April 27, 2010
A popular draw each year at NACM's Credit Congress are sessions offering attendees close access to some of the top bankruptcy and creditors' rights attorneys in the nation. This year's event in Las Vegas, being held from May 16-19, is sure to be no different.
Among the Wednesday sessions is "The Legal Clinic: Ask an Attorney." At least eight prominent attorneys will be available to answer direct questions on a variety of topics. A series of small group discussions each will be led by one of the attorneys with expertise in the field. Slated discussion topics include preference claims and defenses, Section 503(b)(9) claims, reclamation, "Red Flags," credit enhancements and non-bankruptcy alternatives, among others.
According to session panelist Deborah Thorne, Esq., of Barnes & Thornburg LLP, it's a tremendous and even fun opportunity to gain personal access. "You get to sit around a table and focus on a topic of interest—it's very informative," said Thorne. "It's like speed dating with an attorney. You can quickly get information you want...and you're not getting charged by the hour."
Thorne will also present "Preferences, 20-Day Delivery Claims Update" immediately following the "Legal Clinic" session. The session focuses on the wide array of critical changes in preferences and reclamation as well as related case law that has changed the game of late. Again, it's an opportunity for attendees to help evaluate risks before calling an attorney (e.g., when the meter starts running).
"There have been a lot of new cases that have come down in recent months on 503(b)(9) not just to be paid on 20 days delivery and preference," said Thorne. "The law has matured. Debtors' counsel are pushing back and challenging it...It's such an important topic to creditors and sellers of goods."
Thorne notes cases have ramped up since 2008, in part because increased arguments against the allowance of claims due to alleged preference liabilities. Such disputes could drag out payments for months or even years creating the potential to cost a lot more money.
To learn more about NACM's Credit Congress, or to register, click here.
Brian Shappell, NACM staff writer
Executive Exchange Sessions at Credit Congress
New to NACM's Credit Congress, these interactive forums are led by a moderator and supported by a panel. The six subject areas are:
18022. Building and Construction
18023. Credit and Collections
18024. International Issues
18025. Performance Metrics
18026. Agriculture, Steel and Other Commodities
All Executive Exchange sessions are held on Monday, May 17th from 2:00-5:00pm. Attendees are encouraged to submit questions and topics for discussion in advance to the NACM Meetings Department. Visit the Credit Congress web pages for more information about these sessions and all Credit Congress has to offer.
In a recent discussion on NACM's LinkedIn group page, credit professionals are describing the different things that are getting or got them through the financial crisis. More than one noted that, while the crisis was difficult, it has given their profession a different stature within their company.
"The two good things that have come out of this are: 1) an increased realization by top management that credit departments are very important and the skills we have are very valuable, and 2) credit departments across the world have stepped up their game to meet the challenge," said one discussion participant. "The 'crisis' has helped us improve our skills."
"I think upper management can now see how valuable we are," said another. "Back in the day, upper management seemed to always praise the sales department even though we all know a sale is not a sale until it is collected."
While senior management may now see the value of sound credit and risk management as well as how it applies to the company's bottom line, this realization may require a bit more from credit departments and their staff. Company officials now want to know more, and earlier, about a company's key customers should things start to turn south. It's still important for credit professionals to be prepared to present information decisively and accurately, to leave senior company officials with the things they can expect to see from this customer in the coming months and how the credit department plans to handle it.
To learn more about how to gather and structure readily available information into a meaningful report for management, join Ken Rosen, Esq. at 3:00pm EST on May 3rd for his NACM teleconference, "Providing Senior Management the Facts on Financially Distressed Key Customers." Rosen will equip attendees with ideas and concepts they can implement immediately to assist in the development of decisive reports reflecting the real financial condition of their most important customers that, in turn, can be easily presented to senior officials when necessary.
For more information, or to register, click here.
Jacob Barron, NACM staff writer
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A powerful investment group seeking a delay in a company bankruptcy auction was rebuffed by a Third Circuit three-judge panel, and the auction remains set for today. The investors were planning to use the increasingly common, but controversial, credit bid method in an attempt to buy assets of Philadelphia Newspapers LLC and may be unable to do so because of a separate appeal working its way through the court system.
The U.S. Court of Appeals Third Circuit panel rejected a request from a group that includes Angelo, Gordon & Co. and Credit Suisse to delay the company auction until at least May. The investor group's intentions to use a credit bid, in which it would use debt owed to them by the company to then buy its assets largely without cash, were denied in a previous court proceeding to use such a strategy in the Philadelphia Newspapers situation. The credit bid appeal remains in limbo in the Third Circuit as well. For its part, Philadelphia Newspapers officials alleged the move was a blatant attempt to impair the organization's ability to emerge from bankruptcy restructuring before slipping into financial ruin.
