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To: hoosierboy
Can someone tell me what a prepay transaction is? Sorry for my ignorance

Pretty simple actually. Citibank gives Enron $500 million, and has a signed agreement that in a year Enron will give them $650 million worth of oil and natural gas. Enron then tells everyone "Look! We've sold $500 million of oil and are making lots of profit!". That's a prepay transaction.

Unfortunately for Citibank, it is not only blinding obvious that there is no oil pipline from Enron to Citibank, but there is also a memo in which an executive lets the cat out of the bag -- Enron will pay cash rather than oil. So this "Income" is actually a loan.

26 posted on 07/23/2002 7:13:05 PM PDT by TennesseeProfessor
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To: studentintexas
That was a very clear explanation. I finally understand the Enron/Citicorp prepay scheme.

Are the figures of $500 million and $650 million the actual figures, or were you using them as an example to illustrate your point?

If those are the figures, that's a 30% interest charge for one year!

37 posted on 07/23/2002 7:46:31 PM PDT by Ken H
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