BCJ June 2012

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NACM Oregon Business Credit Journal

June 2012A monthly newsletter published by NACM Oregon

It is our experience that BAPCPA’s numerous amendments and modifications to the Bankruptcy

Code have profoundly impacted the Chapter 11 process to the point that it is nearly impossible for retailers to reorganize regardless of the prevailing national and international economic conditions. Time and again in the seven years since its enactment, we have observed that BAPCPA has significantly impaired the ability of retailers to obtain the necessary postpetition financing and breathing room from creditors to test and implement a reorganization strategy, regardless of the debtor’s capital structure, the fluctuating state of the credit markets, or the extent to which they compete with large discount retailers like WalMart or online retailers like Amazon.

As a result, retail cases over the past seven years have invariably taken one of two forms: either the case is

...continue on page 14

In This Issue

BAPCPA Revisited, Part II ....... 1

Chair’s Message ..................... 2

President’s Message ............... 2

Member Profile ...................... 3

Legal Corner .......................... 5

Collection Corner ................... 8

International Corner ............... 11

Lifetime CCE .......................... 12

NOF Scholarship Funds ........... 12

BCLC Webinars ...................... 13

Education Schedule ................ 13

Contacts ................................ 16

BAPCPA Revisited: A Three-Part Series Analyzing Retail Restructurings Before BAPCPA, Since BAPCPA, and the Future of Retail Bankruptcies Under the Bankruptcy Codeby Lawrence C. Gottlieb, Brent Weisenberg, and Michael Klein

filed as a liquidation or the debtor is given a small window within which to conduct a going concern sale under section 363 of the Bankruptcy Code that typically generates enough value only to satisfy administrative and secured creditors. As is discussed below, which path cases take often turns on the timing of the bankruptcy filing relative to the all-important Christmas shopping season.

Undue Constraints on Retailers

As noted in Part 1 of this series, BAPCPA’s amendments have significantly constrained the ability of retail debtor’s to reorganize. Among

This article is Part 2 in a three-part series analyzing the impact of the 2005 amendments to the Bankruptcy Code, commonly referred to as “BAPCPA” on the ability of bankrupt retailers to utilize the Chapter 11 process to successfully restructure their affairs. Part 1 of this series highlighted the major changes to the Bankruptcy Code enacted by BAPCPA. In this piece, we will analyze the impact of the BAPCPA amendments on retail reorganizations.




Message from the Chairman I am honored to have been chosen as your Chairman for the 2012-2013 term. I will be serving with an outstanding Board of Directors that includes: Marsha Johnson, CCE, who is serving as Vice Chairman; Pat Swope, CCE,CICP, Secretary-Treasurer; Raeann Binau, CICP, RGCP, Immediate Past Chairman; and the other Directors: Steven Amiel; Linda Bishop, CCE,CICP; Will Campbell; Tony Ceniga; Paula Cooley, CBA; Sue Hein, former chairman; Lori Jones, CCE; and Kimi Shelton-Muller, CCE. In addition, we will be receiving council from Rick Weisman, CCE, NACM National Board of Directors Western Region and his vast experience with NACM Oregon. To our regret, Kimi will be moving to Boston soon and will be leaving our Board of Directors. I want to thank her on behalf of NACM Oregon for all her outstanding service to the Association. Now that many of us are starting to see some hints of improvement in the economy, I would like to remind you of the many tools and services NACM Oregon provides to the credit professional and credit novice to help you successfully manage your credit functions in an expanding business environment. NACM offers state-of-the-art interactive website, social media, industry groups, educational services, credit reporting services, and collections to help your business be a success. NACM would like to be your first resource when you manage your accounts receivable; our professional staff is here to assist you in any way they can. As a member, you should take advantage of all the benefits of your membership. Throughout the year, we will be notifying you of educational offerings, industry group meetings, and anticipated improvements in our credit reporting services. If you are not a member of an industry group, I suggest you contact your Account Executive to see if there is a group that would fit your business environment. Industry groups are an excellent way to keep up with a growing receivable and to help minimize the chance of sustaining a loss to your

company. The amount of bad debt that our industry group members have avoided by using the information obtained in these meetings would be certainly counted in the tens of millions. On behalf of the Board of Directors, I look forward to NACM Oregon being able to assist your business in becoming more prosperous in the coming year.

