Educational Sessions Focus On Before, After and During of Bankruptcy Filings

This year’s NACM Credit Congress had a lock on bankruptcy-focused sessions, offering both practical and academic looks at how creditors can stay ahead of their struggling debtors.

Veteran bankruptcy expert Hal Schaefer, CCE, CEW started the day off with “A Best Practice Guide to Managing Bankruptcies – Before and After the Filing.” His relaxed, conversational presentation stressed the importance of consistency in successfully navigating any debtor’s bankruptcy filing. “A policies and procedures manual is so important because it will come back to that,” said Schaefer.

“You will find that you may be in the position where you have opened yourself wide open for a preference action,” he said, adding that the timing of certain security measures that creditors take to protect themselves from a debtor default and subsequent preference action could raise some eyebrows. “Timing is a major factor. If you get a standby letter of credit and you get it nine months prior to the filing, it’s fine,” said Schaefer. “If you get it during the 90-day preference period, some red flags are going to go up.” Securitizing certain sales during that 90-day period will make it harder for creditors to eventually use the ordinary course of business defense, should a preference action come up.

Schaefer also noted that he greatly encourages credit professionals to serve on creditors’ committees, but he added that they should be prepared for some upper management pushback. “Always remember you have a fiduciary responsibility to all trade creditors, not just your company,
 he cautioned. “The strangest thing can happen when you’re sitting on the creditors’ committee and someone asks if we should go after preferences,” he noted, saying that often times some companies will want to avoid chasing these items if possible. “It does not make you a hero of the company and it’s a tough call but it’s well worth it.”

The two-part “Bulletproofing Your Credit Department” session was led by Val Venable, CCE, Bruce Nathan, Esq. and Wanda Borges, Esq., and made a solid case for why “Be prepared” should be the motto for credit professionals in addition to the Boy Scouts.

Venable and her attorney panelists offered a look at what signals a creditor can look for in a potential bankruptcy; not signals that predict bankruptcy in a month or two, but years in advance. “If you suddenly start getting trade references from your customers, it could mean that they’ve been cut off and could be looking for other suppliers,” said Venable. Another tip for spotting a potential filing down the road relates back to the advent of companies holding secured debt. “Multiple tranches of secured debt is now becoming the norm,” said Nathan. “You look at the bond debt or their bank debt and a warning signal could be an upcoming bond maturity date.”

“These warning signals are not warning signals of a bankruptcy two months from now, but a bankruptcy two years from now,” he added.

Credit Congress continues in Nashville, TN, at the Gaylord Opryland Hotel and Resort. Check NACM’s Blog for other prior updates.

Jacob Barron, NACM staff writer

‘Doing Business In’ International Series Off to Hot Start



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With small business exporting becoming an increasing important element of the majority of U.S. commerce, attendees at NACM’s 2011 Credit Congress in Nashville flocked by the dozens to the first sessions in a series of five on “Doing Business in ___” series hosted by FCIB.

The first of which, “Doing Business in Canada” drew well in excess of 100 people and became one of the first standing room only, so to speak, sessions of Credit Congress this year. Hubert Sibre, of Davis LLP, described Canadian business terms as extremely varied depending on the province. For example, Alberta is considered very liberal from a pro-debtor standpoint, while Quebec is considered much more conservative on matters of business and credit.

Sibre suggested registering one’s business in every province is almost essential because it greatly improves their position to protect intellectual property in Canadian courts, among other things. It also helps to have a subsidiary based there because bankruptcy judgments made in the United States are unenforceable without a Canadian court officially recognizing it.

A subsequent session on South Korea was led by Kyle Choi, Esq. of Bluestone Law Ltd. Choi spoke the various aspects of why the nation’s stock is rising in the international business community, which includes a highly evolved infrastructure, a wealth of available credit information available on companies there and business-friendly law. Also helpful is its prestigious business quality rating by the World Bank and, according to Choi, that its free-trade agreements with the United States and the European Union will increase competitive fairness by reducing the gap in tariffs, estimated by some at 10%. Also, he contends it will force South Korean companies to produce better products, components and services across the board.

But there are many cultural differences and barriers that need to be taken into account, such as a desire for officials at companies to speak directly with employees on their level with your company (don't pawn her off on the secretary) and the need for formality even in e-mail correspondence.

(Note: Subsequent sessions on Doing Business in Chile, China and Brazil had not been completed at the time of this posting. More coverage is coming to NACM’s blog, eNews and the July/August edition of Business Credit Magazine in the coming days and weeks).

