Case No. 01-16034 (AJG), Chapter 11, Jointly AdministeredUnited States Bankruptcy Court, S.D. New York
December 3, 2001
INTERIM ORDER PURSUANT TO SECTION 345 (B) OF THE BANKRUPTCY CODE APPROVING INVESTMENT GUIDELINES
GONZALEZ, Judge.
Upon consideration of the motion (“Motion”) filed by Enron Corp. and certain of its affiliated entities (collectively, “Debtors”), as debtors and debtors in possession, seeking approval of the Investment Guidelines as defined in the Motion pursuant to section 345 of title 11 of the United States Code (the “Bankruptcy Code”), as described in greater detail in the Motion; and it appearing that the Court has jurisdiction to consider the Motion; and it appearing that the relief requested in the Motion is in the best interest of the Debtors, its estates and creditors; and it appearing that due notice of the Motion has been given and no further notice need be given; and upon the proceedings before the Court; and good and sufficient cause appearing;
IT IS HEREBY ORDERED THAT:
1. The Motion is granted.
2. The Debtors are hereby authorized to deposit and invest their cash and cash equivalents in accordance with the Investment Guidelines while operating as debtors in possession, on an interim basis pending a final hearing to be held on January 7, 2001 at 2:00 p.m. (the “Final Hearing”).
3. Compliance with the Investment Guidelines is deemed to be in compliance with section 345 of the Bankruptcy Code.
4. Obligations under section 345 (b) of the Bankruptcy Code regarding collateralization of investments or obtaining a bond with respect to such investments are hereby waived.
5. The Investment Guidelines may be amended by the Court from time to time upon application by the Debtors, with notice limited to the United States Trustee and any statutory creditors’ committee appointed in the Debtors’ chapter 11 case.
EXHIBIT A ENRON CORP. INVESTMENT POLICY
The objective of the Cash Management function within the corporate Treasury Department of Enron Corp. (the “Company”) is to minimize cash and short-term investment balances by matching short-term liabilities with anticipated cash receipts. However, from time to time, the Company may have temporary surplus cash. This Policy applies to the investment of such temporary surplus cash.
INVESTMENT OBJECTIVES
The Company’s primary objectives of short-term investing are as follows:
1. Preserve principal
2. Maintain liquidity
3. Diversify investment risk
4. Maximize earnings on surplus funds consistent with the first three objectives.
INVESTMENT CRITERIA
Eligible Institutions
Investment transactions (see “Eligible Investments”) may be conducted only with institutions meeting the following credit criteria at the time of the transaction:
Commercial Banks — Banks used for time deposits or certificates of deposit, and/or from which banker’s acceptances and commercial paper are purchased, must have short-term debt ratings of at least P1 by Moody’s and A1 by Standard Poor’s (SP), or long-term ratings of at least A by either Moody’s or SP. Banks with split ratings when the lower rating is BBB+ or below will not be eligible for investment.
Investment Banks, Brokers, Dealers and Investment Managers — Institutions which act as intermediaries and/or institutions from which securities are purchased must have short-term debt ratings of at least P1 by Moody’s and A1 by SP and/or long-term debt ratings of at least A by both Moody’s and SP.
Maturity
At the time of purchase, the remaining maturity of any investment shall be matched to the anticipated liquidity requirements but will not exceed one year. Money market funds must maintain a $1 per share net asset value and have an average maturity which is consistent with this constant value and does not exceed SEC limitations.
Diversification
Investments shall be diversified in a manner consistent with the primary objective of preservation of principal. Investments shall also be diversified by maturity to ensure adequate liquidity. No investment may represent more than 5 percent of the issuer’s total outstanding amount of that security.
ELIGIBLE INVESTMENTS
Investments may be made in the securities listed below subject to stated limits. While investments should be diversified (see “Diversification”), there is no limit on aggregate investments m any one category of securities so long as the investment portfolio does not exceed $250 million. If the investment portfolio exceeds $250 million, no single security category may comprise more than 50 percent of the total portfolio, with the exception of U.S. Treasury securities which have no limit.
Security[*] Limit Per Issuer
A. U.S. Treasury Bills and Notes unlimited
B. Short-term U.S. Federal Agency Obligations $100 MM
C. Commercial Paper (Section 3 (a)3) rated at least A1/P1 with long-term debt rated:
AAA by either agency $50 MM
AA or A by either agency $30 MM
D. Bank Instruments (e.g. Time Deposits, Certificates of Deposit, and Banker’s Acceptances) from banks with long-term debt rated:
AAA by either agency $50 MM
AAA by either agency $30 MM
E. Repurchase Agreements collateralized by:
U.S. Treasury of Agency securities $50 MM/dealer
Other Eligible Investments and CMO’s $25 MM/dealer
F. Approved Money market Funds:
U.S. Treasury or Agency securities $100 MM
“Prime” funds (including corporate securities) $50 MM
G. Tax-Exempt Securities rated at least A, M1G1 or VM1G1 by Moody’s and A or SP-1 by SP $25 MM
H. Auction Rate (Money Market) Preferred Stock rated at least A by both agencies $25 MM
ADMINISTRATION AND CONTROL PROCEDURES
The Treasurer of the Company is responsible for the implementation of and compliance with all aspects of this Policy. This Investment Policy applies to all subsidiaries and affiliates of the Company for which (i) financial statements are fully consolidated into the financial statements of the Company or (ii) the Company is the operator (the “Enron Companies”). All management decisions of each Enron Company will continue to be made by or under the direction of its board of directors or person or persons performing comparable functions and having comparable authority (each such board or person or persons being a “Board”). The applicability of this Investment Policy to each Enron Company is subject to the approval of the Board of such Enron Company Unless approved by such Board, such Enron Company will not be subject to this Investment Policy.
Daily Review and Compliance
The Operating Procedures for daily administration and review of compliance with this Investment Policy are set forth in a separate statement of Investment Policy — Operating Procedures which will be reviewed periodically and revised as appropriate and approved by the Treasurer of the Company and the Executive Vice President Chief of Staff or the President.
Custody
Commercial paper purchased with remaining maturities longer than 31 days, and all other securities, with the exception of money market funds, must be placed in safekeeping in a custody account.
Money Market Funds
Investments in money market funds which maintain a $1 per share net asset value may be made only in selected funds which have been previously approved by the Treasurer and the Executive Vice President Chief of Staff or the President. These funds will be selected on the basis of conformity to the Company’s Investment Policy. Investments will be made in money market funds to achieve cash management operating efficiencies and only when the risk/return characteristics of such funds are judged to be comparable to other available liquid investments. To ensure adequate liquidity and diversification, the total investment by Enron and its affiliates in any money market fund may not exceed 5% of the total fund assets of a U.S. Treasury and/or Agency fund and 2% of the total assets of a Prime fund.
Tax-Exempt Securities
Investments in tax-exempt securities may be made by the account of Enron Corp. when such investments are appropriate based on Enron’s tax position. Tax-exempt investments may be made for jointly-owned companies only if authorized by the chief financial officer of such company.