The rise in credit bidding is partly attributable to the spike in pre-negotiated bankruptcies, which are less settled than a pre-pack filing plan. In essence, some non-traditional lenders such as hedge funds can buy into more second-lien debt—which is more speculative and thus cheaper than first-lien debt—and use it to position themselves to emerge as buyers of the filing company through a quick sale. In essence, the new creditor can use its newfound leverage by threatening to stop lending to the reorganizing company unless the filing company capitulates.
A recent Standard & Poor's study raised significant concerns over the fairness of the practice. S&P, among others, believes the practice often leaves out some of the lower level creditors and pays off some handsomely at the expense of others. Credit bids essentially allow the creditor "to seize the collateral being sold if the auction does not result in an offer above the amount of allowed claims, effectively setting a floor price to the auction," said S&P.
"It can present a challenge for a debtor to conduct a robust auction process with full due diligence processes when the time frame that DIP lenders set is very short," the S&P report argued.
This topic is also discussed in "The Need for Speed," a Business Credit magazine story focused on the risk associated with the newfound trend of rapid bankruptcy proceedings. The story is featured in the upcoming May issue, due out later this month.
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.
A bipartisan group of lawmakers is seeking a comprehensive government investigation into the effects of China's intellectual property rights (IPR) infringement on American jobs and the U.S. economy.
In a letter to U.S. International Trade Commission (ITC) Chairman Shara Aranoff, Sen. Max Baucus (D-MT) and Chuck Grassley (R-IA) noted that IPR infringement is estimated to cost hundreds of thousands of American jobs annually and called on the ITC to produce two reports over the next year quantifying the matter. Intellectual property refers to patents, copyrights and trademarks.
"American workers, the American economy and American businesses are suffering because of China's failure to curb the rampant theft of American intellectual property," said Baucus. "China needs to step up to the plate, live up to its international obligations and protect and enforce U.S. intellectual property rights."
Additionally, the senators urged the ITC to investigate how China's policies favoring indigenous innovation can have a negative effect on U.S. companies operating in the Chinese market, and thereby affect the ability of those companies to create domestic jobs.
"We need to do more to crack down on China's manipulative trade policies," Grassley said. "China is using its 'indigenous innovation' program to discriminate against U.S. products in the Chinese market. And, rampant infringement of intellectual property rights costs the United States billions of dollars each year. These reports will shed light on the problem and help us solve it."
The formal request made by the senators officially triggers the ITC's undertaking and completion of the two reports.
Jacob Barron, NACM staff writer
Join the CFDD Network
CFDD exists, in part, to dynamically impact NACM's global vision by being the leader in educational programming and direction, thereby setting industry standards for professional excellence. To learn more about CFDD, click here.
Join CFDD at Credit Congress at its annual Awards and Installation Luncheon on Tuesday, May 18th! For more information, click here.
Economists at FCIB's annual International Credit Excecutives Conference (I.C.E.) predicted the worst days of the economic downturn are now well in rearview mirror and will likely remain there...at least for this economic cycle. However, signs of a strong recovery could be countered for a time by lingering risks in the financial system that have yet to be mitigated.
NACM Economist Chris Kuehl, who is also managing director of Armada Corporate Intelligence, told I.C.E. attendees that the U.S. economy continues to recover from its deep, painful recession. However, the recovery is being driven by exports and industrial production more than behavior from a newly cautious American consumer base.
"It's not exactly champagne cork-popping time," warned Kuehl. "It's more like wine box-opening time."
What will emerge post-recession in business credit will very likely be a greater frugality across the board. Kuehl promised the days of widespread "no income, no assets" credit applicants garnering loan dollars are over for the foreseeable future, which is a positive development for the long-term sustainability of the U.S. and world economies.
"The whole thing just fell off," said Kuehl of the over-abundance of liquidity during the mid-decade economic boom. "If you got a bunch of credit managers together today, most would say, 'If I did this, I'd lose my job.' We're kind of back in our element a bit."
While catch words such as "mild recovery" and "sustainability" appear to be en vogue as part of a newly emerging cautious optimism, Kuehl said there are still some hurdles that need to be cleared before the economic recovery can advance at a robust pace. Among the top concerns are global geopolitical concerns fueling a likely spike in energy commodity prices, weakness in the value of the dollar and uncertainty on the part of the banking industry over regulatory changes being proposed by an increasingly partisan U.S. Congress.