Brian Shappell, NACM staff writer, can be reached brians@nacm.org

Silent Auction More than Successful at 2011 Credit Congress

Credit Congress provides attendees with a number of ways to support the NACM Scholarship Foundation. There’s the Annual Golf Outing, the raffle of a free Credit Congress registration, and the annual Silent Auction, held during the Monday night Beer and Browse Reception in the Expo Hall.

Previous events have auctioned off purses, clothing, hotel stays, and personal electronics, and this year featured an equally eclectic collection of items. Among them were some Nashville-inspired items like Jack Daniels’ Tennessee Whiskey and collections of classic country albums, while others included Kindle e-readers, iPods and elegant jewelry.

Attendees did their best to outbid their competition and win the item, all in a fun, spirited atmosphere, and for the benefit of the NACM Scholarship Foundation, which provides credit professionals with more opportunities to enhance their skills and raises the profile of the commercial credit field in general.

To learn more about NACM's Scholarship Foundation, click here. Stay tuned to NACM's Blog for more 2011 Credit Congress updates.

Jacob Barron, NACM staff writer

NACM’s 6th Annual Golf Outing Beats the Rain, Exceeds Expectations

NACM’s 6th Annual Scholarship Fund Golf Outing was an enormous success. Held annually at NACM’s Credit Congress, the event offers golfers a chance to support corporate credit education, while also having fun with their colleagues and friends.

This year’s 2011 edition was hosted at Gaylord Springs Golf Links, a short bus ride away from the Gaylord Opryland Hotel, where this year’s Credit Congress is still currently being held.  Although there was an early threat of rain, the weather held off through the afternoon, giving the golfers a sunny day of competition on the links.

Mulligans, throws and other score-reducing items were offered for sale to all the golfers, and they took great advantage of them to jockey their foursome into first place. Although the competition was fierce, only one foursome could prevail, and the one that did consisted of Jim Epperson, Betsy Rhodes, Tommy Rhodes, and Chuck Scott, with a collective score of 19 under par.

Other individuals winning prizes that day were D’Wana Chadwick, who won the ladies’ closest-to-the-pin contest, Darlene Pratt, who won the ladies’ long drive contest, Joe Grier, who won the men’s long drive contest, and Michael Williams, who won the men’s closest-to-the-pin contest. Williams generously returned his winning gift card so that it could be re-sold in the NACM Scholarship Foundation Silent Auction, providing the fund with even more opportunities to provide education funds to commercial credit professionals in need.

NACM thanks all of its golfers for their participation and support! Special thanks also to MiTek Inc., who donated golf towels for the event, and United TranzActions (UTA), who donated water bottles.

Stay tuned to NACM's Blog for more updates on Credit Congress, as it happens live from Nashville, TN.

Jacob Barron, NACM staff writer

Starting from Scratch Concept Helps Business, Credit Departments Reinvent Themselves in Better Imag



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Tuesday’s NACM Credit Congress Super Session, largely to discuss business of the organization, doubled as a call to arms for business and credit departments to act, instead of talk about acting, more and strive to re-invest in making their organizations run as they imagine.

Super Session Speaker Joe Calloway, author of best-seller “Becoming a Category of One,” used Nashville’s own Grand Ole Orpy as an example of a business reinventing itself somewhat. While that was by necessity, as an aftermath of massive flooding, Calloway said more businesses and professionals should take an opportunity to really look at things from their most basic levels and try to rebuild. 

“If you were starting from scratch, what your business look like,” said Calloway, building off a point made earlier in the day by NACM Chairman Kathy Tomlin. “We need to recreate ourselves…we need to start from scratch. To me it’s a great idea to sit back take a breath and think why would we not recreate ourselves?”

He mentioned companies including Google, which made a business plan out of nothing that existed before;  Apple, which watches lines of customer’s waiting for the first day of sales of products they don’t even yet know what they do (See: iPad); and Jim Beam, a company that prides itself on trying out new ideas quickly rather than waiting through weeks and months of tweaking and meetings all while not launching the product or service discussed. What those companies have in common, said Calloway, is a “culture of constant improvement”…it’s a tenant that should be a given.

(Editor’s Note: Check back for continuing coverage here at our blog. Extended coverage will be available in future editions of eNews and Business Credit Magazine).

Brian Shappell, NACM staff writer

Technology Front of Mind Among Credit Congress Attendees

As trite as it may sound, credit professionals continued to be asked to “do more with less.” Evidence of this was quite noticeable during a pair of Executive Exchange sessions at NACM’s 2011 Credit Congress in Nashville as the need for technology weighed heavily on the minds of credit professionals.

