eNews February 23, 2012

February 23, 2012



News Briefs

  1. Romney Bankruptcy Sound Bite Working against Him in Key Home-State Primary
  2. SBA Increases Size Standards, Expands Eligibility as Senate Seeks to Fight Fraud
  3. Second Largest U.S. Bankruptcy Reorganization Wins Approval
  4. Senate Finance Chair Seeks Common Ground with Russia on Trade
  5. South Korean FTA in Effect within Month
  6. Ex-Im Opens $100 Million Credit Facility for Small Business Exporters

 

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Romney Bankruptcy Sound Bite Working against Him in Key Home-State Primary

Understanding the power of the sound bite, whether spoken or in print form, apparently isn't the forte of multi-time presidential hopeful and arguable frontrunner for the Republican nomination. The Obama Administration already appears to be licking its proverbial chops over Mitt Romney's recent quip "I am not concerned with the very poor," whether taken out of context or not. However, the incumbent team might not even get to pounce on it in a general election as recently surging Rick Santorum has taken the lead in polls predicting the outcome in Michigan where, despite his childhood roots, Romney has a considerable image problem largely based on the "Let Detroit Go Bankrupt" headline he penned as part of a now-infamous New York Times op-ed piece. And that could cost him dearly in the monumentally important Michigan primary taking place on Tuesday.

In the fall of 2008, Romney bashed President Barack Obama for the proposed bailouts of Chrysler and General Motors, and the headline that went along with the story has continued to follow Romney like a black cloud whenever he's shown his face in Michigan or other auto-dependent states like Ohio. Granted, Romney's point was about ways to better manage the bankruptcies to improve business prospects for the long-term health of the companies and never to suggest a liquidation that would have caused millions to lose their jobs. Still, Romney's political opponents on both sides of the aisle have repeatedly pounced on "Let Detroit Go Bankrupt," and the person in the best position to reap the rewards is Santorum.

For his part, Romney has doubled-down on his bankruptcy theories and continues to rail against the Obama administration-engineered bailouts of Chrysler and GM, lobbing allegations such as "crony capitalism" and that Washington sold out taxpayers to strong unions when analyzing the administration's role in the solution. The problem is, as most experts have acknowledged to varying extents often based on political affiliation, the government-assisted bankruptcies for two of Detroit's "Big Three" were success stories. And many believe the restructuring efforts would not have been nearly as successful without some financial assistance from the federal government. It's an assertion shared by Bruce Nathan, Esq. of Lowenstein Sandler PC, among others, during interviews in 2011.

"If that bankruptcy had dragged out for GM or Chrysler, they could have died. It was bankruptcy at its best," Nathan had said. "Both came out of it having fixed a lot of their problems. Give credit where credit is due to Obama as well as [former President George W.] Bush. They actually started and implemented a strategy, and it worked. There's a big difference between that and second-guessing."

It is worth noting that both companies, as well as Ford, which didn't take assistance despite financial struggles, have been performing quite well and have propelled the industry to enjoy one of the hottest rebounds during what has been a somewhat sluggish recovery from the recession. How much the 2008 headline and Romney's criticism of a successful strategy will hurt him have yet to be realized, but with Michiganders heading to the polls Tuesday, the answer seemingly isn't far off.

Brian Shappell, NACM staff writer

Bankruptcy 2012: What's Hot, What's Not!

Bankruptcy 2012: What's Hot, What's Not! is just one of several sessions dealing with bankruptcy and troubled companies at this year's Credit Congress, June 10-13 in Grapevine, TX.

Check out the full schedule of events and register at http://creditcongress.nacm.org. But hurry—the early bird registration deadline is March 2!

SBA Increases Size Standards, Expands Eligibility as Senate Seeks to Fight Fraud

More small businesses than ever will soon be eligible for programs available through the Small Business Administration (SBA). A final rule published by the agency earlier this month increased the revenue-based size standards in 34 industries and three sub-industries in the "Professional, Scientific and Technical Services" sector.

The updates come as a result of the SBA's comprehensive review of all size standards for the next several years, mandated by the Small Business Jobs Act of 2010. Numerous public comments were submitted and several observers said that the revision was long overdue. These most recent changes to the SBA's size standards were the first made by the agency in 25 years.

