May 19, 2011
By popular demand, several legal sessions have been slated for NACM's 2011 Credit Congress in Nashville next week. And preferences almost certainly will be among the biggest attention-grabbing issues therein.
As a result of statutory amendments stemming from BAPCPA changes ushered in a little more than five years ago, preferences have become a hot and unavoidable bankruptcy topic. Credit Congress speaker Bruce Nathan, Esq. of Lowenstein Sandler PC promised "major amounts of time" would be spent on the preferences issue because of time limits on such claims.
"We're in the middle of a preferences onslaught," Nathan told NACM. "Given the uptick in bankruptcy filings in 2008 and 2009, we're right in the middle of the storm for preference claims. There have been lots of recent cases, lots of discussions." Among the cases likely to be cited heavily because of lessons learned is that of the Circuit City bankruptcy proceedings, said Nathan.
Nathan and Wanda Borges, Esq. of Borges & Associates LLC will present several times over the course of Credit Congress. The duo will start off together as panelists featured in the Legal Issues Executive Exchange session on Monday afternoon and follow it up in other sessions including "BAPCPA Five Years Later" as well as the two-part "Bulletproofing Your Credit Department." Each will be making several presentations/appearances during the conference.
Nathan described the two-part session as a "soup-to-nuts" program for how professionals need to deal with all aspects of credit. "This is one of the better programs because it's all the things business professionals should be doing, not just when bad things are happening but when good things are happening in order to prepared for if things eventually do go bad," he said. "Session one looks a lot at the beginning of the relationship to make sure credit professionals have their ducks in a row and their t's crossed." Topics included in the session will include antitrust issues, credit insurance, proper documentation elements of a strong guarantee, consignments and protecting your business amid Red Flags Rules, among others. Nathan noted the part two also deals with distressed customer relations and actions and how to protect one's self. That includes topics such as identifying warning signs years before a problem instead of months, letters of credit, UCC rights, termination of contracts before a bankruptcy hits, lien/trust fund/state law rights and 503(b)(9).
"This is good for beginners as well as for the experienced to make sure they're doing it the right way," he told NACM.
Brian Shappell, NACM staff writer
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The United States hit its statutory debt limit of $14.29 trillion earlier this week. This means that the U.S. cannot legally borrow money to meet its current obligations.
It also means that U.S. Treasury Secretary Timothy Geithner will have to implement certain "extraordinary measures" in order to keep the government from defaulting on its debt for the first time in history. In a letter to Senate Majority Leader Harry Reid (D-NV), Geithner declared a "debt issuance suspension period" for the Civil Service Retirement and Disability Fund, which will permit the Treasury to redeem a portion of existing Treasury securities held by that fund as investments, while suspending the issuance of new Treasury securities to that fund as investments.
Geithner also suspended the daily reinvestment of Treasury securities held as investments by the Government Securities Investment Fund of the Federal Employees' Retirement Thrift Savings Plan. In layman's terms, it essentially means dipping into pensions to pay the obligations that would be otherwise handled with debt.
"Each of these actions has been taken in the past by my predecessors during previous debt limit impasses," said Geithner. "I have written to Congress on previous occasions regarding the importance of timely action to increase the debt limit in order to protect the full faith and credit of the United State and to avoid catastrophic economic consequences for citizens."
"I again urge Congress to act to increase the statutory debt limit as soon as possible," he added.
NACM's May Monthly Survey asks what you would do to address the nation's ongoing debt ceiling controversy. Click here to participate today. Respondents each earn .1 continuing education units (CEUs) and are automatically entered into a drawing for a free teleconference registration.
Jacob Barron, NACM staff writer
Distressed Business Services
Many NACM Affiliates are involved in a national network to provide assistance in the rehabilitation (if possible) or liquidation (if necessary) of businesses in severe financial difficulty.
While courts can take several months or more to start a reorganization plan, NACM Affiliates can assist in getting a plan approved in as little as 30 days. Most helpful is the knowledge that experienced professionals are ready to step in at the most difficult time. NACM Affiliate staff members can serve as secretary to creditors' committees, provide other needed advisory services and are fully aware of the prevailing laws and regulations relevant to each situation.