John Hardy Emerson Hardwood Co. [email protected]

Message from the President The 116th annual Credit Congress started on Sunday of this week. With more than 1,200 registrants, this Congress in Dallas has the highest attendance of the last five years. The NACM Oregon members have enjoyed several keynote speakers, industry credit group meetings, and a large variety of educational sessions. We’ll have more information and pictures to share in the next Business Credit Journal. I attended a meeting of the NACM National Board of Directors and the Affiliate management corps this week. We discussed a number of crucial issues for the future of the NACM network, including a national membership for companies with multiple, decentralized credit operations. You will hear more about this over the next few months. At the opening general session and in the expo that followed, we celebrated the successful launch of the NACM Trade Credit Report. In the last few months the database used to generate this product has grown by more than 15%. If you are not already a contributor, I hope you will speak with your Account Executive about this today! Thank you for our continuing support.

Rod Wheeland, CCE, CAE Direct: 971.230.1158 [email protected]

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Member ProfilePacific Metal Company

The history of the Pacific Metal Company, and the personal stories of Lou Rice and Sandy Nosler, Pacific Metal’s current Credit Manager and President, respectively, would be significantly different if it hadn’t been for the San Fransisco earthquake and fire of 1906. It was during the aftermath of that tragic disaster that Frederick K. Morrow, founder of Pacific Metal Company decided to join his brother, William Morrow, and consolidate the company at the branch they had opened in Portland. Up until that fateful day in April 1906, the company Frederick Morrow had started in 1876 as a metal supply company specializing in solder and babbitt metal had grown with the West Coast’s population and prosperity. By that time the Portland branch had already moved locations and expanded into a product line that included tin, zinc, and aluminum. In fact, as the Northwest’s sole aluminum distributor, they had to store the precious metal in their safe. This period of the company’s transition, consolidation and incorporation finally concluded in 1922 when it became, officially, the Pacific Metal Company. Sandy Nosler came to Pacific Metal from Kaiser Aluminum relatively late in his professional career. After turning down a promotion and transfer to Chicago with Kaiser in 1986, he accepted an outside sales position at Pacific Metal. Nosler, with a subtle sense of humor, refers to his tenure at Pacific Metal as his “second” career. First or second career, it is a successful one. Nosler was quickly promoted to branch manager and became Vice President of Sales and Marketing in 1990. Perhaps aided by his outside perspective, he understands the unique role Pacific Metal plays in the metal supply ecosystem. In the simplest terms, Pacific Metal supplies metal to manufacturing companies and precision sheet metal

Pictured l to r: Sandy Nosler, President, and Lourdes “Lou” Rice, Credit Manager.

shops, including those specializing in the electronic, food processing, truck/trailer, recreational, medical, and dental equipment industries. The raw material like aluminum, carbon, galvanized, painted and stainless steel as well as a small quantities of brass and copper come into Pacific Metal directly from the mill. Whether this material is in plate, sheet, coil, pipe, tube, or extruded form, Pacific Metal clients often need additional changes. Yet the machinery necessary





to roll, level, or shear metal is massive and expensive. With the space and and raw materials on hand, Pacific Metal provides the perfect solution to their clients: they can make the necessary customizations under their own roof. It is a service their clients use. Seventy-five percent of the metal sold is customized, explains Nosler. Yet it’s more about service than “value added” business at Pacific Metal. The impressive machines sitting on their warehouse floor can’t replace the deep business relationships developed and nurtured over the decades. Their branches in Seattle, Boise, Spokane, Eugene, and Billings are a perfect example, Nosler points out, of Pacific Metal’s commitment to service and quality. Just as having branches in close proximity allows Pacific Metal to directly meet the product needs of their clients, having a credit manager with Lou Rice’s experience helps Pacific Metal meet their client’s diverse credit needs.

Lou Rice was hired at Pacific Metal in 1976 right after she graduated from University of Portland where she studied business and psychology. She began as the Assistant Credit Manager under Harold Thomas, who enticed her away from the career she had planned with the Portland Police Bureau. After more than thirty years in Pacific Metal’s credit department, which she now manages, Rice describes her job as easy. “It’s fun. It really is,” she says with her constant smile. Talking to both Lou Rice and Sandy Nosler, it’s clear how much mutual respect they have for each other and those they work with. Rice describes credit management as “both credit and sales at the same time.” That difficult balancing act is made easier, as Rice puts it, “By the respect I have from my superiors.” It’s not just her superiors that respect Rice. Once the “newbie” of NACM meetings, now Rice is the one other credit managers call for advice. It is not surprising then, given this winning chemistry, that Pacific Metal—now a successful subsidiary of Reliance Steel & Aluminum’s international family of metal distributors—is catching back up to its pre-recession revenue of $100 million.

Sandy explains how the Red Bud High Speed Cut-to-Length Blanking line works.

Member Profile, continued from page 3

Sandy pointing out raw metal coils.




The Dreaded Preference Demand by David H. Conaway

You are in your office finishing your Starbucks when the mail comes. One letter is from what looks like alaw firm...is it real or is it propaganda? You open it only

to find a letter from counsel for a trustee in bankruptcy. Dear creditor, the trustee demands you pay back the payments from the debtor (your customer) over two years ago...the dreaded preference demand. But, if you pay 80% today, it will all go away.