During the Executive Exchange session on Collections, Lynnett Harman noted that using the web and various social media platforms has proven very helpful not just in brand building, but with collections of information. However, when using any of these, credit professionals have to be careful to ensure content is fresh, because they won’t come back if information is out of date, she contended. Additionally, being careful about who is “friended” on places like LinkedIn, Twitter and Facebook is key because so much information tends to get out there into public consumption, including those who are competitors or potential fraudsters.

“They have some great elements about them, but there are also some significant issues of privacy,” she said.

Moderator Scott Lee noted his collections people use social media as well as Google searches to find those debtors who don’t want to be found because they don’t want to or aren’t able to pay. He quipped, “It’s amazing what you can find out” simply from what people post themselves.

Meanwhile, in the Credit Management session, an interesting exchange revolved around the idea of online credit applications and their pros and cons. Former NACM Chairman Val Venable said they can be very helpful for a credit department IF it’s used for business-to-business transactions ONLY. The moment you take personal information of the party, such as a social security number, the credit department becomes exposed to privacy protection mandates outlined in places like the Federal Trade Commission’s oft-misunderstood Red Flags Rules. But, in the B2B context, it allows speed, easy manageability and paperless options that can be desirable for a credit department. 
 
Asking for individual information puts you into privacy issues; you’d need a whole new level of security,” said Venable. “It’s a wonderful tool as long as you have things like an electronic signature disclaimer box must be checked by the customer. Don’t let it be a default…make them check the box. That will help you down the road when they say ‘I didn’t know I would have to pay a late fee’ or ‘I didn’t know what the terms were.’”

(Note: Check back for coverage from the 2011 NACM Credit Congress from Nashville on our blog throughout the week. Additionally, more detailed coverage will be included in future eNews editions and the July/August issue of Business Credit Magazine).

Brian Shappell, NACM staff writer

2011 Credit Congress Opens, NACM Awardees Unveiled

NACM's 2011 Credit Congress opened up officially with the unveiling of the exhibit floor Sunday evening and kicked into high gear Monday morning with the well-attended General Session program.

Attendance rose from 2010's level upon the return to the Music City. Tomlin applauded Nashville for demonstrating that it is a city of resilience in the wake of massive and damaging flooding that left portions of buildings like the Grand Old Opry and the Gaylord Opryland Resort, host venue of Credit Congress, submerged. 

NACM would like to congratulate 2011's group of award winners, who were recognized Monday at the Gaylord Opryland resort:
  • O.D. Glaus Credit Executive of Distinction Award: Mike "Pooch" Puccinelli
  • Chairman Award: Phyllis Truitt, CCE
  • CCE Designation of Excellence: Sheila Romes, CCE
  • CBF Designation of Excellence: Don Kruggel, CBF
  • CBA Designation of Excellence: Kathy Antoine, CBA
  • Instructor of the Year: Gwen Stroops, CCE
  • Student of the Year: Shane Norman, CCE
Chairman Kathy Tomlin also officially announced that Toni Drake, CCE, was named 2012 Chairman Elect during this past weekend, and she will assume the role following the one-year term of Marshall Kahn, CCE.

(Editor’s Note: Check back on NACM’s blog and our Twitter feed -- our handle is NACM_National --throughout the week for regular updates from 2011’s NACM Credit Congress in Nashville. Extended coverage will be featured in the July/August edition of Business Credit Magazine).

Brian Shappell, NACM staff writer

Preferences Talk on the Menu at Next Week's Credit Congress

NACM 2011 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 during legal-focused sessions at the annual conference.

“We’re in the middle of a preferences onslaught,” Nathan told NACM. “Given the uptick in Chapter 11 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 from it is that of the Circuit City bankruptcy proceedings, said Nathan.

Nathan is among several expert bankruptcy attornies presenting at this year's Credit Congress. Check out this week's edition of NACM eNews, available Thursday afternoon, for the full story. And check our blog throughout next week for regular updates live from Credit Congress in Nashville (running May 22-25).

Brian Shappell, NACM staff writer

U.S. Hits Debt Ceiling

The United States today hit its statutory debt limit of $14.29 trillion. 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, which, in layman’s terms, 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


U.S. Exports Reach Another Record in March, but Oil Important Stretch Trade Deficit

U.S. trade activity went through its growingly common routine of another one leap forward, one leap backward in March, the latest U.S. Department of Commerce Statistics indicate. The sum of it all remains an ever-growing trade deficit.

U.S. Commerce Secretary Gary Locke announced that U.S. exports of goods and services in March 2011 increased 4.6% between February and March to a record $172.7 billion. Both the goods side ($124.9 billion) and services ($47.7 billion) hit high-water marks historically. Among other records were the surge in the export value ($7.7 billion) as well as value of trade routed to Canada and South and Central America. The U.S. even managed to shave its Chinese trade deficit down from $18.8 billion to $18.1 billion, thanks in part to small business exporting levels. Ignoring the elephant in the room, escalating demand and prices for oil products, Locke celebrated the news in a brief statement on the Commerce website.