Increasing the size standards "will enable more small businesses to retain their small business status and...give federal agencies a larger selection of small businesses to choose from for small business procurement opportunities," said the SBA, which also estimated that as many as 8,350 additional firms will become eligible for SBA programs as a result of these revisions.

While the SBA increases access to its financing programs, and simultaneously increases competition for small business contracting funds, high-ranking lawmakers are keeping an eye on fraud in the agency. Most recently, Senators Mary Landrieu (D-LA) and Olympia Snowe (R-ME), chair and ranking member of the Committee on Small Business and Entrepreneurship, respectively, reiterated their call for swift passage of the Small Business Contracting Fraud Prevention Act (S. 633), a bipartisan bill that would aim to prevent federal contracting fraud.

"It is imperative that the House of Representatives pass the critical contracting fraud prevention legislation that the Senate has already unanimously agreed to," said Snowe. "In testimony before our Committee, SBA Inspector General Peg Gustafson noted that our bill 'will greatly assist [her] office's efforts in deterring, detecting and prosecuting false statements made to obtain...contracts.'"

Specifically, the bill would provide a comprehensive oversight framework within the SBA to execute effective certification, surveillance and monitoring of small businesses, as well as increase criminal penalties for companies awarded contracts through fraudulent means. S. 633 passed the Senate unanimously in September of last year and has 13 bipartisan cosponsors, yet the House has yet to take up the legislation.

Jacob Barron, CICP, NACM staff writer

FCIB International Credit Executives (I.C.E.) Conference

Westin Michigan Avenue Chicago • May 2-4, 2012

INNOVATION THROUGH PRACTICAL APPLICATION

Roll up your sleeves and get back to basics during this annual event aimed at helping you become a better professional through practical application.

  • Learn applicable, hands-on techniques during the Productivity Enhancement Roundtable
  • Discover best practices from real-life case studies in the Trade Compliance session
  • Get real answers to your toughest day-to-day credit and country issues, obstacles and challenges during the Doing Business in the BRICs session
  • Establish new networks and build lasting business relationships

As an NACM member, register at the FCIB member rate of $695 (before March 21st )/$825 (after March 21st).

To view the entire I.C.E. conference program, please click here.

Second Largest U.S. Bankruptcy Reorganization Wins Approval

Like Lehman Brothers before it late last year, the complicated and litigious bankruptcy reorganization of Washington Mutual can see the light at the end of the tunnel as a U.S. Bankruptcy Court judge has approved a plan after a group of angry creditors acquiesced hours earlier.

On Friday, Judge Mary Walrath approved the Washington Mutual (WaMu) reorganization plan, the second largest in U.S. history, after some three-and-a-half years of wrangling. Among the fallout from the case is what could be seen as a small victory for lower-level creditors. Even though most will receive pennies on the dollar as a result of the expense of a drawn-out case, it was a shock to many watchers that lower level creditors were able to recoup anything. It also found that the court, or at least Walrath, was not as willing to promote secured, senior creditors on the backs of others to the extent many believed would occur.

Walrath, who rejected multiple WaMu reorganization plans because of opposition from creditor groups, was able to approve of this one because of a deal struck last week with a group of debt holders. The group, mostly securities investors, fought against previous plans because the debt was converted into stock—they would have received significantly less value out of stock than out of the categorization of being a holder of debt. The agreement includes their receiving $18 million from JPMorgan Chase, which purchased WaMu assets after its collapse, as well as the reimbursement of millions in legal fees.

Marked by their size, drastically different plans and legal wrangling between creditors, attorneys and judges have characterized Lehman Brothers and WaMu as the two most difficult bankruptcy proceedings seen in U.S. court history. If nothing else, the cases may have illustrated the versatility and adaptability of the Chapter 11 system.

"To process the claims and have some sense of order going forward was quite an achievement," said Scott Cargill, Esq. Of Counsel at Lowenstein Sandler PC in a late 2011 NACM interview about the implications of the massive reorganization cases. "In 2008, there were a lot of fears about whether our restructuring system could even handle something like this."

Brian Shappell, 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.

Click here to learn more about NACM's Distressed Business Services.

