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Enron Mail |
Bob,
With regard to cross commodity netting, I think we need to address the concept of not netting across commodities. While many commodities do not settle on the same day, and do not present a problem, we need to rethink the issue when the settlement day is the same. I have concerns in two areas: the first is from a credit perspective, that we are sending out funds the same day we expect to receive them. Obviously, there is a risk that we pay and the counterpart does not. Can we quantify when this happens, the counterparts and the dollars involved? We may just need to put some guidelines in place as to when this is acceptable and when a credit approval is required. My second concern is a legal one: are we compromising our position on termination netting if we have not been practicing settlement netting? Mark Taylor is the best person to address this issue. This is more likely to be a problem I would imagine for those transactions where we do not separate the termination and settlement netting concepts within the contract (see below). Once I get legal feedback from Mark, let's sit down and discuss. Thanks, Tanya ---------------------- Forwarded by Tanya Rohauer/HOU/ECT on 03/06/2000 01:12 PM --------------------------- Tanya Rohauer 03/06/2000 01:11 PM To: Ed Quinn/HOU/ECT@ECT cc: Shari Stack/HOU/ECT@ECT, Sara Shackleton/HOU/ECT@ECT Subject: Re: Frito-Lay Please bear in mind that this suggestion is contingent upon legal approval. I do not want our settlement netting position to compromise our termination netting position. ---------------------- Forwarded by Tanya Rohauer/HOU/ECT on 03/06/2000 01:08 PM --------------------------- Tanya Rohauer 03/06/2000 01:02 PM To: Ed Quinn/HOU/ECT@ECT cc: Shari Stack/HOU/ECT@ECT, Sara Shackleton/HOU/ECT@ECT Subject: Re: Frito-Lay One of the remaining open items in the ISDA being negotiated is netting. I have spoken with Bob Klein and he has indicated that his group can accommodate not netting across commodity lines. Due to Pepsico's (credit support provider) strong credit profile, I am comfortable agreeing to Frito Lay's request. However, netting across commodities for termination is not negotiable. I would suggest we present Frito Lay with the compromise that we will agree to settlement netting within commodity lines only, but retain termination cross commodity netting. Please call me if you have questions. Thanks, Tanya
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