You pull out the file with all the bankruptcy notices you’ve received during the customer’s bankruptcy case, making sure you filed the proof of claim. You recall that you shipped goods that your customer received within 20 days of its bankruptcy filing. So, your proof of claim also contains an administrative claim for those invoices. Your attorney has told you that the administrative claim will probably be paid, since it enjoys administrative priority. The attorney told me those claims are on parity with professional fees so maybe it will get paid.

Then you pull the invoices of shipments during the same period and analyze the payment history. Do I have a new value defense? Do I have the ordinary course of business defense? Looks pretty solid, so time to call the trustee’s counsel and put this to bed. After a few weeks of emails and phone calls, you finally get a response. Ok, send me your information on new value and payment history and I’ll get back to you. Free discovery? Yes, but if I can bury this quickly, no worries so you email the PDF to the trustee’s counsel. Depending on when the trustee’s two-year statute of limitations runs, you either hear from counsel quickly, or slowly. Eventually, you get a letter back saying, I’ve reviewed the information and agree to reduce the demand by the

amount of the new value shipments. But I don’t buy your ordinary course defense…you have the burden of proof and I will make you prove it. Translated... I know you won’t spend the money to come to court, so instead you will pay me more to settle.

Oh, and by the way, forget about the distribution on your unsecured claim. And forget about getting your 20-day administrative claim paid. Not until we resolve this preference. Translated...I’m using any leverage I can to get more money out of you. You didn’t expect this curve ball. Better call counsel. Ok, click on “Contacts”...Shumaker.

What is the trustee saying and can he do this? Not pay my administrative claim? Not pay my unsecured claim? What gives?

The trustee is relying on Section 502(d) of the bankruptcy Code. It says:

...the court shall disallow any claim of any entity...that is a transferee of a transfer avoidable under section....547, 548...unless such entity or transferee has paid the amount...for which such...transferee is liable....

The trustee says that “any claims”...my unsecured claim and my 20-day administrative claim...are toast until I pay back the alleged preference payment. Your response: have you read Judge Walrath’s recent Delaware opinion in Giuliano v. Mitsubishi Electronics America, Inc. (dated May 1, 2012)? In that case, Mitsubishi timely filed a proof of claim that included a general unsecured claim of $569,107 and a 20-day administrative claim for $829,393. The debtor is “Ultimate Electronics” that operated 46 retail electronics stores, primarily in the mid-west and western states.

On July 19, 2011, the trustee for Ultimate Electronics filed a preference action against Mitsubishi to recover $4,744,787, and to also “disallow” Mitsubishi’s general unsecured claim of $569,107 and its 20-day administrative claim for $829,393,


Legal Corner




both under Section 502(d) above. Mitsubishi filed a motion to dismiss the trustee’s complaint because the complaint didn’t specify which debtor entity made the alleged preference payments to Mitsubishi, and because the trustee’s attempt to disallow Mitsubishi’s claims was not proper.

Bottom line, the Delaware Court ruled in favor of Mitsubishi, and dismissed the preference action but gave the trustee the right to amend its complaint to get the parties right. In doing so, the Court stated that Section 502(d) is not applicable unless and until there is a “judicial determination” on the preference complaint. Translated...the trustee can’t hold your claim(s) hostage until the trustee gets a judgment on the complaint. Which almost never happens.

With this case, the Delaware Court has turned the dial a bit in the preference wars...some leverage back to the creditor.

We hope you have found this useful and that it will be helpful to you in defending and resolving any preference claims you encounter. If you have questions about this issue or this decision, pick up the phone or shoot me an email.

David H. Conaway is a partner with Shumaker, Loop & Kendrick, LLP, in the Charlotte office. Mr. Conaway’s principal areas of practice are bankruptcy (primarily Chapter 11 proceedings), non-bankruptcy insolvencies or restructurings, workouts, commercial transactions, and international business transactions and disputes. He can be reached at [email protected].

Reprinted with permission

Preference Demand, continued from page 5

1. Don’t interrupt angry callers. Allow them to vent unless there language is unacceptable, or they threaten you.

2. Don’t pass the buck halfway through the explanation of their grievance. Once you start listening, you own the problem. Also, don’t put an irate customer on hold.

3. As they speak, take notes. If you missed something, at the end of their comments ask for clarification of the point(s) you missed.

4. Summarize your notes and ask them to confirm your

understanding or clarify your misunderstanding.