Far less discussed by Commerce officials was that the trade deficit increased to $48.2 billion, about a 6% increase from February to March. Oil imports spiked by 18% in March to a dollar-value-level of $39.3 billion, the highest in nearly three years.

Brian Shappell, NACM staff writer

CICP Road Diary: Entry #10 Did He Pass, or Didn't He?


I thought long and hard about how best to title this entry, it being the final one in my CICP road diary experiment. I wondered, “how best can I extend the audience’s breathless suspense, with which I’m sure everyone will read this entry?”

The answer, of course, is to make you all wait till the end to see whether I actually passed. Of course, with the advent of computer scrolling technology, you could just poke your head down there to find out what you want to know, but that wouldn’t be very sporting of you, would it?

In any case, I took the test last Friday, submitting it around 7pm, with maybe 30 seconds to spare. When they say it takes 4 hours and 15 minutes, they’re not fooling around. It might take you less time, and if that’s the case, then you probably lack the neurotic attention to detail that has been both the blessing and curse of my personality for the last 26 years, and I envy you. Really, I probably took the test twice, going through it once, then through it again (albeit at a quicker pace) to make sure everything had an answer, and a correct answer at that.

One thing that I anticipated going into the test (something that seems silly looking back) was that the multiple choice questions and the short answer questions would be separate. I expected to have to plow through 100 multiple choice questions before ever even encountering a comment box. Alas, the essays are interspersed throughout the test, in the order the material was presented, which was helpful in some ways and challenging in others. Once you get in a groove answering multiple choice questions, you might want to stay in that groove, so to have to start thinking more critically, and to be forced to answer a question using your own words, rather than just A, B, C, and D, can present something of a hurdle, one that could throw you off and cost you precious seconds.

So, rather than adjust to this new format of sporadic short answer questions, I went through, answering all the multiple choice ones first then working back through the essays. It just felt more comfortable that way, and you can go back and forth in the test, skipping questions that you don’t know in order to come back to them later, so I figured that would be best, rather than changing my approach on the fly.

Studying the post-tests was definitely the most helpful portion of my review regime. Some of the questions are similar, and even if they aren’t, they all are similar in format, organization and subject depth, so it prepares you for how the questions themselves will be phrased, which is helpful.

Having taken the test on a Friday, I figured I would go home, try not to think about it for the weekend, and then check my score when I got in on Monday. My curiosity got the better of me though, and on Saturday afternoon I logged into my work email account to see if anything had arrived. I honestly didn’t expect an answer, but, sure enough, Professor Paul Beretz had already sent me my results (which are only pass/fail; they don’t give you the actual percentages or anything).

In any case, I passed. I’m officially a CICP.

Since I’ve reached the end of this particular road, this entry will mark the end of my road diary efforts, and I hope it’s provided any prospective students with some hints about what they’re getting into, and what the course actually entails. If nothing else, I hope it’s at least been entertaining. I’ve enjoyed writing it, and I hope you’ve enjoyed reading it. Special thanks too to Paul and the FCIB gang, without whom the course, and this diary, would not have been able to exist.

If anyone needs me, I’ll be at my desk, using a pen to crudely scribble “CICP” onto every single one of my business cards.

Till next time,

~Jacob Barron, CICP

IRS Delays 3% Withholding Requirement to 2013

Hearing Scheduled in House Small Business Committee

The Internal Revenue Service (IRS) issued final rules last week that delay the 3% withholding requirement on government contracts until 2013. Under this arrangement, the withholding and reporting requirements will generally apply to payments made after December 31, 2012.

Additionally, the House Small Business Committee will hold a hearing in order to more thoroughly address the 3% requirement on May 26. A repeal bill in the House, H.R. 674, originally introduced by Rep. Wally Herger (R-CA), has also garnered more than 100 cosponsors.

All of these developments, taken together, could increase the chances for a full repeal of the 3% withholding before the end of the year.

Previous attempts to delay the provision have been supported by industry as well as Congressional and Executive leaders. In March, President Barack Obama called for a three-year delay, echoing the requests of other observers who have hoped that a delay will give lawmakers more time to enact a full repeal.

