Selling the Chapter 11 Debtor

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Information on selling the chapter 11 debtor.

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Selling the Chapter 11 Debtor

  1. 1. SELLING THE CHAPTER 11 DEBTORS Presentation For: CMA BUSINESS CREDIT SERVICES/ NACM OREGON WEBINAR March 5, 2009
  2. 2. OVERVIEW – U.S. TROUBLED MARKETS <ul><li>Recession, worse? </li></ul><ul><li>Credit Crunch </li></ul><ul><ul><li>No funding to restructure troubled companies </li></ul></ul><ul><li>Reduced Consumer Spending </li></ul><ul><li>Increase in Bankruptcies/Liquidations </li></ul><ul><ul><li>Chapter 11s and other bankruptcy filings up over 60% in 2008 </li></ul></ul><ul><ul><li>Increased bankruptcy filings continuing in 2009 </li></ul></ul>
  3. 3. U.S. TROUBLED INDUSTRIES <ul><li>Automotive </li></ul><ul><li>Real Estate </li></ul><ul><li>Furniture and Other Housing-Related </li></ul><ul><li>Retail </li></ul><ul><li>Energy </li></ul><ul><li>Newspaper and Other Media </li></ul>
  4. 4. PROTECT YOURSELF <ul><li>Watch Out for Warning Signals About Customer’s Financial Distress </li></ul><ul><li>Helpful Sources of Public Information: </li></ul><ul><ul><li>Credit Check </li></ul></ul><ul><ul><li>Standard & Poors/D&B/Moody’s </li></ul></ul><ul><ul><li>U.S. Credit Group </li></ul></ul><ul><ul><li>Uniform Commercial Code, Judgment, Lien and Litigation Search </li></ul></ul><ul><ul><li>Pay distress publications, such as Debtwire, Daily Deal, Daily Bankruptcy Reports, Bloomberg reports </li></ul></ul>
  5. 5. WARNING SIGNALS OF TROUBLED U.S. COMPANIES <ul><li>Upcoming Significant Bond Principal/Interest Payment </li></ul><ul><li>Loss of Credit Insurance or Market for Puts </li></ul><ul><li>Industry Problems </li></ul><ul><li>Loan Covenant Defaults </li></ul><ul><li>Buyer Grants Second/Third Liens in Its Assets </li></ul>
  6. 6. WARNING SIGNALS OF TROUBLED U.S. COMPANIES <ul><li>Buyer’s Delay in Providing Financial and Other Information </li></ul><ul><li>Increase of Credit Reference Requests </li></ul><ul><li>Buyer Suffers Financial Losses </li></ul><ul><li>Buyer’s Deteriorating Liquidity </li></ul>
  7. 7. WARNING SIGNALS OF TROUBLED U.S. COMPANIES <ul><li>Slow Payment of Invoices </li></ul><ul><li>Increased Frequency of Post-Dated Checks or Held Checks </li></ul><ul><li>Increased Frequency of Bounced Checks </li></ul><ul><li>Loss of Trade Credit </li></ul>
  8. 8. WARNING SIGNALS OF TROUBLED U.S. COMPANIES <ul><li>Resignation or Firing of Buyer’s CEO or CFO </li></ul><ul><li>Retention of Chief Restructuring Officer or Crisis Manager </li></ul><ul><li>Retention of Insolvency Professionals </li></ul><ul><li>Formation of Ad Hoc Bondholder Committee </li></ul>
  9. 9. WARNING SIGNALS OF TROUBLED U.S. COMPANIES <ul><li>Tax Liens are Filed Against Buyer’s Assets </li></ul><ul><li>Collection Lawsuits Filed Against Buyer </li></ul><ul><li>Rumors of Sales of Buyer’s Business or Assets </li></ul><ul><li>Rumors of Bankruptcy Filing by or Against Buyer </li></ul><ul><li>Buyer Announces a Payment Moratorium </li></ul>
  10. 10. CLAIMS PRIORITY <ul><li>Equitable Distribution of Debtor’s Assets According to Size of Claim and Priority </li></ul><ul><li>Hierarchical Distribution System </li></ul><ul><ul><li>Higher priority claims must be paid in full before distributions to lower priority creditors </li></ul></ul><ul><ul><li>Parties could agree to different treatment </li></ul></ul>