Meanwhile, keynote speaker Freddy Van den Spiegel, chief economist for European financial firm BNP Paribas Fortis, joked that U.S. lawmakers will continue to act surprised by what caused the downturn and pass new regulations to "make sure this never happens again." But waiting to see the U.S. lawmakers' plan and the real impact of proposed changes could continue to impede the needed return of market and consumer confidence.
"All of this new regulation will create a new environment, but we don't yet know what the consequences will be," said Van den Spiegel before later adding that fixing the ills of the financial system is a difficult balancing act.
Still, Van den Spiegel believes the worst of the crisis has come and gone, and a return of confidence will start to fuel needed consumer spending and market investments. Helping drive that improvement will be the stabilization of many financial institutions.
"Banks have already digested a large portion of their losses," he said. "What we've seen is a re-capitalization of the banking system. Banks are better capitalized than before the crisis. So, the bank system seems to be more resilient than before the crisis." In essence, frozen credit conditions should thaw substantially during the remainder of 2010 and throughout 2011, though it could take up to five years to return to a level traditionally considered normal, Van den Spiegel suggested.
However, some risks to any optimistic outlooks remain present. Van den Spiegel noted, "There is still a huge mess to be cleaned up" to get back to a truly sustainable economic environment, both in the U.S financial system and abroad.
"Normally, a crisis is a moment where excessive behaviors are corrected and bubbles are brought down so we can start the recovery from a clean table," he said. "This time, the table is not clean. This crisis did not resolve all existing imbalances."
Brian Shappell, NACM staff writer
MLBS Offers Complete Lien and Bond Services and More
NACM's Mechanic's Lien and Bond Services (MLBS) brings best-in-class service options to today's construction credit professional.
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.
For more information on NACM's MLBS, click here.
U.S. Secretary of Defense Robert Gates recently called on Congress to approve President Barack Obama's reform plan for the nation's export controls.
"The fact is, America's decades-old, bureaucratically labyrinthine system does not serve our 21st-century security needs or economic interests," he said, in a recent speech to Business Executives for National Security. "Tinkering around the edges of our current system will not do."
Specifically, Gates noted that the bureaucratic apparatus that has formed around export controls now involves an amalgam of authorities, roles and missions scattered around the federal government. "In theory, this provides checks and balances—the idea being that security concerns, customarily represented by the Department of Defense, would check economic interests represented by the Commerce Department and balance out diplomatic and relationship-building equities represented by the State." However, the result has instead been a confusing and error-prone system that raises questions about jurisdiction on the part of companies and government officials alike.
"Our plan relies on four key reforms: a single export-control list, a single licensing agency, a single enforcement-coordination agency and a single information-technology system," said Gates. "A single export-control list will make it clear to U.S. companies which items require licenses for export and which do not. This single list, combined with a single licensing agency, would allow us to concentrate on controlling those critical technologies and items that are the basis for maintaining our military technology advantage."
"Items that have no significant military impact, or that use widely available technology, could be approved for export quickly," he added.
Gates noted that the president hopes to have legislation to sign to enact the reforms before the end of 2010.
Jacob Barron, NACM staff writer
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A new study conducted by the Mortgage Bankers Association (MBA) found that commercial and multifamily mortgage credit lending declined by 46% in 2009.
The amount of commercial real estate loans closed by financial firms dropped to a total $82.3 billion in 2009 and a per-loan average of $7.2 million. When firms acting as intermediaries are added to the mix, the 2009 origination total increased to $111.5 billion, MBA noted. The largest decreases could be found in lending targeted for new commercial office properties, followed by retail and hotel development. MBA researchers note there simply was little appetite for commercial construction throughout the year, largely because of high vacancy rates and the shrinking sizes of many companies.
The largest number of originations (1,203) emanated from the greater New York City market, which also boasted the highest dollar total for the year (about $16.2 billion). The Charlotte market closed on the second largest number of originations (1,009). Meanwhile, the largest per-loan averages were found in greater Chicago ($21.7 million per loan) and Boston ($19.4 million). Among the least active commercial real estate markets in the nation were Providence, RI, Louisville, KY and Memphis, TN.
Brian Shappell, NACM staff writer
On April 19, 2010, Kansas Gov. Mark Parkinson (D) signed into law S.B. 377, which would cap retainage at 5% for properly performing contractors and subcontractors, and allow contractors and subcontractors to provide a retainage bond, an irrevocable bank letter of credit, certificate of deposit, cash bond or other type of asset or security in lieu of retainage. In addition, the law requires retainage to be released within 30 days of substantial completion as part of the regular payment cycle, and allows for the release of retainage to early-finishing subcontractors. The law takes effect July 1, 2010.
Source: American Subcontractors Association (ASA)
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