eNews May 24, 2012

May 24, 2012

News Briefs

  1. Senate Considers New Bankruptcy Bill Geared toward Small Businesses
  2. Call It Outsourcing or Call It Offshoring, Shared Services Centers En Vogue among EU-Based Companies
  3. Japan Takes Unexpected Ratings Knock from Fitch over 'Leisurely' Behavior
  4. Ex-Im Moves on Colombia after FTA Enters into Force
  5. Hilgers Joins Westhuis As Second Euro-Based FCIB Growth Award Winner
  6. ABI Poll Finds Trustees Not Necessary in All Chapter 11 Cases


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Senate Considers New Bankruptcy Bill Geared toward Small Businesses

In 2010, NACM worked with Senator Sheldon Whitehouse (D-RI) and his staff on a bankruptcy reform bill geared toward expediting the Chapter 11 process for small businesses.

While that legislation went nowhere then, Whitehouse has redoubled his efforts to reform the bankruptcy process for smaller companies with a new bill. The Small Business Reorganization Efficiency and Clarity Act, S. 2370, introduced at the end of April without any fanfare or notice, is now set for markup today, May 24, in the Senate Judiciary Committee.

It's expected to be voted out of the committee by a bipartisan voice vote without amendments, due in part to its noncontroversial nature. Much of the bill stipulates a number of research requirements for the U.S. Comptroller General, the Administrative Office of the U.S. Courts and the Executive Office of U.S. Trustees, all of which will result in a report to Congress on small business bankruptcies no less than a year after the bill's enactment.

Changes the bill would make include doubling the deadline by which the court must confirm a small business reorganization plan, from 45 days to 90 days, and establishing a new category of "cause" that may be considered by the court in deciding whether to grant the debtor's motion to dismiss a Chapter 11 reorganization case or convert it to a Chapter 7 liquidation case鈥攏amely, "failure of a small business debtor to designate itself as a small business debtor." This last provision is similar in some ways to NACM's recommendations on Whitehouse's previous bill from the last Congress, and suggests that small businesses should be compelled to make use of the bankruptcy process designed specifically for them.

A full copy of the bill can be found here. Stay tuned to NACM's eNews and blog for forthcoming updates on NACM's activities and analysis of the bill.

- Jacob Barron, CICP, NACM staff writer, government affairs liaison

International Business Sessions at Credit Congress

Going to Credit Congress? NACM and its industry-leading international division, FCIB, have developed upwards of 10 educational programs for the 2012 Credit Congress being held June 10-13 at the Gaylord Texan in Grapevine, TX.

Among the internationally-focused sessions this year are two more in the popular "Doing Business In..." series featuring Canada and Mexico, as well as "Credit Risk: No Safe Haven" and "An Uncertain Global Economy and Its Effect on Credit," among other sessions. And, as usual, FCIB will host its annual Credit Congress luncheon, scheduled for June 11, featuring popular guest speaker Chris Kuehl, PhD, NACM economist. There's still time to register for Credit Congress and, if already registered, to add these events.

For more information on FCIB, visit www.fcibglobal.com.

 Call It Outsourcing or Call It Offshoring, Shared Services Centers En Vogue among EU-Based Companies

Though outsourcing has its detractors in the United States and pro-labor countries because of protectionism and grim economic prospects, many international credit professionals at FCIB's Annual International Credit and Risk Management Summit in Hamburg still rely on at least one shared services center or have established new roots working in one.

FCIB Board Member Martine Zimmermann, credit manager at F. Hoffman-La Roche in Switzerland, told conference attendees that many in her industry have centers in places like India and some Eastern bloc countries. However, having faced uncertainties, with the most notable ones being salary increases and frequently changing staff, she admits some colleagues are not quite sold on them.

"This is especially an issue in India, where its known escalation as a key emerging economy is forcing a change in demographics, or at least demand from those who want to move up a rung amid newfound wealth, or for some, a livable wage," one credit executive at the conference noted during a question-and-answer session which intimated it might be the right time to stop outsourcing to India. But there are still plenty of Asian and Middle Eastern areas drawing attention for the same reasons India did a few years ago: significant cost reduction.