5. Ask what outcome they would consider to be fair and reasonable, meaning a win-win outcome.

6. Do not make the mistake of over committing. If anything, under commit and over deliver.

7. Rather than being tied to a specific deadline, instead promise periodic updates and keep that commitment.

8. If you assign, transfer or delegate the problem identified by the angry customer, you should remain involved until the problem is resolved.

Ten Tips on Working with Angry Customers9. If your company is wrong—and even if you or your department were not involved in the mistake or misunderstanding that caused the customer to become irate— apologize sincerely on behalf of the company.

10. Finally, when the customer’s issue has been addressed, call to find out the customer’s level of satisfaction or anger with the outcome.

© 2010. Michael C. Dennis. All Rights Reserved




Fair Debt Collection Reform Bill Re-Introduced U.S. Rep. Barney Frank (D-Mass.) Thursday introduced another bill that would amend the Fair Debt Collection Practices Act (FDCPA) to specifically exempt debt collectors from liability when using approved language in voice mails and messages. The bill’s (H.R. 5794) purpose, as officially stated, is to “amend the Fair Debt Collection Practices Act to exempt a debt collector from liability when leaving certain voice mail messages for a consumer with respect to a debt as long as the debt collector follows regulations prescribed by the Bureau of Consumer Financial Protection on the appropriate manner in which to leave such a message, and for other purposes.” Rep. Frank, the ranking Democrat on the House Committee on Financial Services, introduced a nearly-identical bill in February, HR 4101. At introduction, HR 4101 was referred to Frank’s committee. The only additional action taken on the bill was a subsequent referral on April 26 to the Subcommittee on Financial Institutions and Consumer Credit. The title language for H.R. 4101 and H.R. 5794 is identical. The full text of the new bill introduced last week is not yet publicly available, so comparisons between the two are difficult right now. But like with HR 4101, the intent of the bill seems to be to exempt debt collectors from liability under the FDCPA when leaving phone messages for consumers, provided that the collectors use processes and language that has been approved by the CFPB. Rep. Frank’s office did not respond to a request for clarification Monday. We will be monitoring this development closely and will report back once we know the key differences between the two bills.

Oregon Revenue Forecastby Cindy Robert

The legislature is meeting in committee days this week, and the state economists delivered the June Revenue Forecast to a joint hearing of the Senate and House Revenue Committees this morning. The numbers show slow but steady growth in the overall economy. General fund revenue is up $115 million from the March forecast but down from the close of 2011 session forecast. When all is said and done, and legislative actions from the short session are considered, the economist explains that the net result is a drop of $18 million in resources for the state. In the context of a nearly $15 billion budget, this is a blip on the RADAR, and the state will be able to proceed without making new adjustments to the budget. The next forecast is due in September.

© New Yorker Cartoon. Leo Cullum from cartoonbank.com. All Rights Reserved.

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Collection Corner“The Agency You Choose” by Brenda Terreault, JD, CBA

Choosing a collection agency that operates with integrity protects your money and interests. For instance, Richard Pinto, 68, and his son, Peter Pinto, 37, both former executives at Oxford Collection Agency, each pleaded guilty earlier this year to charges of conspiracy, bank fraud, money laundering, and wire fraud stemming from a $10-million fraud scheme against a Connecticut-based bank. They each face up to 35 years in prison and a fine of up to $20 million. Sentencing is set for September 13.

The victims of the scheme included the creditors who had hired the agency to do their collection work. Creditors who did not receive remittances may never see restitution from the defendants. Their past-due customer, having already paid the creditor’s agent, will not be required to pay the same debt again. Authorities currently estimate that victims lost more than $10 million.

According to the U.S. Attorney’s office, Oxford collected debts for various clients - including Washington Mutual Bank, Dell Financial Services, Cogent Communications and Labcorp. Under state law, third party agencies must remit funds to the client within

Brenda Terreault, JD, CBA, is the Collection Services Manager for NACM Oregon and an Oregon attorney. She has more than 18 years’ experience

as an attorney, investigator, and operations manager in governmental, corporate, and law firm settings. Brenda is a regular instructor for NACM Oregon classes/seminars and webinars and a contributing writer in the monthly NACM Oregon Business Credit Journal newsletter. She earned her CBA designation in March 2010. You can contact her at 971.230.1196 or [email protected].

a specific time frame, which is usually 30-60 days. Instead, these agency principles would routinely withhold collected debts from certain clients, diverting amounts that debtors had paid to use for their own ends. They euphemistically referred to these amounts as a client’s “backlog.”

Federal authorities became involved through Troubled Asset Relief Program (TARP) violations. The principles secured a $6 million bank line from a bank that received TARP funds, but they did not inform the bank about the “backlogs” or outstanding payroll taxes. They also sent falsified financial statements to the Bank and laundered funds using the bank line to promote the ongoing fraud scheme against their clients. The principles additionally solicited millions of dollars from investors without disclosing the existence of the “backlogs”. Some investor funds were deposited into personal bank accounts without investor knowledge.

