Footnote 8

166. Finally, in the Rawhide minority interest structure – which raised $750 million inDecember 1998 – a downgrade event was defined as a specified drop in the rating of Enron’s longterm,unsecured debt. Under the transaction documents, that downgrade would put other provisionsinto play which, at their end, required Enron to repay certain loans. This was significant since at thedate of bankruptcy, the loan amount was still approximately $691 million.167. Thus, in just three structures, a drop in Enron’s credit rating could have triggeredevents that could have required Enron to make payments of more than $4 billion dollars – again,money Enron did not have. And these three were not the only structures in which credit ratingtriggers created adverse consequences for Enron. The transaction documents for other structuresincluded triggers that caused defaults, increased margins, increased interest rates, eliminated theability to invest in Enron notes, and increased pricing for the financing – to the tune of more than$3 billion: Triple Lutz ($114 million), Valhalla ($50 million), Nahanni ($15 million), SEAcquisition (up to $120 million), Margaux ($125 million), Mahonia ($650 million), AircraftFinancing ($468 million), Monte ($350 million), Brazos VPP ($170 million), Enron Building NorthSynthetic Lease ($284 million), Tammy ($500 million), Choctaw ($500 million), and JT Holdings($74 million).c. The Insiders understood how the rating agencies determined Enron’scredit rating.168. The soundness of Enron’s credit rating depended on the soundness of certainfinancial ratios. Five were key: (i) funds flow interest coverage, (ii) pre-tax interest coverage,(iii) funds flow from operations to total obligations, (iv) total obligations to total obligations plusshareholders’ equity and certain other items, and (v) debt to total capital. Between them, these fiveratios shared six components:604041v1/007457-42-