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Enron Mail |
trip last week was disappointing on several scores:
1) veba debt found out to be 13 million dollars. both an operator within gm and veba themselves confirmed these numbers to different people within enron. 2) gm starting to not supply customers. they have been living hand to mouth and cash flows are reaching critically tight levels. both q8 and totalfina have not been able to get gasoline from gm since thursday of last week. the stocking out of gasoline is more to do with the fact that gm's term gasoline supplier, vitol, will only supply them gasoline if they pre-pay their entire months volume. we are looking to step-in and work gasoline thru ectric as we do gasoil presently. that means that enron sells the product to ectric and ectric hold the product in tankage and allow gm to prepay as they can (usually payments of around 500,000 usd). 3) without my going there I wouldn't have a clue that they were in these difficulties. the office lacks a commercial person to manage the business. don antonio, 73 year head of the company, insists on all negotiations going through some consultants he has hired. these consultants know little about the market and don't seem to grasp the seriousness of the situation. the only positive thing I can say is that they are trying to push ectric as the only way forward for gm in their present situation. this is positive because I believe of all the creditors we will continue to get paid the most since without us the business will fold tomorrow. reason for this is that we are the holders of the strategic stock which is required to be an operator and are providing through the ectric jv structure a way to keep the business going. 4) strategy going forward would be to continue on the same course of trying to get as much money as we can back without getting any more involved. this is problematic given we are beginning the process of transferring gm's better credit customers to ectric and raising the profile of ectric in spain. also very frustrating given the lack of commercial management within gm at the moment. 5) at the moment we are pressing them for a cash flow statement. this situation looks bad given their practise of factoring receiveables to the banks, outstanding debt (we know of 20 million dollars between enron and veba) they have no inventory of their own, and no credit lines to get supply. on viewing this situation in spain I phoned london looking to get increased credit line to gm under a secured line that would enable them to keep the business going. steve young suggest that we take advantage of this situation to also get at least half of our existing unsecured debt changed to secured debt. the consultants were sceptical that don antonio had personal cash that he could put up in an escrow acct. we stressed to them that collateral assets would take much longer to value and register and therefore would not be an immediate remeady to their cash flow problem. no guarantee that don antonio will meet these conditions but from our impressions of things he doesn't have much choice at the moment. would be revealing if he is unwilling or unable to do so because I think that would reflect the present leveraged state of don antonio or a disbelief that they are going to make it through this difficult time. think that we have a head start on the other creditors in understanding just how critical gm's present condition is and should do all we can to keep them going while we try to get our unsecured debt paid back. 6) gm had approached us about 6 weeks ago to buy the company or a share of it. given that we might be put in a position of looking at some assets as collateral for present unsecured debt do we want to get some people down there to evaluate the worth of the company? if we were looking for countries where some retail business was a worthwhile hassle spain would certainly make the list. from a trading perspective I still feel if we could turn this business around the shorts would be valuable to the london gasoil and gasoline books. greatest concern here is that presently that would require us to run the business so gm don't bring very much to the jv. the gm customer base has a good payment history and gm have significant storage capacity in a country short of this infrastructure. hard to find any romance in this at the moment but if we going to have to invest so much effort to get our money back anyway it might be worthwhile doing a more detailed appraisal of gm. not sure what the value of their retail gasoline sites, transportation company, branded name within spain, etc is worth? we might get greater transparency from them if they think we are interested in taking an equity stake. at the moment their greater fear is on us walking away completely and so to date they have always tried to give us the most optimistic scenario. 7) to review the present course of action is to assign over to ectric the customer we are ok with on credit and work on getting these customers to undertake supply contracts. subject to credit and senior management approval, we would like to help gm in the present cash flow squeeze by establishing some type of rolling weekly credit line. this would have to be backed by cash or some kind of collateral and at the same time as that is established the same would have to be done for some percentage of our present unsecured debt. 8) we should prepare a plan for the worse-case scenario. 9) sorry to be so long-winded. thoughts/comments??
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