  11. 11. CLAIMS PRIORITY <ul><li>Secured Creditors on Top </li></ul><ul><ul><li>Secured lender with security interest in Debtor’s existing and after-acquired accounts, inventory, equipment and general intangibles </li></ul></ul><ul><ul><li>Federal and state tax liens </li></ul></ul><ul><ul><li>Judgment liens </li></ul></ul><ul><ul><li>Trade creditors with state law lien rights </li></ul></ul><ul><ul><ul><li>Mechanics’ or materialmens’ liens </li></ul></ul></ul><ul><ul><ul><li>Artisans’/processors’/repairmans’/diemakers’/ molders’ liens </li></ul></ul></ul><ul><ul><ul><li>Warehouse liens </li></ul></ul></ul><ul><ul><ul><li>Carrier liens </li></ul></ul></ul>
  12. 12. CLAIMS PRIORITY <ul><li>Next In Line: Administrative Claims </li></ul><ul><ul><li>Actual and necessary costs and expenses of bankruptcy </li></ul></ul><ul><ul><li>Examples: </li></ul></ul><ul><ul><ul><li>Post-petition trade credit </li></ul></ul></ul><ul><ul><ul><li>Post-petition rent </li></ul></ul></ul><ul><ul><ul><li>Post-petition employee compensation </li></ul></ul></ul><ul><ul><ul><li>Post-petition professional fees </li></ul></ul></ul><ul><ul><ul><li>Section 503(b)(9) claims for “20 Day” Goods </li></ul></ul></ul><ul><ul><li>Risk of administrative insolvency – delayed and/or discounted payment of post-petition trade credit </li></ul></ul>
  13. 13. CLAIMS PRIORITY <ul><li>Next In Line: Lower Level Priority Claims </li></ul><ul><ul><li>Wages/salaries/compensation earned within 180 days of the bankruptcy filing up to $10,950 per employee </li></ul></ul><ul><ul><li>Employee benefit plans: claims for contributions for services rendered within 180 days of bankruptcy filing to the extent of $10,950 multiplied by number of employees covered by plan less amounts paid on account of wage/salary priority claim </li></ul></ul><ul><ul><li>Certain taxes </li></ul></ul><ul><ul><li>Other special claims </li></ul></ul>
  14. 14. CLAIMS PRIORITY <ul><li>Next In Line: Pre-Petition General Unsecured Claims </li></ul><ul><ul><li>Pre-petition unsecured trade claims </li></ul></ul><ul><ul><li>Same treatment </li></ul></ul><ul><ul><li>Disposition at conclusion of case </li></ul></ul><ul><ul><li>Exception – critical vendor </li></ul></ul>
  15. 15. PROTECT YOURSELF: DOCUMENTATION TO ENHANCE COLLECTION <ul><li>Credit Enhancements </li></ul><ul><ul><li>Letter of Credit </li></ul></ul><ul><ul><li>Security Agreement or Consignment </li></ul></ul><ul><ul><li>Guaranty </li></ul></ul><ul><ul><li>Credit Insurance and/or Puts/Sales of Claims </li></ul></ul><ul><ul><li>Liens and/or Trust Fund Claims </li></ul></ul><ul><ul><li>Setoff and Recoupment </li></ul></ul>
  16. 16. LETTERS OF CREDIT: 3 SEPARATE CONTRACTS Beneficiary (Seller) Letter of Credit Letter of Credit Reimbursement Agreement (Secured) Sales Contract Applicant (Buyer) Parties and Contracts Issuing Bank
  17. 17. LETTERS OF CREDIT: 3 SEPARATE CONTRACTS <ul><li>First: Contract between Creditor/Letter of Credit Beneficiary and Debtor/ Letter of Credit Applicant </li></ul><ul><li>Example: </li></ul><ul><ul><li>Sales or services contract </li></ul></ul>
  18. 18. <ul><li>Second: Contract between Debtor/ Letter of Credit Applicant and Letter of Credit Issuer </li></ul><ul><ul><li>Letter of credit issuer’s agreement to issue letter of credit </li></ul></ul><ul><ul><li>Reimbursement agreement </li></ul></ul><ul><ul><ul><li>Applicant’s agreement to reimburse issuer for payments under letter of credit and other fees and charges </li></ul></ul></ul><ul><ul><li>Security agreement/collateral security for Applicant’s reimbursement obligations </li></ul></ul>LETTERS OF CREDIT: 3 SEPARATE CONTRACTS
