did not disclose deals nature: S&P
24 July 2002
did not disclose to Standard & Poors (S&P) rating
services the debt-like nature of certain structured finance
transactions and their effect on Enrons financial situation,
S&Ps credit analysts submitted before the senate
permanent subcommittee on investigations.
subcommittee hearings on The role of the financial institutions
in Enrons collapse began on 23 July 2002 here.
Enron did not, despite our repeated requests for complete,
timely and reliable information, disclose any information
revealing a link between the prepaid forward transactions
and the swap transactions, says S&P managing director
Ronald M Barone, who is one of the principal credit rating
analysts covering Enron.
Similarly, Enron provided no indication that these transactions
were in any way related to any of (its) Yosemite or credit-linked
notes transactions despite an explicit inquiry by S&P
regarding the effect, if any, of these structured finance
transactions on Enrons financial situation, he says.
such links did, in fact, exist and Enrons use of prepaid
forward transactions and swap transactions were, in reality,
an alternate form of financing giving rise to debt-like
obligations, such information would have likely had a
material impact on our rating analysis. The revelation
of the debt-like nature of these transactions would also
have had a substantial effect on our qualitative analysis
of Enrons credit, Barone says.
makes it clear that on no occasion did S&P advise,
consult or suggest to Enron that it should employ these
prepaid forward transactions and/or swap transactions
or any other means, to increase cash flow.