The Internal Revenue Service, the Federal Bureau of Investigation, the Special Inspector General for the Troubled Asset Relief Program (TARP), and the Connecticut Securities, Commodities, and Investor Fraud Task Force continue to investigate the case.

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Every time you participate in the Credit Managers’ Index (CMI), you are contributing to a leading economic indicator. You hold the power to elevate the status of the credit profession today.

The CMI has been featured in these publications and many more!

SIGN UP TODAY!

Simply sign up for the CMI and you will receive a monthly reminder to take this quick survey. There is no math involved, you just have to indicate whether something is better, the same or worse than the month before. It’s quick and easy! The next survey opens June 18, 2012.

Help raise the status and respect of the credit profession. Your participation is the solution! Learn more about the CMI here.

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Manual of Credit and Commercial Laws, 103rd Edition—Four Volume Set . . . Special Price $69.95NACM 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. The latest version of the Manual of Credit now comprises four volumes that either may standalone ($29.95 each plus S&H) or continue to serve as a cohesive and comprehensive set ($69.95 plus S&H). Chapters and appendices from the book have been reorganized under the following headings:

Volume I: General Business Law, Related Statutes, and CollectionsVolume II: Commercial and Con-sumer Credit TopicsVolume III: Construction IssuesVolume IV: Bankruptcy and Insolvency Issues

Contact Barbara Salazar at 971.230.1182 or 800.622.6985 ext. 182 or email to [email protected] to order your copy.

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Top Tools and Tricks for the Overburdened Credit ProfessionalAre you a credit manager with seemingly too much to accomplish in a 24-hour day, let alone a standard work shift? You are answering phones, making in-house visits to customers, tracking delinquent debtor lists, reviewing new credit appli-cants, considering software to help with the credit function. It all sounds exhausting, but busy is never an excuse for bad customer service.

Make Technology Your Friend The busy credit professional, especially in a department of few, has to take care of its customers all of the time. This includes when on the road visiting other clients. Now the use of technology such as smartphones and tablets are an excellent way to check business correspondence from virtually anywhere. Skype allows a virtual conference call environment when face-to-face communication and its benefits are desired, but impossible. Also, look into in-house upgrades to systems such as electronic credit applications that can be reviewed on a laptop from anywhere with a WiFi connection. In short, the hotel room, the airport, even a rental car can be your fully functional office—so use them as such!

Don’t Forget the Basics While technology can help a credit professional juggle, the entire operation falls apart without the proper organization, preparedness, and focus. One of the most crucial basics is spending the time needed to build a solid report with the customer as well as doing all the homework at the beginning of the relationship. Though it can be hard to do amid other tasks, the upfront dedication can really reduce headaches down the road.

That good report also can mean customers tend to avoid going over the head of or around the credit department and straight to ownership. And, if there’s a decision to be made to pay collector A or collector B, you want to be the collector that has the better relationship with the debtor.

Play Well with Others Do you get blamed by sales staffers who think credit department costs them sales? Is there a sometimes antagonistic relationship as a result? Too bad—make it work. When you’re a credit professional on an island, get all the help you can. Salespeople can be helpful in relaying information a credit manager can glean to decide if trouble with a customer is coming:

• Is there significantly less equipment in the yard? • Is there one person or two people where you used to see 10 in the office? • Do you see/sense more stress on the part of the owner or manager?

Also, tagging along with a sales person on one of their visits can be helpful because their visits carry the perception of less “high pressure” than that of a creditor coming to collect or find out what’s happening. It could just get you in the door quicker…and when the debtor’s guard is down.

Fix Inevitable Problems Immediately Mistakes happen. Customers fall through the tracks. Once these occur, it is critical to make fixing their problem the first order of the day. And, remember sincerity counts. In addition, paying more attention to the wronged customer for a while is a helpful way to repair any damage done. After all, everyone, especially in business, wants to feel like they’re really important in your world. So do what’s necessary to convince them that they are after your credit department has dropped the ball.




International Corner, by Alice Knight, RGCP

Learning is a process. It is never complete but always evolving and changing. This is particularly true in the international arena.

I am often asked “How did you learn that?” There are three answers:

1. I learned it at school, a seminar, a forum, etc.—intellectually. 2. I learned it the hard way— something went wrong. 3. I learned that even if you do everything right it can still go wrong.

Here are some examples of the difference between book and real world learning.

BOOK LEARNING: Always be able to control the documents needed for a letter of credit.