  19. 19. <ul><li>Third: Contract Between Letter of Credit Issuer and Letter of Credit Beneficiary </li></ul><ul><ul><li>Letter of credit </li></ul></ul><ul><ul><li>Letter of credit issuer agrees to honor upon presentation of complying documents </li></ul></ul><ul><ul><ul><li>Immediate payment </li></ul></ul></ul><ul><ul><ul><li>Deferred payment </li></ul></ul></ul>LETTERS OF CREDIT: 3 SEPARATE CONTRACTS
  20. 20. <ul><li>Letter of Credit Issuer </li></ul><ul><ul><li>Pays beneficiary upon presentation of required documents </li></ul></ul><ul><li>Letter of Credit Applicant </li></ul><ul><ul><li>Party for whose account letter of credit is issued </li></ul></ul><ul><li>Letter of Credit Beneficiary </li></ul><ul><ul><li>Party to whom letter of credit is issued </li></ul></ul>LETTERS OF CREDIT PARTICIPANTS
  21. 21. LETTERS OF CREDIT: INDEPENDENCE PRINCIPLE <ul><li>Each of the Contracts Underlying a Letter of Credit is Independent </li></ul><ul><ul><li>Dispute concerning one contract not grounds for relieving parties from obligations under other contracts </li></ul></ul><ul><ul><ul><li>Customer dispute under contract not grounds for Issuing Bank’s dishonor of letter of credit upon Beneficiary’s presentation of required documents </li></ul></ul></ul><ul><ul><li>Issuing Bank’s inability to obtain reimbursement from Applicant not grounds for dishonor upon presentation of required documents </li></ul></ul>
  22. 22. LETTERS OF CREDIT: INDEPENDENCE PRINCIPLE <ul><li>Letters of Credit Deal in Documents </li></ul><ul><li>Standards of Documentary Compliance </li></ul><ul><ul><li>Strict Compliance – Majority Rule </li></ul></ul><ul><ul><li>Substantial Compliance – Minority Rule </li></ul></ul>
  23. 23. LETTERS OF CREDIT: VS. GUARANTY <ul><li>Distinction From Guaranty </li></ul><ul><ul><li>Guaranty enforceable based on default in underlying transaction </li></ul></ul><ul><ul><li>No documentary presentation requirements unless guaranty states otherwise </li></ul></ul>
  24. 24. ADVANTAGES OF LETTERS OF CREDIT <ul><li>Instant Liquidity </li></ul><ul><ul><li>Compliant letter of credit draw usually honored by issuing bank within a few business days </li></ul></ul>
  25. 25. ADVANTAGES OF LETTERS OF CREDIT <ul><li>Issuing Bank’s Credit Standing </li></ul><ul><ul><li>Letter of Credit Issuing Bank substituted for or added to credit of Applicant to secure or support underlying obligation </li></ul></ul><ul><ul><li>Need to confirm financial standing of issuing bank </li></ul></ul><ul><ul><li>Request for creditworthy bank to act as “confirming bank” </li></ul></ul>
  26. 26. ADVANTAGES OF LETTERS OF CREDIT <ul><li>Draw Now/Litigate Later </li></ul><ul><ul><li>By virtue of independence principle, Issuing Bank must honor Beneficiary’s presentation of compliant documents </li></ul></ul><ul><ul><ul><li>Beneficiary holds funds while Beneficiary and Applicant litigate disputes </li></ul></ul></ul>
  27. 27. ADVANTAGES OF LETTERS OF CREDIT <ul><li>Bankruptcy Protection </li></ul><ul><ul><li>Issuing Bank will honor compliant letter of credit drawing notwithstanding Applicant’s bankruptcy filing </li></ul></ul><ul><ul><li>Beneficiary can draw under letter of credit, notwithstanding automatic stay </li></ul></ul><ul><ul><li>Preference risk can be limited </li></ul></ul>
  28. 28. ADVANTAGES OF LETTERS OF CREDIT <ul><li>Difficult to Enjoin Letter of Credit Drawings </li></ul><ul><ul><li>Fraud </li></ul></ul><ul><ul><li>Irreparable harm </li></ul></ul><ul><ul><li>No adequate remedy at law </li></ul></ul><ul><ul><li>Public interest </li></ul></ul><ul><ul><li>Posting bond </li></ul></ul>