Meanwhile, outgoing FCIB Board Member Henk Swinnen, of Netherlands-based DSM Shared Financial Service Center, defended the use of shared services centers. He noted, "Let's say the average rate is 7000 euros鈥攊f you increase it 10% per year, it's still much cheaper than Holland and northern Europe." He added that his company was not outsourcing, but "offshoring," and noted that after 10 years of use, the experience of using a shared services center has been very positive.

Katarzyna Wawro, cash and credit team leader for Hitachi Data Systems' location in Poland, noted that, like many others, the shared services center of this foreign corporation's satellite office in which she works started small and expanded after finding success. "Initially, we only did simple processes. Now everything for managing credit is there and we are doing all collections for Europe, Canada and the United States," she said.

Not every delegate at the summit was without serious concerns, however. For example, panelist Raul Davila, international credit manager for New York-based Bamberger Polymers, was among those who said complications with moving functions of the business away from the main credit department can easily arise and often be harder to fix when thousands of miles away, or when operating on significant time differences, or in a vastly different cultural landscape.

- Brian Shappell, CBA, NACM staff writer

Look for much more coverage on FCIB's International Credit and Risk Management Summit on NACM's blog and in the July/August edition of Business Credit magazine!

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Japan Takes Unexpected Ratings Knock from Fitch over 'Leisurely' Behavior

In line with a March Business Credit article outlining the vast troubles facing Japan, Fitch Ratings sent a definite message that it believes the Japanese should be moving at a faster pace in addressing its growing debt concerns this week.

Concerns over Japanese debt and growth鈥攁s noted by experts like Adolfo Laurenti, deputy chief economist at Mesirow Financial, Masaaki Kanno of JPMorgan Security Japan Co., and NACM Economist Chris Kuehl, PhD in Business Credit鈥攅ased slightly as a surge in trade surplus was recorded just before the end of March. But this week's Fitch downgrade has put Japan back into prominence in the world media in the most dubious of ways...at least for those who still value such analysis from U.S.-based ratings agencies that have faced much criticism in recent months and years.

Fitch downgraded Japan's long-term foreign and local currency issuer default ratings to 'A+' from 'AA' and 'AA-.' They are the lowest ratings for the nation out of the big three raters, which also includes Standard & Poor's and Moody's Investment Services. Fitch also listed both outlooks as "negative."

"The downgrades and negative outlooks reflect growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios," said Andrew Colquhoun, head of Asia-Pacific Sovereigns at Fitch. "The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged, high-income countries, and implementation is subject to political risk." Fitch added that Japan's gross government debt is projected to approach 250% of GDP by early 2013, by far the highest of any developed economic power.

Endemic issues facing Japan include:

  • One word: debt. The debt-to-GDP ratio presently exceeding 200% is nothing short of astonishing.
  • The nation must figure out how to address energy needs, especially with an expected, perhaps unavoidable movement away from nuclear power, at least in the short term.
  • The export sector faces massive disadvantages compared to other regional nations' manufacturing sectors, especially China, because of its overly high, even troublesome, value of its currency (the yen) as investors continue to remove money from the euro.

- Brian Shappell, CBA, NACM staff writer

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Ex-Im Moves on Colombia after FTA Enters into Force

Well, that didn't take long.

The free trade agreement (FTA) between the United States and Colombia entered into force on May 15, and the Export-Import Bank of the United States (Ex-Im) has wasted no time in taking advantage of it. Three days after the FTA became effective, Ex-Im announced that it had signed a memorandum of understanding (MOU) with Banc贸ldex, Colombia's government-owned development and foreign trade bank, to work together to further facilitate trade between the two nations.

Specifically, the MOU accounts for an exchange of information on trade and business prospects that may present opportunities for cooperation. It's a statement of general intent between Ex-Im and its Colombian equivalent to promote the availability of Ex-Im financing to Colombian companies, particularly small and mid-sized ones.

