From: david.delainey@enron.com
To: richard.lydecker@enron.com
Date: 2000-10-10 09:52:00+00:00
Subject: Re: Basic

Dick, you are doing the right things - if you run into timing issues in the 
future do not hesitate to give me a call directly.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 10/10/2000 
09:51 AM ---------------------------


Richard Lydecker@ENRON
10/09/2000 04:27 PM
To: David W Delainey/HOU/ECT@ECT
cc: Jeff Donahue/HOU/ECT@ECT, Raymond Bowen/HOU/ECT@ECT 
Subject: Re: Basic  

Dave, I agree with your perspective on this.  Building another theoretical 
model in the Basic situation seems naive to me.  This company is and has been 
in a financial death spiral.  For months, all involved on the ENA side have 
been focused on a probability that the Basic situation would result in a 
writeoff of a very significant piece of the Merlin debt and nothing for the 
equity.  The deal we are working on is at the high end of the projections 
reviewed with the rating agencies on recovery for the Merlin debt and 
actually gets us at least some chance of recovery on our equity.

I do not agree that no effort has been made to market the company.  As you 
recall, we worked very intensively in trying to support an IPO which would 
take out the debt.  Despite many attempts to structure a successful offering 
(and a series of difficult concessions by Enron), the IB finally pulled it.  
The S-1, by the way, was about the ugliest I have ever seen.

We carefully evaluated seeking an industry purchaser.  Our conclusion was 
that this risked losing significant value, would require a good deal of time, 
and had virtually no likelihood of equalling the recovery we have would 
achieve if we can do the deal on the table.   This evaluation was reinforced 
with the contacts we have had with industry players.

In any liquidation there is always the possibility that another path could 
possibility capture more value.  In this case especially, I think we have a 
very good idea of reality and are making an uniformed decision to recommend a 
better-than-exected exit.  This is not a firesale.

We will continue to work constructively with RAC in a non-confrontational 
mode on Basic.  Be assured, however, that if I feel there is a real risk of 
process getting in the way of achieving our objectives, I will raise a red 
flag.  Dick.




David W Delainey@ECT
09/29/2000 11:34 AM
To: Rick Buy/HOU/ECT@ECT
cc: David Gorte/HOU/ECT@ECT, Jeff Donahue/HOU/ECT@ECT, Richard 
Lydecker/Corp/Enron@Enron, Raymond Bowen/HOU/ECT@ECT 

Subject: Re: Basic

Rick, I disagree - the DASH had an implication unsubstantiated that the 
current deal on the table is a bad one.  I believe that RAC should provide a 
clear opinion or say directly that the analysis is deficient.

It is too easy to state the obvious.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 09/29/2000 
11:17 AM ---------------------------
From: Rick Buy on 09/29/2000 10:18 AM
To: David W Delainey/HOU/ECT@ECT
cc: David Gorte/HOU/ECT@ECT, Jeff Donahue/HOU/ECT@ECT, Richard 
Lydecker/Corp/Enron@Enron, Raymond Bowen/HOU/ECT@ECT 
Subject: Re: Basic  

In my opion this DASH did exactly what it was supposed to do - prompt a 
dialog on whether we are getting an adequate price for this asset. My 
understanding is that no model was built to value an alternative nor was 
there any effort to market the company. If we want to "take the money and 
run" (whhich in this case is probably the right decision) fine, but we should 
know what we are leaving behind, especially given the current commodity price 
environment.  Rick