REAL WORLD: An inexperienced trader sold product to Mexico back in the days when Mexico was still an L/C market. The best part was that we could save money on freight forwarding because a friend would do it for the customer at no cost to us. By the time it got to me it was too late. Needless to say we were not able to get the Bill of Lading in time to present documents. Since the freight forwarder was not working for us we had no leverage. We finally got paid but I’ll never forget the need to have control over all required documents.

BOOK LEARNING: With a Documents against Payment sale you control the goods until you are paid.

REAL WORLD: We had a shipment to South Korea. The market went down and the customer wanted to renegotiate

Alice Knight is Vice President of Finance & Administration for Paper Products Marketing, Inc. Ms. Knight has more than 45 years' of experience in International Finance and is an active member of ICTF and NACM. She has served as Co-chair, Panel Member, and Presenter at Annual Global Conferences, as President of FCIB Forest Products Group.

the price. We had our overseas agent move the goods to a third-party bonded warehouse and resold the goods. When we sent a truck in to move the goods to the new buyer it was denied access. It turned out the original buyer owned the industrial park and denied access to our goods in the supposedly third-party warehouse. This was finally resolved but now we do much more investigating as to the ownership of third-party warehouses.

BOOK LEARNING: The shipper of record is ultimately responsible for all charges.

REAL WORLD: I knew that if we paid a freight forwarder and they did not pay the steamship line we were liable. I knew that if something was shipped collect and the consignee did not pay the charges that we, as shipper of record, would be liable. I knew that if the ship was damaged or sunk that we, as shipper of record, would be liable for general average, but I didn’t think about detention/demurrage. We have a longtime customer in Thailand. We shipped product in July, September, November, and December. In February, a trader was there and in general conversation it was mentioned that they still had some 100 uncleared containers on the dock. The trader casually mentioned it to me but said “don’t worry, we’ve been paid.” Our traffic manager started checking and— surprise—containers from as far back as July were still on the dock and we were promptly put on notice that we were liable for the charges! We immediately

contacted the customer and were told that they had paid their freight forwarder but “he took the money and ran.” Then the flooding hit and things became a mess. We surveyed various shipping companies and freight forwarders as to their polices about notifying shippers on a timely basis. The only thing everyone agreed on was that as shipper of record we were ultimately responsible. This was finally resolved but what to do now? Do we track every container until it is returned? This would involve a huge amount of time. Do we wait and see if it happens again? The monetary consequences can be huge. For now we are tracking all shipments to this customer and if there are major environmental problem, earthquakes, flooding etc., we will probably track containers in that area. I learned shipped and paid is not always the end.




NACM-Oregon FoundationThe NACM-Oregon Foundation grants scholarships to credit professionals for continuing education, professional designations, and conference expenses.

The Foundation manages two scholarship funds: the NACM-Oregon Scholarship Fund and the Phylliss Clark Memorial Fund. The Foundation offers scholarship to the following events:

• All NACM Oregon educational courses

• Portland Community College courses within the Credit Administration and Advanced Credit Administration Programs in preparation for professional designation

• Self-study courses in preparation for professional designation

• Registration and exams fees for the National NACM Professional Designation Program

• NACM/CFDD Pacific Northwest Credit Conference

• National Credit Congress and Exposition

• NACM National schools such as Credit Management Leadership Institute, Mid-Career School, and the Graduate School of Credit and Financial Management

If taking a course or pursuing your certification seems like an expensive proposition, think again. These scholarship funds are a benefit to you as a member, so please take advantage by applying for next year.

To apply—

To apply for scholarship funds, or for more information, contact Lourdes (Lou) Rice, NOF Scholarship Committee Board Director, Pacific Metal Company at 503.454.1051 or [email protected].

Submit applications to:

Lourdes (Lou) A. Rice, NOF Scholarship Committee Board Director Pacific Metal Co. 10700 SW Manhasset Dr. Tualatin, Oregon 97062p: 503.454.1051 f: 503.454.1065 e: [email protected]

Lifetime Certified Credit Executive

Congratulations to Dave Erickson, CCE, Allports Forwarding, Inc., in becoming a Lifetime Certified Credit Executive! Those of us who hold the CCE designation recognize the significant effort in time and funding that is required to retain certification. Now, Dave is able to successfully avoid submitting a form and paying fees every three years! Again, congratulations on earning your Lifetime CCE designation!

http://www.nacmoregon.org/about/foundation.html

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Business Credit Learning Pre-petition Claims Can Be Costly for Vendors June 13 9-10 a.m. (PT)

Construction: 2012 Washington Lien Law June 14 9-10 a.m. (PT)

What Do Trade Creditors Need to Know About Antitrust? June 19 9-10 a.m. (PT)