The 3% withholding requirement was originally enacted in Section 511 of the Tax Increase Prevention and Reconciliation Act (TIPRA), which was signed into law in 2006. It was originally scheduled to go into effect on Jan. 1, 2011, but was delayed to Jan. 1, 2012 in 2009 by the American Recovery and Reinvestment Act (ARRA), and delayed to 2013 by last week’s IRS rulemaking. Should the requirement go into effect, most transactions for goods and services with a government entity would be subject to a 3% withholding tax, kept by the governmental entity in question.

NACM has fought the enactment of this provision, which will fall disproportionately on smaller businesses, since its introduction. As a member of the Government Withholding Relief Commission (GWRC), NACM has lobbied for a full repeal and hopes Congress acts quickly to remove this unfair and potentially harmful provision from the tax code.

Stay tuned to NACM’s Credit Real-Time blog, NACM’s eNews and Business Credit magazine for future updates.

Jacob Barron, NACM staff writer

CICP Road Diary: Entry #9 Pre-Test Jitters

So, as savvy readers will note, the title of this blog post implies that I have not taken the CICP test yet.

The reason for this is because I haven’t.

My original plan was to sit and do it on Wednesday, which is to say, yesterday, but as it’s sort of a busy week for the magazine, time for studying, and especially for testing, was scarce. Such is life, but now I plan to take the test tomorrow afternoon, allotting for some studying time beforehand. This is, in some ways, exactly the type of last-minute test-taking procedure that I wanted to avoid, but it largely wasn’t up to me, I’d say, so I’ll make due, but I’m still a tad nervous.

If anything, though, you can look at this as a last minute reminder that while the CICP course deserves as much of your attention as you can muster, you more than likely won’t be capable of offering 100% of your focus, 100% of the time.  Important to remember, I’d say, and important to not let it stress you out too.

I’ve studied a bit already, going through the post-tests, as previously mentioned, as well as some of the more complicated things that I, quite literally, had zero experience with before joining the course.  I knew very little about theories behind bad debt allowances before taking the class, so that got another run-through.  I also was a novice when it came to foreign exchange practices too, so that also got another look.

Through the process of studying, I’m also sort of memorizing the course’s geography, which isn’t exactly the point, I’ll admit, but could come in handy when taking the actual test. 

The point of the CICP designation isn’t to signify that the holder can tell you what module came after the Structured Trade Finance module (it’s the Monitoring Trade Loans module) or what module covered pre-export and post-export financing (that would be Cash and Treasury Management: Part Two). It’s to signify the holder’s excellence and expertise in the field of international credit management.

Still, I want to do well, and since it’s an open-book test, I want to spend at least a little bit of time familiarizing myself with the table of contents.  Not doing so could eat up some of those precious 255 minutes that I’ll have to complete the test’s 100 multiple choice and 20 short answer questions (in my last post I said I’d have four hours to take the test, but that’s slightly inaccurate; I’ll actually have four hours and 15 minutes).

I should get back to the books though. By this time tomorrow, I’ll either be a proud new CICP, scrounging for an extra $100 in order to schedule a re-test, or, you know, still taking it. That last one’s probably the most likely option, unless I can somehow speed through the test at 4 questions a minute.

Whatever happens, I’ll catch you all on the flip-side.

Till next time,

~Jake

Portugal Bailout Figures Set; Awaits Opposition Party Capitulation

A bailout agreement between debt-riddled Portugal and the European Union/International Monetary Fund appears to be complete with just one more hurdle to clear. And it appears to have come just in time to prevent a default.

Reports out of Europe Wednesday indicate the Portugal bailout will be valued at 78 billion euro/$116 billion (USD). All parties actively were pressing opposition leaders, primarily from the Social Democrats party, for an agreement ahead of the official announcement. The bailout would require a host of Portuguese austerity measures highlighted by the following: an increase taxes in areas including those in the property category, a freeze on the levels of many existing benefits and public sector wages/pensions, barring of spending on new construction projects like the Lisbon airport and Liston-Porto high-speed rail link and tighter cuts, perhaps even potentially significant cuts to, education, health and housing.

The bailout marks the third of the so-called “PIIGS” nations (Portugal, Italy, Ireland, Greece, Spain) to accept financial assistance in less than one year amid crushing debt loads. Additionally, Portugal saw its sovereign credit rating plummet just five week ago as Standard & Poor’s noted that the bailouts pre-conditions almost surely would require a restructuring of debts and that all senior unsecured government debt would be subordinated to the EU’s European Stability Mechanism.

Freddy van den Spiegel, chief economist and director of public affairs for BNP Paribas Fortis, told NACM that Portugal’s bailout is a short-run positive in the sense that it restores some confidence in the EU and the euro currency. However, the economist noted that deep, existing problems are far from resolved and will remain a steep challenge for the Iberian nation in the coming years.

Brian Shappell, NACM staff writer