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The U.S. Senate eyed an extension of the Small Business Innovation Research (SBIR) and Small Business Technical Transfer (STTR) programs last week, after a long-term reauthorization failed.
Following five weeks on the Senate floor, and dozens of amendments, a bill that would have reauthorized the programs for another eight years stalled after failing to garner the 60 votes necessary to end debate on the bill and move it forward. The cloture vote fell strictly along party lines, 52-44, with no Republicans voting in favor.
In response, Sen. Mary Landrieu (D-LA), chair of the Senate Committee on Small Business and Entrepreneurship and an original sponsor of the bill, filed a one-year extension, without which the SBIR and STTR programs would expire on May 31. "After years of negotiations, and with so much support from my colleagues and the small business community, it is extremely unfortunate that we are right back where we started. To ensure that the SBIR and STTR programs do not end completely, I am filing a one-year, clean extension," said Landrieu. "There are too many businesses across the country with great ideas that are working with our government to develop technologies to improve national security, better the diagnosis, treatment and cure of diseases and move us closer toward energy independence and efficiency that would be left in the dark if these programs were to stop."
The long-term reauthorization was derailed by one specific amendment proposed by bill cosponsor and Senate Small Business Committee ranking member Olympia Snowe (R-ME). Originally existing as a standalone bill known as the Small Business Regulatory Freedom Act, Snowe's amendment, cosponsored by Sen. Tom Coburn (R-OK), would've imposed new regulatory review requirements on federal agencies, mandating that they conduct periodic reviews of their rules and measure the impact of certain regulations on small businesses.
Senate Majority Leader Harry Reid (D-NV) refused to allow the amendment to come to a vote, concerned that it was not germane to the legislation and that it would be a thinly-veiled excuse to allow larger corporate interests to have a greater say in the regulatory process. Republican support consequently vanished for the entire reauthorization bill.
The failure of the reauthorization also marks the failure of a separate amendment, filed by Sens. Scott Brown (R-MA) and David Vitter (R-LA), that would've repealed a 3% withholding tax set to go into effect on most government contracts. The Internal Revenue Service (IRS) recently issued a delay of the implementation of this tax from 2012 to 2013, but NACM and many other business advocates have lobbied for a full repeal.
Jacob Barron, NACM staff writer
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Meet Greg Powelson, director of MLBS, in Nashville during NACM's 115th Credit Congress & Expo. Greg will be presenting "Mechanic's Liens & Bonds: Critical Elements for Every Construction Credit Manager."
As a trio of long-delayed free trade agreements finally appears almost ready for congressional votes this summer, the U.S. Chamber of Commerce has gone back on the offensive by promoting the virtues of the deals and their potential positive effects on U.S. businesses.
The Chamber took to its website in recent days to unveil a sort of manifesto outlining reasons U.S. officials and lawmakers need to finish the job of passing into law pending free trade agreements (FTAs) with South Korea, Colombia and Panama. The message: FTAs do not add to the overall U.S. trade deficit (largely because there is no such agreement with China). They do add, rather than scuttle, American job opportunities and increase opportunities for significant export growthâ€”and the three new deals will only expand upon those developments in the group's estimation.
"The eight agreements in the latest generation of U.S. FTAsâ€”covering a total of 13 countriesâ€”have either moved the U.S. bilateral trade relationship from deficit to surplus or added to the surplus in every instance but one," the Chamber argued. "In fact, 2010 marked the third straight year in which the United States has run a manufactured goods surplus in excess of $20 billion with our 17 FTA partners as a group...The facts show American FTAs bring real benefits to U.S. exporters, workers and farmers."
Last December, the U.S. and South Korea forged what has become the expected final version of its deal, which was originally crafted at the behest of the Bush Administration in April 2007, mainly to address objections raised by the now on-board U.S. auto industry. President Barack Obama, working toward a stated goal of doubling exports within the next five years, hopes to sign the pact, if passed by Congress, into law by July. It should be the first of the three to be signed into law, if any are.
In April, President Barack Obama and Colombian President Juan Manuel Santos reached to an agreement on labor improvements, such as the rights those who unionize and labor workers' safety in once crime-plagued Colombia, long seen as a significant stumbling block to completing the FTA. Perhaps buoyed by China's attempts to build trade inroads with the nation, it's now the second of three trade agreements started during the Bush Administration to move forward. The framework of the Colombian FTA was forged in 2006. Also negotiated at that time was the framework of an FTA with Panama. Said FTA is lagging behind the two others in progress at present, but it remains no less likely to pass through Congress and Obama's desk eventually.