10 Tips for Great Customer Service June 20 9-10 a.m. (PT)

Real World Best practices for Collecting Bad Checks June 21 9-10 a.m. (PT)

International Credit Update June 26 9-10 a.m. (PT)

The 2012 California Collection Law June 28 9-10 a.m. (PT)

Financial Statement Analysis Using Excel Case Study July 10 9-10 a.m. (PT)

Construction: 2012 Idaho Lien Law July 12 9-10 a.m. (PT)

Course Levels

C (core) – Classes that focus on credit concepts, techniques, and practical tips. They are designed for the newer credit department employee and the more experienced credit professional looking for a review;

I (intermediate) – Classes assume basic knowledge of credit concepts and address specific issues and approaches to resolution;

A (advanced) – Classes that assume significant knowledge and experience and address complete topics of interest to credit and financial professionals.

Registration

To register for on-site classes, please call Elizabeth Heintz at 971.230.1120 or email [email protected]

Webinar fee:

$79 each—member $109 each—nonmember

For a complete list of webinars and descriptions, please visit www.busi-nesscreditlearningcen-ter.com.

If you have any questions on any of the webinars, call Elizabeth Heintz at 971.230.1120, or [email protected].

Schedules are subject to change.

Behaviors that Drive our Decisions on Risk Taking and Ethics June 28 7:30 - 9 a.m. NACM Oregon Classroom CEU: .15, Course Level: Intermediate $41/member, $95/nonmember Guest Speaker: Greg Saliba, Sr. Vice President, Capital Pacific Bank

Certification Roadmap Introduction September 6 11:30 a.m. - 1 p.m. NACM Oregon Classroom Free to members—lunch included! Guest Speaker: Marilyn Rea, CCE, Pacific Architectural Wood Products

Building Blocks to Successful Credit Management October 9 8:30 a.m.-4 p.m. NACM Oregon Classroom CEU: .65, Course Level: Core

How Do I Manage Risk and Maximize My Company’s Revenue Opportunities? October 25 8:30-11:30 a.m. NACM Oregon Classroom CEU: .3, Course Level: Advanced Guest Speaker: Robert S. Shultz, Founding Partner, Quote to Cash Solutions (Q2C)

Education Class Schedule

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BAPCPA - Part 2, continued from cover

other things, the revised Bankruptcy Code:

• Amends section 365(d)(4) to require debtors to assume or reject their real property leases within 120 says of filing, subject to a additional 90-day court approved extension. Extensions beyond this initial 210-day period cannot be granted without the consent of the landlord, regardless of the size of the retailer. This amendment marked a sea change for retailers, who faced no real deadlines in analyzing whether to assume or reject their leases prior to BAPCPA;

• Provides utilities with increased forms of adequate assurance of future payments within 20 days of filing;

• Provides vendors that ship products received by the debtor within 20 days of the bankruptcy filing with an administrative claim for the value of such goods that must be satisfied in order for a plan of reorganization to be confirmed. Prior to BAPCPA, these claims were generally afforded general unsecured status and were paid out at cents on the dollar after the debtor’s emergence from bankruptcy; and

• Limits the period in which the debtor may exclusively file and solicit acceptances for a plan of reorganization.

Collectively, these amendments have made it more difficult for Chapter 11 retailers to obtain the postpetition financing that is vital to fund ongoing operations while simultaneously constraining the company’s ability to utilize the financing it does receive in furtherance of a reorganization.

From a lender’s perspective, a retailer’s ability to routinely obtain extensions of the assumption/rejection period provided two critical protections. First, a lender could be assured that the retailer was provided with sufficient time to analyze the value of each individual store lease before making the critical decision to assume or reject the lease. Second, and more importantly, lenders

were assured that they would be provided with enough time to conduct a “going-out-of-business” sale on the premises in the event that a decision was subsequently made to terminate the reorganization process. Absent the ability to conduct a GOB sale from the debtor’s store locations, a lender is deprived of the most commercially viable location from which to liquidate its inventory. Because a well-run GOB process takes approximately 12 weeks, post-BAPCPA debtors must make the decision to assume or reject within three to four months in order to provide enough time to conduct GOB sales should the need arise.

Recognizing the increased leverage that the amendments to section 365(d)(4) provides them, as well as the higher costs of confirming a plan as a result of BAPCPA, DIP lenders have been reluctant to provide retail debtors with financing to do anything more than a nominal restructuring effort before gearing up for the inevitable liquidation.

