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December 1, 2009

News Briefs

  1. Bankruptcy Filings Up 34% in FY09
  2. Complying With PCI-DSS
  3. Supreme Court Set to Hear Arguments on PCAOB, SOX's Constitutionality
  4. Third Quarter Mergers and Acquisitions Are a Mixed Bag
  5. Latin America Poised to Recover From Crisis Faster Than U.S.
  6. Federal Government Approves Use of ConsensusDOCS Template Contracts for Use in Construction Projects

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Bankruptcy Filings Up 34% in FY09

Bankruptcy petitions filed in fiscal year 2009 jumped by 34.5% over 2008's numbers.

The most recent report released by the Administrative Office of U.S. Courts showed that a total of 1,402,816 cases were filed in the 12-month period ending September 30, 2009, compared to 1,042,993 cases in the same period ending in 2008.

Business filings experienced an even larger percentage increase, jumping 52% in FY09 to 58,721 from 38,561 in 2008. Non-business filings increased by 34% from 1,004,342 in 2008 to 1,344,095 in 2009. Chapter-wise, the largest increase was seen in Chapter 11, becoming increasingly popular with filings rising by 68% between FY08 and FY09. Chapter 7 filings, the most common Chapter filed, increased by 45% from 679,982 in 2008 to 989,227 in 2009.

The numbers were released just prior to the Thanksgiving holiday, in the wake of an announcement by the U.S. Bureau of Economic Analysis (BEA) that growth in the third quarter of 2009 wasn't as robust as initially reported. The original GDP growth figure of 3.5% was revised down to 2.8%, illustrating the tenuous nature of the nation's ongoing economic recovery.

Much of the blame for the increase in bankruptcies can be attributed to an overall shortness of credit nationwide. Over the last year, executives and congressional leaders have continually searched for ways to loosen up the country's credit markets, and while many indicators have shown signs of economic life, banks still remain reluctant to lend to consumers and businesses, especially those in the nation's struggling construction sector.

A full report with historical information can be found at the U.S. Courts' website here.

Jacob Barron, NACM staff writer

How to Manage Conflict...And Survive It!

Conflicts in today's business environment can often crop up quickly, and many people tend to react to them with their initial gut response. While an emotional reaction may seem natural at the time, it can often have negative ramifications for everyone involved and wind up turning a small disagreement into a major hassle. Join host Toni Drake, CCE of TRM Financial Services, Inc. on December 2nd for the NACM added-advantage teleconference, "How to Manage Conflict...And Survive it!" Learn why effective conflict resolution takes precise, considered communication, as well as constructive management. This teleconference will give attendees the tools they need to more carefully handle a precarious situation by identifying the various stages of conflict.

To register, click here.

Complying With PCI-DSS

As credit remains stubbornly unavailable in today's slowly recovering economy, many businesses small and large have come to rely on their trusty credit cards for operating capital. Accepting cards has become increasingly necessary for vendors but comes with a considerable amount of baggage, most notably the governing acceptance rules of the Payment Card Industry Data Security Standard (PCI-DSS).

Sellers looking to insure their business by ensuring their PCI compliance received a rundown of what the PCI-DSS requires of them from Don Roeber, manager of merchant PCI compliance at Fifth Third Bank, in his recent NACM-sponsored teleconference, "PCI Security Requirements."

Roeber began by delineating between the types of risk facing merchants who accept credit cards. "Operational risk is just the risk that you all have each day accepting plastic," he said, "the authentication techniques that you use to make sure it's a legitimate card and to make sure the person giving it to you is who they say they are."

This type of risk is taken care of pretty well by card issuers like Visa and MasterCard, but another type of risk specifically targets the actual acceptance of the card and the associated transactions. "Systemic risk is the risk of actually taking this data and processing that transaction," said Roeber. "It's the risk that you take on once you have custody of that data and having a security program around to keep it safe while you have it."

The magnetic stripe of a credit card contains a wealth of valuable data, much of which can be used to defraud the user if not taken care of properly. The PCI-DSS requires accepters to be judicious about storing this data, even to the point of limiting just how much of it they can retain before facing potential fines and penalties. "When you authorize a card, when you accept a transaction from a customer, after that card is authorized, after it's been approved, the only data that you can keep is the cardholder name, card number, the expiration date and the service code," said Roeber. "Any other data outside of those four fields is sensitive authentication information."

Roeber discussed other kinds of information hackers are looking for when defrauding customers buying from non-PCI compliant vendors and 12 requirements merchants must observe when it comes to the PCI-DSS.

For a replay of this teleconference, contact Tracey Flaesch at 410-740-5560 or at traceyf@nacm.org. For more information on NACM's teleconference series, visit NACM's website at www.nacm.org.

