fw : deacero , sa louise : we are working to value the cost of both coverages so we can compare it to the reduction in credit reserve ( if any ) . we should have a first look to go over with markus tomorrow am . regards , drew - - - - - original message - - - - - from : fiala , markus sent : tuesday , march 27 , 2001 3 : 14 am to : kitchen , louise ; william s bradford / hou / ect @ enron cc : seyfried , bryan ; tingleaf , drew subject : deacero , sa louise - some news and views for yourself on this credit . hedging this name for any duration past 5 years is all but impossible at present . insurance companies will write protection , with 10 % first loss being taken by ene ; but proof of loss must exist and all covents must be adhered to otherwise payout can be made void . believe the offering you have from zurich should be used to cover first 35 mil of 65 mil exposure at the front end . this is the cheapest alternative but does come with certain hindrances ; ie timeliness of payments and proof of loss . an additional constraint here is the bb or better private rating ene must get for deacero . what enroncredit can offer is to hedge the excess exposure above the insurance coverage . we would cover failure to pay and bankruptcy of said name . we would offer protection in either a 2 or 3 year rolling tranche format . protection can either be bought for the duration ( 15 yrs npv ) at 3 . 5 % , cash settlement ( louise you get paid out 100 - recovery ( of financial assets ) = payout ) . or on a rolling basis at 30 bpts over where enroncreit hedges itself in the market ( expect to get 2 yr protection off at 2 % per annum at present ) . we have the ability to structure this tranche on an accreting or amortising basis to either suit the p 95 or actual exposures ( payment can be made digital ; cost would be stated cost / ( 1 - . 35 % ( expected recovery ) ) . louise if you want to call me today to discuss i will be in till 18 : 00 london time . bill , we would hedge out the credit exposure on a ltol basis and run the duration risk , require permission from yourself to run / manage this risk . mkf