Post-BAPCPA: Timing Is the Key to Avoid a Liquidation

Prior to BAPCPA, lenders were far more likely to finance a debtor’s attempt at reorganization, partly because the Bankruptcy Code essentially provided them with an indefinite period of time to market and assign the debtor’s below-market leases to third parties at a premium in the course of a subsequent liquidation. Post-BAPCPA, however, both lenders and debtors are well-aware that the 210-day assumption/rejection period currently proscribed by section 365(d)(4) is too short to enable Chapter 11 retailers to judge the vitality of their business and adequately evaluate which of their commercial leases are necessary for a successful reorganization and which should be jettisoned.

As a result, post-BAPCPA Chapter 11 retail cases have almost uniformly been postured at the outset as either a full-chain liquidation or as a truncated sale process followed by a liquidation if going concern bids are not sufficient to




BAPCPA - Part 2, continued from page 14

pay off secured lenders. This pattern has been remark-ably consistent, appearing in cases that occurred both before and after the Great Recession of 2008 began to affect banks’ ability to lend and the bursting of real estate bubble caused property values to decline.

The path on which a particular retail bankruptcy will proceed depends on the timing of the debtor’s filing of peti-tion. It is our experience that Chapter 11 retailers that file for bankruptcy in the early or middle part of the calendar year are provided with the opportunity to quickly market their assets as a going concern, provided that such efforts do not interfere with the lender’s ability to conduct GOB sales. Retailers that file later in the year, on the other hand, are given virtually no opportunity to conduct a going concern sale process, as lenders insist that GOB sales commence during the critical holiday shopping season in order to maximize the value of their collateral. In the latter scenario, lenders aware of the low likelihood of a successful reorganization are simply unwilling to risk conducting GOB sales after the holiday season.

Is BAPCPA To Blame?

To be sure, numerous factors that have weighed heavily on the macroeconomic climate over recent years, including the credit crunch, the subprime lending crisis and the eroding value of commercial leases, have clearly contributed to current environment in which Chapter 11 retail reorganizations are nothing more than a pipe dream. Nevertheless, characterizing the difficulties currently facing bankrupt retailers as solely the result of one or more of these economic factors would be to ignore the effect that the increased leverage granted to lenders and other creditor constituencies by BAPCPA has wrought on the Chapter 11 process.

Unless and until section 365(d)(4) of the Bankruptcy Code is amended further to provide debtors with a full and

fair opportunity to evaluate their lease portfolio before being forced to assume or reject their leases, lenders will be unwilling to provide debtors with sufficient financing to effectuate a true reorganization process. In the interim, troubled retailers will be faced with two unappealing options: (i) file for bankruptcy in the middle of a calendar year and obtain DIP financing sufficient to run a lightning quick sale process, and then liquidate if the sale process does not generate sufficient value for the estate; or (ii) delay filing until later in the year and liquidate at the outset of the case. In Part 3 of this series, we will look at what the future has in store for retail bankruptcies.

Lawrence C. Gottlieb is a partner in the Bankruptcy & Restructuring Group of Cooley, LLP. Brent Weisenberg and Michael Klein are each associates in the Bankruptcy & Restructuring Group at Cooley.




Board of Directors NACM Oregon

ChairmanJohn Hardy Emerson Hardwood Co. [email protected]

Vice Chair Marsha Johnson, CCE TEC Equipment, Inc. [email protected]

Secretary/TreasurerPat Swope, CCE, CICP Pacific Seafood Co., [email protected]

CounselorRaeann Binau, CICP, RGCP Airgas - Norpac, Inc. [email protected]

Customer Service/ Credit Reporting971.230.1220 [email protected]

Data ContributionShannon Abnal, CGA 971.230.1166 [email protected]

Member Services Kathy Linscott, CGA 971.230.1164 klinscott@nacmoregon

Member Services Account Executives Clara Nemeth, [email protected] Denise Redding, CGA 971.230.1178 [email protected]

National Account Executive Caroline Anderson, CGA 971.230.1168 [email protected]

EducationElizabeth [email protected]

Directors Steve Amiel Tektronix, [email protected]

Linda Bishop, CCE, CICP Tektronix, [email protected]

Will Campbell Standard Supply [email protected]

Tony Ceniga Industrial Finishes & [email protected]

Paula Cooley, CBA American Steel [email protected]

Sue Hein Rapid Bind, [email protected]

Lori Jones, CCE [email protected]

Kimi Shelton-Muller, CCE EKC Consulting, [email protected]

PresidentRod Wheeland, CCE, CAE NACM [email protected]

Industry GroupsRichard Browning, CGA 971.230.1188 [email protected]

Kristen McBride, CGA 971.230.1176 [email protected]

Collection ServicesBrenda Terreault, JD, [email protected]

BillingMarmie Carpenter971.230.1146 [email protected]

Meeting Room RentalElizabeth [email protected]

Newsletter EditorBarbara Salazar971.230.1182 [email protected]

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BCJ June 2012

Documents

Transcript of BCJ June 2012