Jacob Barron, NACM staff writer

Partner With Someone You Can Trust

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Usually, the first step after the account is placed is to notify your debtor and make an immediate demand for full payment. The intensity of phone calls increases if payment is not made. If direct personal contact is appropriate, NACM Affiliates have many resources, including the ability to draw on a nationwide network of Affiliates. When necessary, NACM Affiliates will forward an account to one of the bonded attorneys in its tried and proven network. NACM Affiliates exhaust all collection possibilities before recommending litigation to you. All funds collected are placed in separate trust accounts.

NACM Affiliate collection services include:

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Click here to learn more about NACM's Collection Services.

Supreme Court Set to Hear Arguments on PCAOB, SOX's Constitutionality

The U.S Supreme Court is set to hear arguments regarding the constitutionality of the Sarbanes-Oxley Act (SOX), one of the decade's most controversial regulatory statutes that was passed in the wake of the Enron scandal.

In Free Enterprise Fund and Beckstead and Watts, LLP v. Public Company Accounting Oversight Board, the court will decide whether or not the regulatory body created by SOX, the Public Company Accounting Oversight Board (PCAOB), violates a number of well-established constitutional principles.

The foundation of the case is the plaintiffs' belief that the PCAOB violates the separation of powers clause, which dictates that all agencies must be accountable to one of the government's three branches. Since the board's wide-ranging policy-making powers operate free of presidential, congressional, or judicial oversight and control, the plaintiffs argue that its existence is unconstitutional.

Furthermore, the Free Enterprise Fund contends that since its members are appointed by the Securities and Exchange Commission (SEC), instead of by the president, the PCAOB also violates the constitution's appointments clause.

Following a two-year journey through the court system, the Supreme Court agreed to hear the plaintiffs' case, granting certiorari in May 2009. Arguments are scheduled to be heard next week, on December 7. A ruling will follow that may have ramifications for the accounting industry as well as the nation's small businesses that have so far been unaffected by the Act's considerably more stringent reporting requirements.

SOX has already faced challenges this year, with the SEC and Congress going tit-for-tat on the Act's application to smaller firms. After the SEC released a statement that small businesses would be forced to comply with SOX in June 2010, without exception, Rep. Scott Garrett (R-NJ) quickly responded with legislation that would exempt small businesses from the Act's auditor attestation requirement. The bill was then rolled into an amendment on an investor protections bill, which was recently approved by the House Committee on Financial Services.

Stay tuned to NACM's eNews and Credit Real-Time blog for further updates.

Jacob Barron, NACM staff writer

Dealing With Delinquent Accounts

The delinquent account is an increasingly familiar sight in today's difficult economic environment. While these customers can often be the most frustrating, a credit professional armed with the right tools, and the right knowledge, can get the most possible from these entities and wind up putting their company on top should the case come to court. For tips on how to do this, join Scott Blakeley, Esq. for his upcoming NACM-sponsored teleconference, "Dealing with the Delinquent Account: From Repayment Agreements to Collection Suits to Arbitration." Blakeley will lead attendees through the process of handling a delinquent customer and illuminate how different in- and out-of-court practices can aid unpaid trade creditors.

To learn more about this teleconference, or to register, click here.

Third Quarter Mergers and Acquisitions Are a Mixed Bag

Three key industrial sectors—industrial manufacturing, metals and chemicals—provided a mixed bag of mergers and acquisitions (M&A) results for the third quarter of 2009 (Q3), according to a series of quarterly M&A reports recently issued by PricewaterhouseCoopers LLP (PwC). A heightened pace characterized the industrial manufacturing sector in terms of both M&A deal volume and value; in fact, deal value rose 272%, representing a significant increase when compared to the prior quarter. On the other hand, the metals sector saw an increase in M&A deal volume but a decrease in deal value, while the chemicals sector witnessed a decline in deal volume.

More specifically, during Q3 the industrial manufacturing sector had 29 M&A deals with a disclosed value of $6.7 billion—a marked improvement over the 10 deals with a disclosed value of $1.8 billion that took place in the second quarter of 2009. The Q3 figures for this sector also reversed the declining deal value trends that characterized activity throughout 2008 and during the first half of 2009.

For the metals sector, 20 M&A deals valued at more than $3.5 billion were settled in Q3, representing a small increase compared to the 18 deals announced in the first quarter of 2009 and the 16 deals completed in the second quarter. Still, the 34 deals comprising M&A activity for the first half of 2009 were valued at $74.5 billion, a figure that is unlikely to be matched by the combined total value of M&A deals for the second half of the year.

The chemicals sector continued to reflect wan economic conditions as it saw the volume of M&A deals decline during Q3. While there have been 156 deals announced since the beginning of 2009, deal activity in Q3 was slightly lower than the previous two quarters, putting the sector on pace to finish the year more than 20% below 2008 levels. Similarly, total deal value for 2009 is likely to be more than 40% lower than total deal value for 2008.

