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Energy names such as Enron and El Paso Energy have sparked the secondary market this week with big chunks of each name changing hands. A $20 million piece of Enron was auctioned by Societe Generale at the 13 1/2 level, as recent reports indicated that the company's former CFO, Andrew Fastow, would be indicted as early as next week. Calls to Enron and SocGen were not returned by press time.

A series of sham electricity option trades Merrill Lynch entered with Enron in late 1999 that allowed the latter to book a fictitious USD60 million profit have come home to roost, reportedly resulting in the termination two weeks ago of Dan Gordon, Allegheny Energy's president of energy trading, according to an official familiar with the situation at Allegheny. The deal, which was first reported by The New York Times last month, apparently infuriated Allegheny's management because it raised awkward questions over the valuation of two acquisitions: the three Midwest peakers Allegheny bought from Enron in November 2000 and Merrill's energy trading team it purchased in January last year. Gordon, who was terminated as president of Allegheny's energy trading group on Sept. 5, was previously head of Merrill's energy trading team and took the Enron trade to senior Merrill management to get it signed off.

Below is a summary of the most important statistics from the British Bankers' Association's 2001/2002 survey of the global credit derivatives market.

Teck Cominco, a Canadian mining and refining concern with USD1 billion in outstanding debt, is considering entering an interest rate swap to convert part or all of a fixed-rate bond it recently sold into a synthetic floating-rate liability. Larry Mackwood, treasurer in Vancouver, British Columbia, said he is monitoring the swaps market and would pull the trigger on a fixed-to-floating swap referenced to a recent USD200 million bond offering if pricing improves. "We want to do it as cheap as possible," he said, noting the company has used interest rate swaps in the past but is not an active user.

Crédit Agricole Indosuez has restructured its Korean fixed income and debt capital markets operation by bringing aboard Gin Lee, head of foreign exchange and short-term derivatives marketing at BNP Paribas in Seoul, in a new role as head of sales and deputy treasurer. The move adds a layer of management, so that the debt capital markets origination and fixed-income and derivative sales report to Lee. Previously the teams reported directly to Y.J. Lee, treasurer in Seoul. Gin Lee reports to Lee, who was on vacation and could not be reached.

ISDA's collateral committee, which deals with issues surrounding the credit support annex for derivatives transactions, is focusing on three areas: establishing definitions for debt, cash and equity collateral; developing methodologies for establishing and changing haircuts; and creating a simple way for firms to amend the credit support annex. Robert McWilliam, head of global collateral management at ABN AMRO in London and chairman of the committee, said the bulk of the work would be done this fall, ahead of its April 2003 deadline for the asset definitions.

Congress has eliminated several sections of a bill that could have dealt a mortal blow to the synthetic and cash securitization market, according to DW sister magazine Real Estate Finance & Investment. The clauses were part of the pending Employee Abuse Prevention Act of 2002 and would have allowed bankruptcy trustees to seek a more senior position than securitization investors in the event of a bankruptcy. This could have resulted in investors suffering delays in receiving recovery values or even losing their whole investment because the bankruptcy trustees could have had priority over the company's securitized assets, according to Lorraine McGowen, partner in the bankruptcy and debt restructuring group at Orrick, Herrington & Sutcliffe in New York. Steven Weise, attorney in the Los Angeles offices of Heller Ehrman White & McAuliffe, agreed, "Some of the provisions could have had a severe and dramatic effect on the structured finance markets."

Foreign derivatives houses, including Deutsche Bank, Salomon Smith Barney and Credit Lyonnais, are beefing up their Korean equity derivatives presence in anticipation that new rules allowing Korean end users access to the onshore market will result in business trickling through to the offshore mart. "We've been building up our exchange-trading presence in Korea," said Nick Fennell, head of equity derivatives at Deutsche Bank in Hong Kong. Harold Kim, managing director of Asia Pacific equity derivatives at Salomon Smith Barney in Hong Kong, also has high hopes for the onshore OTC mart resulting from clearer regulations and local houses entering the fray.

KBC Financial Products has been structuring products recently that offer investors a hybrid return from the equity, credit and hedge funds arena. Carlo Georg, managing director and head of trading in London, said investors have been steering away from single asset class products and in particular, the demand for equity products has plummeted roughly 50% over the past year because of investors' aversion to the equity markets.

The planned 2002 ISDA Master Agreement will include a new definition of the close out amount and will add a force majeure termination event. Richard Tredgett, partner at Allen & Overy in London, said the new definition of the close out amount is the most important change because the market quotation requirement is seen as too strict a procedure and in market turmoil it is difficult to obtain quotations. In the new close out definition, the overriding principle is good faith and commercial reasonableness, Tredgett explained, adding that it combines elements of both market quotation and loss, maximizes flexibility of the non-defaulting party and does not require strict procedures of market quotation.

Roland Burley, at Bankgesellschaft Berlin AG in London, thinks there is more than one way to view the Marconi situation and explains why.

The Royal Bank of Scotland Financial Markets will bring its first managed collateralized debt obligation to the market this quarter. The EUR1 billion (USD981.8 million) CDO will be managed by a large European fund manager, according to David Littlewood, global co-head of the structured credit products group in London. He declined to provide further details.