FW: E-Notes:  Risk Considerations for Enron Counterparties:  Fail	ure  to Exercise Rights May Constitute Waiver This was forwarded to me by a partner who has ended up on Baker McKensie's e-mail distribution list.I don't know if Enron uses Baker&Mckensie but you might want to ask them to reconsider their marketing pitches. I assume they at least screened your lawyers from this distribution.  Joe -----Original Message----- From: Holmes, Pat  Sent: Wednesday, October 31, 2001 5:33 PM To: Dilg, Joe Subject: FW: E-Notes: Risk Considerations for Enron Counterparties: Failure to Exercise Rights May Constitute Waiver I thought you might be interested in this.  Mike Zimmer is a partner with Baker and McKenzie in DC.  Pat Holmes -----Original Message----- From: Zimmer, Michael J [mailto:Michael.J.Zimmer@BAKERNET.com] Sent: Wednesday, October 31, 2001 3:22 PM Subject: E-Notes: Risk Considerations for Enron Counterparties: Failure to Exercise Rights May Constitute Waiver >  <<...OLE_Obj...>>  > E-Notes provides regular briefings on new developments in global energy > and public utility law. >  > October 31, 2001 >  > RISK CONSIDERATIONS FOR ENRON COUNTERPARTIES: > FAILURE TO EXERCISE RIGHTS MAY CONSTITUTE WAIVER >  >  > 	The reduction by Moody's Investor Service Inc. of Enron Corp.'s > senior unsecured long-term debt to Baa2 from Baa1 this week may be an > issue of concern for companies that are counterparts to Enron obligations. > This downgrade may have immediate consequences under existing transactions > with Enron given that its current credit rating is now two levels above > non-investment grade.  Any further downgrade into non-investment grade > levels could seriously affect relationships between counterparties and > Enron, and possibly Enron counterparties and their counterparties.  >  > 	Enron is the principal in nearly one-quarter of all electricity and > natural gas trades in the United States.  For Enron's power and gas > trading counterparties, a credit event such as a downgrade by Moody's may > precipitate certain obligations under the terms of their trading > transactions.  For example, any downgrade, not just a downgrade resulting > in a sub-investment grade rating, may entitle a counterparty to require > Enron to provide additional credit in support of Enron's purchase > obligations.  Counterparties should examine all power, gas or other > commodity purchase and sale documentation to confirm whether they possess > this right.  The failure to exercise this right may constitute a waiver > and foreclose access to critical performance and payment assurance, > threatening to alter the risk assessment and mitigation considerations > upon which the transactions were originally based.  Furthermore, a failure > to declare a credit event or default against Enron could cause a default > on the part of the counterparty itself in collateral or ancillary > arrangements, such as its financing.  The potential for a domino effect, > causing defaults or credit events in a series of transactions, is > considerable. >  > 	It is uncertain whether Enron's efforts to obtain new lines of > credit will be sufficient to overcome the current difficulties. > Regardless, it is prudent to review the terms of existing transactions > with Enron or its affiliates, including any guarantees or other forms of > corporate credit support.  It is also advisable to examine the terms of > transactions dependent on, or otherwise ancillary to, transactions with > Enron or its affiliates to avoid any consequential effects of the Enron > credit ratings downgrade. >  > 	For further information on how Enron's current financial situation > could impact your firm's transaction risk profile, please contact Michael > Zimmer at 202.452.7055 or michael.j.zimmer@bakernet.com, Jonathan W. > Gottlieb at 202.452.7084 or jonathan.w.gottlieb@bakernet.com or Samir > Desai at 202.452.7057 or samir.s.desai@bakernet.com .  >  > Michael J. Zimmer > Jonathan W. Gottlieb > Samir S. Desai >   >  >  >  > __________________________________________________________________________ > __ > E-Notes is a publication of Baker & McKenzie.  It does not constitute > legal advice or a legal opinion on any specific facts or circumstances. > The contents are intended as general information only.  You are urged to > consult your attorney concerning your situation and specific legal > questions you may have.  For further information on the subjects discussed > in E-Notes, contact Michael J. Zimmer, > mailto:michael.j.zimmer@bakernet.com or > Jonathan W. Gottlieb, mailto:jonathan.w.gottlieb@bakernet.com. >  > For more information about BAKER & McKENZIE and our global energy and > utility practice, click on our electronic business card: >  <<...OLE_Obj...>>  >  > or visit our website at  Areas/nabfmp/energy/!viewme.htm> . >  >  >                                           ++++++CONFIDENTIALITY NOTICE+++++ The information in this email may be confidential and/or privileged.  This email is intended to be reviewed by only the individual or organization named above.  If you are not the intended recipient or an authorized representative of the intended recipient, you are hereby notified that any review, dissemination or copying of this email and its attachments, if any, or the information contained herein is prohibited.  If you have received this email in error, please immediately notify the sender by return email and delete this email from your system.  Thank You