Strategic buyers were primarily behind these results as financial investors remained on the sidelines, their absence a continuing reflection of tight credit markets and a lack of liquidity. Smaller deals have taken the place of their bigger counterparts, and will likely continue to characterize the pace and tone of deal activity until the overall economic outlook stabilizes.

As previously established in the earlier quarters of 2009, deal activities mostly targeted the Asia-Pacific region. As acquirers, this region dominated the metals sector, making up 75% of deal volume and 93% of deal value through Q3. Asia-Pacific also accounted for more than one-third of all deal value and volume in Q3 in both the chemical and industrial manufacturing sectors.

"The outlook on deal activity and deal value for the rest of 2009 is following along the same path we saw in the first half of the year, with positive hints emerging from the industrial manufacturing and metals segments," said Dean Simone, U.S. industrial products leader at PwC. "Lack of financial investors, tight capital markets and the practically nonexistent large-deal activity suggest we haven't turned the corner just yet in the industrial products sector. We are seeing some signs of hope in the Asia and Oceania region, but, by and large, we remain off the pace of 2007 and 2008 activity."

Source: PricewaterhouseCoopers

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Latin America Poised to Recover From Crisis Faster Than U.S.

Latin America has the tools to recover quickly from the current financial crisis due to its stable and well-capitalized banking sector, while it will take the United States more time mainly because of high unemployment and low levels of consumer confidence, experts said during the 43rd Annual Assembly of the Latin American Federation of Banks (FELABAN) in Miami.

"Although the worst seems to be over in the United States, we think it will take a long time for the labor market and the economy to return to normal," said David Wyss, chief economist for Standard & Poor's, during the event, which gathered more than 1,500 bankers from 43 countries. "We won't emerge from the recession for several more quarters at least."

Wyss said there are tepid signs of a recovery, although it is still too early to talk about a normalization of the U.S. economy.

Ricardo Marino, president of FELABAN, said the outlook for Latin America is much more encouraging, noting that the global crisis has affected the region less severely. "Latin America was one of the last regions to be affected by the crisis. It will be one of the first to recover. The region is much less vulnerable than in the past and its banks today are much more solvent, have greater liquidity and are well capitalized. Latin American banks haven't suffered and won't suffer the debilitating effects of the crisis that began in the United States," he added.

Standard Chartered Bank's regional head of research for Latin America, Douglas Smith, emphasized the region's positive aspects going forward.

"The first good news is that 2009 will end on a more optimistic note than had previously been thought. Looking ahead, the outlook is considerably better," he said. However, he pointed to three variables that could impact the region in 2010: Capital controls (to impede excessive currency appreciation); Brazil's elections, which, unlike in other electoral processes, could lead to a change in economic strategy and a tilt toward interventionism; and Argentina's return to the capital markets.

He added that Latin America's recovery will not be held back by Mexico's dependence on the U.S. or by intra-regional tensions that, in the case of Venezuela and Colombia, "are much more noise than anything else on the part of the government in Caracas."


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Federal Government Approves Use of ConsensusDOCS Template Contracts for Use in Construction Projects

The federal government has joined a growing list of groups that allow for the use of template construction contract documents prepared by a coalition of building, owner and surety groups known as ConsensusDOCS. The decision by the U.S. Department of Agriculture's Rural Utility Service opens the way for key template documents to be used in water construction projects worth up to $20 billion each year.

"It just got much easier for federal officials to write smart, effective contracts that help keep the work on time and on budget," said Brian Perlberg, Executive Director of the ConsensusDOCS coalition.

The federal agency announced that it will allow the use of two of the coalition's documents, the Electronic Communications Protocol and the Contractor's Qualification Statement for Engineered Construction. The protocol allows for key project information to be transmitted electronically, saving significant time and money. The qualification statement, meanwhile, provides federal officials with an easy-to-use form for evaluating contractor qualifications.

Perlberg noted that the federal government is the latest in a series of large-scale project owners to embrace the ConsensusDOCS contracts. He noted that states such as South Dakota, Michigan and North Carolina allow the use of the coalition's documents. He added that Habitat for Humanity now routinely uses ConsensusDOCS contracts on a number of its key projects.

"You don't need to start from scratch every time you need a construction contract," Perlberg said. "We spend years getting these contracts right so others can focus on getting the project right."

Offering a comprehensive catalog of more than 90 contract documents covering all project delivery methods, ConsensusDOCS contracts are the first and only industry standard contracts written and endorsed by 23 leading construction organizations. For more information, visit www.ConsensusDOCS.org.

Source: ConsensusDOCS Coalition

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