Footnote 8

could not trade with others in the commodities markets except by posting collateral. Withoutsubstantial cash, posting collateral was a significant problem. As the Enron Examiner found, EnronWholesale Services – the division of Enron that created trading markets in gas, oil, electricity andother energy products – was by far the most significant of Enron’s business segments. “Thus, thecontinued success of Enron’s entire business was dependent upon the continued success of itsWholesale Services business segment, which in turn was dependent upon Enron’s credit ratings forits senior unsecured long-term debt.” Exam. II at 18-19.163. One other reason why Enron’s credit rating was vital: A key component of Enron’scredit rating was the amount of its debt. To avoid increased debt, the Insiders used financingstructures to obtain cash that could be accounted for on Enron’s financial statements as somethingother than debt or, in some cases, not at all. Ironically, some of those structures themselves had theeffect of increasing the importance of Enron’s credit ratings because they included defaults ortrigger events directly or indirectly based on Enron’s credit rating. Three examples:164. The Marlin share trust structure raised more than $1 billion in December 1998. Thestructure included a trigger, and a trigger event occurred if Enron’s credit rating on its senior debtfell below a certain point at the same time that Enron’s stock price fell below a certain point for acertain number of days. Once a trigger event occurred, other provisions went into play, theculmination of which was that Enron could be required to make a deficiency payment to noteholdersof $915 million.165. Enron’s other large share trust, the Osprey (or Whitewing) structure, involved asimilar arrangement. Through an initial financing in September 1999 and subsequent rounds in Julyand October 2000, Enron raised more than $2.6 billion. In connection with that structure, a declinein credit rating coupled with a fall in Enron’s stock price could, under certain other circumstances,require Enron to pay $2.4 billion to noteholders.604041v1/007457-41-