"Colombia is one of the fastest-growing markets for U.S. goods and services in Ex-Im Bank's portfolio, and it was our single-largest country market last fiscal year. We join Banc贸ldex in celebrating the entry into force of the historic U.S.-Colombia free trade agreement on May 15," said Ex-Im Chairman and President Fred Hochberg. "Ex-Im Bank's agreement with Banc贸ldex will further encourage opportunities for both countries. It will also strengthen our ability to reach more Colombian buyers and assist more U.S. exporters in tapping the potential of this emerging market."

Banc贸ldex CEO Santiago Rojas noted, "The free trade agreement will be an opportunity for both countries to increase their bilateral trade, which will have a positive effect on the competitiveness of each country as well as on the ability to generate employment in some sectors. The cooperation between Ex-Im Bank and Banc贸ldex will support the opportunities that the free trade agreement could bring to entrepreneurs."

- Jacob Barron, CICP, NACM staff writer

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Hilgers Joins Westhuis As Second Euro-Based FCIB Growth Award Winner

In what came as a shock to perhaps only the winner herself, Regine Hilgers, CICP, EMEA credit controller based in Germany for Ashland Specialty Ingredients, was presented with FCIB's Service Development and Growth Award as the annual International Credit and Risk Management Summit came to her native Germany in May.

Flanked by the first-ever winner of the award, Mannes Westhuis, of Bierens Collection Attorneys, as well as NACM President Robin Schauseil and FCIB Director of Europe, the Middle East and Asia Noelin Hawkins, the seemingly tireless Hilgers accepted the distinction designed to recognize the valuable contributions volunteers are making to further grow and develop FCIB's member services and to encourage more people to serve. The award program is a way to thank and honor FCIB members who, by their demonstrated commitment and example, inspire others to engage in volunteer service.

"Receiving the award was really an unexpected surprise and maybe an even better-kept secret than the safe code at Fort Knox," Hilgers told NACM. "The acknowledgement of the work behind the scenes to make the FCIB a group by and for credit professionals around the globe is a big honor, and to receive it in front of such an audience is an unforgettable moment."

Westhuis, who received the award in Vienna in spring 2011, said he hopes the achievement by himself and Hilgers鈥攁s well as Luis Noriega, the first North American-based award recipient last year鈥攈elps inspire credit professionals to do more to support the profession and FCIB as an organization.

"The award says you can combine the 'what's in it for me'鈥攖he getting in touch with leads and customers鈥攚ith social and professional responsibility," Westhuis said. "It can go hand-in-hand, together. If you don't support an organization like FCIB, the credit profession won't grow and won't get better."

- Brian Shappell, CBA, NACM staff writer

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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.

ABI Poll Finds Trustees Not Necessary in All Chapter 11 Cases

A poll conducted by the American Bankruptcy Institute (ABI) found that trustee participation isn't necessary in every Chapter 11 bankruptcy filing. A clear majority felt that a trustee doesn't need to be appointed to, at the very least, restrain a debtor in possession (DIP) from abusing its position.

A whopping 64%鈥47% "strongly" and 17% "somewhat"鈥攄isagreed that the DIP model has proven to be too susceptible to abuse and thereby warrants a trustee to be appointed in every Chapter 11 case.

Under U.S. bankruptcy law, the DIP model allows a person or corporation who has filed bankruptcy to remain in possession of property upon which a creditor has a lien or similar security interest. Critics of the DIP model have recommended that a trustee be appointed in every Chapter 11 case to at least provide oversight for a DIP with limited management authority.

Conversely, 32% of the respondents鈥19% "strongly" and 13% "somewhat"鈥攂elieved that a trustee should be appointed in every case in order to prevent such abuses. Two percent did not know, or had no opinion on the matter.

DIP financing can often provide an ailing debtor with a second chance, but, as far as unsecured creditors are concerned, their participation can be a mixed blessing, as claims frequently fall by the wayside.

- Jacob Barron, CICP, NACM staff writer

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