch - there is a mess with Fimat and since you used to run John's book and may see something in this situation I do not, I wondered if you could give me any feedback in this before I send it to Deffner.  Thanks, Sarah	


On Tuesday, Oct. 30 Warren Tashnek (Fimat Houston) and Steve Forman (Fimat NY) telephoned me to inform Enron that Fimat cut its trading lines from $20 million to $11 million for Enron.  This cut is irrespective of the $20 million credit limit we have from Soc Gen for the margin line.  (Soc Gen is the bank that owns Fimat brokerage.)  Fimat made this decision based on the following events according to Steve:

Thursday 10/25
ENE positions were expitted from ABN to Fimat.  The positions came from existing positions at ABN, JP Morgan, SSB and Goldman Sachs.  Generally brokers agree how to handle expitting of trades including the transfer of cash associated with the moving of the trades. 
Specifically a major issue evolved with ABN and Fimat.  In this case, Fimat agreed with ABN to transfer the trades at the trade price and then rebook them at the trade price.  There was a $10 million variation margin associated with this transfer of trades at the trade price which ABN agreed to send on Friday to Fimat.  Since Fimat agreed to accept the trades at the trade price, Fimat was exposed in the event that ABN did not send the $10 million on Friday.  If Fimat had agreed to transfer the trades at the settlement rate instead of the trade price then Fimat would not have been exposed for $10 million in variation margin on Thursday night.    

Friday, 10/26
On Friday, Fimat did not receive its $10 million from ABN as agreed.  When Fimat called ABN, ABN told Fimat that ENE called ABN and instructed ABN to send the money directly to ENE.  This left Fimat exposed for $10 million on behalf of Enron.  
On Friday morning, Fimat brokerage statements showed that ENE was owed $28 million by Fimat.  Fimat sent $5.7 million to Soc Gen to pay down the Soc Gen margin line for Enron.  This left $22 million available for ENE but Fimat wanted its $10 million.  This led to confusion between Enron and Fimat. 
On Friday, there was a conversation between Fimat NY and Fimat Montreal.  Fimat Montreal asked Fimat NY to take positions on behalf of ENE.  The number of positions and the variation margin associated with these positions were undisclosed.  
Very late on Friday, HSBC tried to transfer Canadian positions to Fimat Canada without an account for Enron at Fimat Canada.  
Based in the bad press on Enron and the gossip in the financial community right now, Fimat NY told Fimat Montreal to refuse the transfer.  
Fimat wants to know why Enron is expitting trades from bigger brokerage houses that have increased risk allocations fro Enron.  Fimat is uncomfortable with these events.  

Monday, 10/29
Fimat decides it wants an explanation from Enron.  Fimat wants to reassess the brokerage statements and double check both the amount of money transferred to them and also the positions transferred.  Fimat informed Enron that it would not move money based on brokerage statements alone.  Fimat would not confirm to Enron what amounts of money should actually move until later in the day.  This does not work for Enron as we must inform our Treasure by 8:00 am as to what cash transfers will occur.  Under our current loan agreement with Soc Gen, Fimat informs Soc Gen by 12:00 noon if money should move so Fimat is changing its way of doing business with Enron based on its discomfort with ENE as a counter party.  

Tuesday, 10/30
100 positions were expitted to Fimat to offset the gas positions from ABN.

Fimat proposed solutions
$3 million T-bill posted to Fimat as collateral on ENE behalf
Guarantee to Fimat with respect to trading from ENE (although ENE has already posted guarantee to Soc Gen for margin line)
ENE to convince Soc Gen to guarantee to Fimat that Soc Gen will make payments on ENE's behalf

My tkae on the situation:
Fimat is upset based mainly on Enron's handling of expitted trades and bad press.  I told Fimat that I believed the reason trades were expitted to Fimat was that ENE wanted to move its positions to brokers who were offering margin lines to ENE.  I promised to look into our handling or mishandling of the situaiton but it seems that disorganization rather than ill intent was responsible for Fimat's inconveniences.   I explained that Enron is prepared neither to mediate between Soc Gen and Fimat nor to cause Soc Gen to make payments to Fimat on our behalf.  That issue should have been resolved when the amrgin line was set up and the payment mechanism has been working fine so far.  As far as the confusion with ABN, we were not party to the discussions betweeen Fimat and ABN and can not make any comment to that.    Finally we can not make margin payments to Fimat when we do not have proper notice time.  I am sorry that there is bad press out there but I do not think we should give Fimat special permission to comb through our statements on an on going basis.  This may have been necessary for them earlier this week but they need to get their act together and get the proper number to us early in the morning like all the other brokers.  

We need to determine how much we need Fimat right now.  I am not inclined to entirely blow them off especially sinces I  do not want them to tell other brokers that we are acting strangely and hurt our reputation further right now.  At the same time, no one around Enron needs more work right now and we can not hold a high maintenance broker's hand hand every step of the way.  Let's decide what to do and implement.

Sarah