Senate Finance Chair Seeks Common Ground with Russia on Trade

Russia was formally invited to join the World Trade Organization (WTO) at the end of last year, and their membership could create a world of opportunities for U.S. exporters. However, these opportunities could be left unfulfilled if Congress doesn't act on legislation approving permanent normal trade relations (PNTR) with Russia before their government approves its accession agreement.

To speed up the process and get the rest of a wary Congress on board, Sen. Max Baucus (D-MT) met with Russian officials on a recent trade mission designed to ensure that the U.S. takes full advantage of Russia's entry to the WTO. Russia will become an official WTO member 30 days after ratifying its accession agreement, which it must do by early July. If, by that point, Congress has not passed legislation providing Russia with PNTR, the U.S. could miss out on several lucrative business opportunities.

Lingering concerns about intellectual property rights and market access for U.S. companies have led Baucus and his colleagues to urge both the WTO and the U.S. Trade Representative to hold Russia to a very high standard as the country joins the global trade collective. Much is at stake when it comes to the country's accession: while U.S. exports to Russia currently average about $9 billion a year, that number is expected to double within five years as a result of Russia joining the WTO.

"Expanding trade with Russia could mean billions of dollars of new opportunities for American businesses, ranchers and farmers and create thousands of jobs here at home. But Russia has to play by the rules, and having Russia in the WTO will help to make that happen," said Baucus, highlighting some specific barriers still handicapping the U.S.-Russia trade relationship. "Russia has made progress opening its economy over the past two decades, and it's critical this progress continues through its WTO accession. Russia now needs to end its unscientific barriers to agricultural products like beef, poultry, pork and dairy, and it needs to improve enforcement of intellectual property rights."

"Establishing permanent normal trade relations with Russia would be a major boost for our exports and will help us address these serious issues in the WTO," he added.

Baucus met with Russian President Dmitry Medvedev, as well as First Deputy Prime Minister Igor Shugalov, who serves as Russia's top official on economic and trade issues, and Minister of Economic Development Elvira Nabiullina.

To learn more about how to best export to Russia, tune into FCIB's upcoming "Doing Business in Russia" webinar, scheduled for March 21. Click here to register.

Jacob Barron, CICP, NACM staff writer

Best-in-Class Service from NACM's Mechanic's Lien and Bond Services (MLBS)

MLBS' Lien Navigator is a web-based service that provides up-to-date information for all 50 states and Canada, including notice, lien, payment bond and suit timelines, procedures and other relevant information in a state-by-state/province-by-province format.

MLBS also offers two preliminary notice to owner (NTO) services, deadline tracking, a lien and bond filing program and a suit against bond and foreclosure service. Both NTO services include, at no additional charge, a Next Action Notification Email. These reminders are sent automatically to ensure that your lien and suit deadlines are met during each step of the lien process.

Please join us for two new MLBS Workshops—Liens & Bonds: Managing the Process from a National Perspective and/or UCC Filings and the Best Possible Position to Get Paid. Both will be held on Wednesday, March 21, 2012, 8:00am-12:30pm and/or 1:00-3:15pm, Los Angeles, California.

For more information on NACM's MLBS and these workshops, click here.

South Korean FTA in Effect within Month

It's been a long, hard-fought trip to the finish line, one wrought with political and labor interests, even though a free trade agreement (FTA) between the United States and South Korea was forged some five-years ago. But now, barring a threatened yet unlikely veto by South Korea opposition lawmakers, the FTA is set to go into effect in a few weeks.

U.S. Trade Representative Ron Kirk and South Korean Minister for Trade Park Tae confirmed that the U.S.-South Korea FTA will enter into force on March 15. The deal's value is estimated at nearly $90 billion. Getting the measure through saw U.S. supporters and opponents alike coming from both political parties as the idea of job protectionism divided lawmakers more on regional lines than the usual partisan ones. In South Korea, the divisions seemed to come from two groups: big business versus the middle class and working poor. Some painted the deal as more beneficial to the United States and more of a move for the sake of appearances and posturing on the part of Seoul. To wit, domestic manufacturers in the automotive and agricultural industries will gain market access with the Asian trade partner never realized before within said industries.