Brian Shappell, NACM staff writer
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- 25 chapters operating throughout the United States
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- Designed to aid the beginning credit professional as well as those at the mid- and executive-levels
- Membership available to all credit professionals who are members of NACM or CRF; direct membership available in areas with no CFDD chapter
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Meet fellow CFDD members during NACM's 115th Credit Congress & Expo in Nashville and join us for a special CFDD Luncheon on Tuesday, May 24â€”the perfect place to learn all about CFDD!
A semi-annual study released in mid-May predicts significant growth for the manufacturing sector, albeit at a slightly slower rate than last year's, throughout 2011 despite the continued slow economic recovery. But, unlike a recent NACM/Credit Managers' Index (CMI) report, it carries few warnings of the potential for volatility.
The Institute for Supply Management (ISM) predicts manufacturing revenue will increase by 7.5% for 2011, slightly off the pace of 2010s 7.9% growth rate for the sector. ISM briefly noted that an increase in prices for materials has been reported by some those polled and predicted a 0.6% hike in costs for the remainder of the year, but did not seem to believe such price increases will be too significant a drag on the sector's growth.
The institute's forecast is a little rosier than that of the April CMI, which painted a picture of general stability, but it's one that comes with plenty of warning signs of volatility creeping under the surface even as durable goods orders remain in a "generally positive place."
"Manufacturers have been hit with crippling price hikes in the last couple of months," said Chris Kuehl, PhD, managing director of Armada Corporate Intelligence and NACM economic advisor. "The cost of metals has soared and is so volatile that it is almost impossible to plan for the hikes. The same pattern has been seen for manufacturing depending on other raw materials like resins and plastics." Kuehl, who will be speaking in multiple sessions at NACM's 2011 Credit Congress in Nashville next week, added that "the commodity price surge has been near universal and has combined with higher fuel costs to put a strain on companies."
Meanwhile, on the supply side, ISM predicted a total 2011 revenue increase of 2.1% and a 0.9% employment uptick. The study noted that price concerns remain a "prominent area of concern in the non-manufacturing sector." Still, predicted continued, yet slow, revenue growth through year's end.
Brian Shappell, NACM staff writer
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A bipartisan bill that would create a U.S. covered bond market moved out of subcommittee earlier this month.
Reps. Scott Garrett (R-NJ) and Carolyn Maloney (D-NY) introduced the U.S. Covered Bond Act of 2011 earlier this year in March, but the bill has only just moved out of the House Financial Services Committee Subcommittee on Capital Markets and Government-Sponsored Enterprises, and into the full Committee.
"As our nation continues to recover from the recent financial crisis and certain credit markets remain locked, Congress must examine new and innovative ways to encourage the return of private investment to our capital markets," said Garrett, in a release from when the bill was originally introduced. "We must also consider creative ways to enable the private sector to provide additional mortgage, consumer, commercial, and other types of credit. I believe establishing a U.S. covered bond market would further these shared policy goals."
Covered bonds are similar to the asset-backed securities that played a large negative role in the 2008 financial crisis. The difference is that covered bonds remain on the issuer's balance sheet, providing investors with an added layer of security should the issuer, usually a bank or other financial institution, become insolvent.
The idea behind Garrett and Maloney's legislation is that if banks can make money off of loans by bundling and selling them as covered bonds, then they'll make more loans, thereby loosening a credit logjam and enhancing the nation's economic convalescence. Additionally, the concept of a covered bond market is enticing to lawmakers since it would provide a means to spur growth without adding to the federal deficit.
"One reason I am particularly interested with covered bonds is the fact that they can be a purely private means of finance without government guarantees or subsidies," said Garrett. "Many proposals to help alleviate the current strains in our credit markets focus on government loans or guarantees. However, I believe covered bond legislation offers a way for the government to provide additional certainty to private enterprise and generate increased liquidity through the innovation of a new marketplace without putting the taxpayers on the hook."
Jacob Barron, NACM staff writer
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