fyi
-----Original Message-----
From: McMahon, Jeffrey 
Sent: Wednesday, October 10, 2001 9:00 PM
To: Buy, Rick
Subject: FW: Credit charge for Balli-Klockner transaction


I need to discuss this deal with you...it is essentially a physical option to supply steel to a very large service center with locations in the US and in Europe.  The challenge for you guys will be that it will require a $30mil option payment to them.  Very good deal without credit issues...pls call me when you have a chance.

-----Original Message----- 
From: Ford, Sue on behalf of McMahon, Jeffrey 
Sent: Wed 10/10/2001 2:23 PM 
To: McMahon, Jeffrey 
Cc: 
Subject: FW: Credit charge for Balli-Klockner transaction





-----------------_________________________________________________

Sue Ford - Executive Assistant

Enron Industrial Market - Office of the Chairman

Tel: 713-853-5176

Fax: 713-646-5930

sue.ford@enron.com

 -----Original Message-----

From:   Garner, Bruce  

Sent:   Wednesday, October 10, 2001 11:29 AM

To:     McMahon, Jeffrey

Subject:        FW: Credit charge for Balli-Klockner transaction

fyi

 -----Original Message-----

From:   Maley, Paul  

Sent:   10 October 2001 17:28

To:     Cose, Simon; Murphy, Ted

Cc:     Garner, Bruce; Bokeloh, Frank; Herbelot, Olivier; Pearce, Christian; Amiry, Homan; Patel, Nish

Subject:        RE: Credit charge for Balli-Klockner transaction

Simon

I have run an indicative credit reserve which comes out at $15m.

It should be made clear at this stage the number is only indicative and subject to further change and discussion.  Forward price curves and volatilities will need to be confirmed, as will the option structure.

We still want to achieve the best possible contractual terms through pursuing collateral rights and should consider other risk-mitigating options such as bankruptcy protection.  The tenor and $ exposure would warrant sign-off at a very senior level, and will obviously be covered by the DASH approval.

The deal is clearly of great value to Enron, but we should question the motives of Balli in wanting or needing to do this.  How much do we know about their exisiting banking relationships and ability to access funding at present?

I'm sure we will discuss further.

Paul

 -----Original Message-----

From:   Cose, Simon  

Sent:   09 October 2001 19:51

To:     Murphy, Ted

Cc:     Garner, Bruce; Bokeloh, Frank; Maley, Paul

Subject:        Credit charge for Balli-Klockner transaction

Ted

Bruce Garner has asked me to bring you into a trade we're looking at with Balli-Klockner (BK). Ken Curry was asked to evaluate a related proposal a week back but is now on holiday and Rebecca Phillips was not brought up to speed. This latest proposal would be a European trade and the client is under time constraints and keen to move fast.

The transaction is as follows:

Enron has the right to sell to BK physical Hot Rolled Coil steel at Index (CRU HRC) + 7.5% 

Start:  Jan2002

End:    Dec2016

Tonnage:        500 000 Metric Tonnes per annum (total tonnage: 7.5 million MT)

Enron pays a premium of 30 million USD upon contracting.

The CRU Index is Enron's benchmark steel index and physical steel trades at Index flat. There is thus 7.5% intrinsic value in the puts which translates to approx. $75 million USD in present value terms ($45million net of premium).

Our counterparty would be the parent of the soon to be combined Balli Klockner PLC and the various Balli service centres soon to be merged (BK Holdings Ltd UK). BK are not offering us additional credit relief, ie. bank guarantees, LC's, insurance bonds, etc. Your help in establishing our appetite and an appropriate credit charge for this transaction would be much appreciated.

Many thanks

Simon Cose

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