Late last year, the final significant hurdle was cleared as South Korean ruling party lawmakers ignored a significant portion of the voter base fighting the pact over the fear of job losses or economic hits and called a hasty, surprise vote to push through confirmation of the final agreement. As a result, the FTA, which originated during the Bush Administration and was signed by President Barack Obama about one month prior to the chaotic South Korean vote, passed overwhelmingly there but not before some unrest. Fights broke out between lawmakers and at least one opposing South Korean politician allegedly released some form of tear gas or pepper spray in parliament chambers.

The pact was among three Free Trade Agreements (FTAs) passed by Congress in October. The effort to pass them gained momentum in 2009 after President Obama started publicly discussing his goal of doubling U.S. exports by 2014. Approval of the FTAs with South Korea, Panama and Colombia had long been seen as important to boost business for U.S.-based companies feeling the pinch of lower domestic demand. The FTAs, in theory, will significantly expand U.S. exports in those markets, help small businesses and lower tariffs on American goods. The Korean FTA was widely regarded as the most significant of the three new U.S. pacts and will be the first to go into effect.

Brian Shappell, NACM staff writer

Look Who's Covering the CMI

The Wall Street Journal, Bloomberg, Businessweek and the LA Times to name just a few!

Be a part of this leading economic indicator. Participate in the monthly Credit Managers' Index by going to the CMI web page during each survey period. It only takes a few minutes and earns you points toward recertification.

Need a reminder? Sign up for the CMI email alert to be notified each time the survey opens.

Ex-Im Opens $100 Million Credit Facility for Small Business Exporters

Following its biggest year ever, the Export-Import Bank of the U.S. (Ex-Im) is using its momentum to push new products designed to enhance exporting even further. The most recent new Ex-Im service is a $100 million revolving credit facility, designed for small businesses, called the Global Credit Express (GCE).

"Global Credit Express is an innovative product that will help small business exporters obtain the financing they need to improve their bottom line and succeed in a highly competitive global economy," said Ex-Im Chairman Fred Hochberg. "This new product will provide additional liquidity for eligible American exporters and access to financing at a reasonable cost."

Through GCE, small business exporters may be eligible for a revolving line of credit, up to $500,000 for 6-12 months. The program will begin in a pilot phase, wherein an additional $100 million in financing will be made available through a select number of lenders nationwide. After the pilot period, Ex-Im will evaluate the results of this direct loan program and determine whether to increase the available amount. Potential participants should be aware, however, that the product is specifically designed to finance the business of exporting, rather than individual export transactions, like other forms of financing available from other lenders.

The GCE was first announced at a recent event attended by Hochberg and President Barack Obama at a Boeing assembly facility in Everett, WA, aimed at touting the administration's trade successes while urging officials to go even further in their attempts to support exporting.

First on the list is a reauthorization of Ex-Im altogether, which President Obama urged Congress to approve before it was too late. The bank's authorization was last extended in December 2011 through the end of May 2012, at its current lending ceiling of $100 billion. Due to increased demand, however, Ex-Im predicts that it will reach this ceiling at the end of March. Unless the bank's authorization is renewed and its lending cap raised, Ex-Im would be forced to halt all new transactions.

To find out more about how to grow your company through exporting and international trade, visit FCIB's website at www.fcibglobal.com.

Jacob Barron, CICP, NACM staff writer

It's Here! Introducing the "NEW" Manual of Credit and Commercial Laws—2012 Edition

Now in four separate volumes to meet your specific needs. Buy whatever volumes you need, or get the complete set at a significant savings!

NACM has re-envisioned and revitalized its flagship publication, the Manual of Credit and Commercial Laws. Not only will the new edition continue to provide essential information for credit and finance professionals, it will do so in a highly flexible and more affordable format. In its new form, the Manual of Credit now comprises four volumes that either may purchased separately or as a comprehensive set. Chapters and appendices from the book have been reorganized under the following headings:

• Volume I: General Business Law, Related Statutes and Collections
• Volume II: Commercial and Consumer Credit Topics
• Volume III: Construction Issues
• Volume IV: Bankruptcy and Insolvency Issues

Many sections within the chapters have also been reworked, including those covering cellphone-based collection efforts, FTC rulemaking in terms of decedent estates and data security/breach initiatives at the federal government level.

Click here to visit NACM's online Bookstore for Manual features and updates, and more information about the wide array of resources available to today's credit professionals.

 

To view past eNews issues or to visit the NACM Archives, click here.

 

 

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