  29. 29. ADVANTAGES OF LETTERS OF CREDIT <ul><li>Timely Dishonor/Statement of Nonconforming Documents Required Upon L/C Dishonor </li></ul><ul><ul><li>Issuing Bank must timely dishonor </li></ul></ul><ul><ul><li>Issuing Bank must identify all discrepancies when communicating dishonor </li></ul></ul>
  30. 30. LETTERS OF CREDIT: DOCUMENTARY VS. STANDBY <ul><li>Two Types of Letters of Credit </li></ul><ul><ul><li>Documentary letter of credit </li></ul></ul><ul><ul><ul><li>Primary payment vehicle </li></ul></ul></ul><ul><ul><li>Standby letter of credit </li></ul></ul><ul><ul><ul><li>Backstop/secondary payment vehicle in the event of Applicant’s default of its contract with Beneficiary </li></ul></ul></ul>
  31. 31. STANDBY LETTERS OF CREDIT <ul><li>Beneficiary Looks to Debtor/Customer for Payment </li></ul><ul><li>Standby Letter of Credit as Backstop </li></ul><ul><li>Keep Documentary Requirements SIMPLE! </li></ul><ul><ul><li>Draft (Demand for Payment) </li></ul></ul><ul><ul><ul><li>Sight – payable immediately upon loan </li></ul></ul></ul><ul><ul><ul><li>Time – payable fixed time after loan or on maturity date </li></ul></ul></ul><ul><ul><li>Document showing debtor’s failure to timely pay, other default, preference risk, other draw events </li></ul></ul><ul><ul><li>See L/C Forms – Supp. Tab A at pp. 1–3 </li></ul></ul>
  32. 32. LETTER OF CREDIT – PROVISIONS <ul><li>Letter of Credit Amount </li></ul><ul><ul><li>Is the amount correct? </li></ul></ul><ul><li>Name of Beneficiary/Applicant </li></ul><ul><ul><li>Make sure correct and consistent with draw documents, particularly invoice </li></ul></ul><ul><li>Expiration Date </li></ul><ul><ul><li>Is there sufficient time for drawing on letter of credit? </li></ul></ul>
  33. 33. LETTERS OF CREDIT – IMPACT OF APPLICANT’S BANKRUPTCY FILING <ul><li>Beneficiary Can Draw on Letter of Credit, Notwithstanding Applicant’s Bankruptcy Filing </li></ul><ul><li>Neither Letter of Credit, Nor Its Proceeds, are Property of the Debtor’s Estate and Issuing Bank Pays From Its Own Assets </li></ul><ul><li>Automatic Stay Does Not Preclude Either Issuing Bank’s Payment, or Beneficiary’s Draw, Under Letter of Credit </li></ul><ul><li>Bankruptcy Court Injunction of Drawing by Beneficiary or Payment by Issuing Bank Unlikely </li></ul>
  34. 34. LETTERS OF CREDIT – IMPACT OF APPLICANT’S BANKRUPTCY FILING – PREFERENCE ISSUES <ul><li>Standby Letter of Credit Issued for Debtor’s/Applicant’s Account More Than 90 Days Before Its Bankruptcy Filing and Drawn on By Creditor/Beneficiary and Paid Within 90 Days of Bankruptcy, or After Bankruptcy, is Not a Preference </li></ul>
  35. 35. LETTERS OF CREDIT – IMPACT OF APPLICANT’S BANKRUPTCY FILING – PREFERENCE ISSUES <ul><li>Issuing Bank’s Payment to Beneficiary Under Standby Letter of Credit Issued for Debtor’s Account Within 90 Day Preference Period to Secure Payment of Antecedent Debt and Secured by Debtor’s Assets May Be Subject to Preference Risk </li></ul>
  36. 36. CONSENSUAL SECURITY INTEREST – GOVERNING LAW <ul><li>Governing Law Article 9 – Uniform Commercial Code </li></ul><ul><ul><li>State not federal law </li></ul></ul><ul><ul><li>May vary by state </li></ul></ul>
  37. 37. CONSENSUAL SECURITY INTEREST – CREATION <ul><li>Security Agreement Describing Collateral </li></ul><ul><ul><li>Must be signed or authenticated by Debtor </li></ul></ul><ul><ul><li>Collateral described by asset category </li></ul></ul><ul><ul><li>See Purchase Money Security Agreement – Supp. Tab B at pp. 4–13 </li></ul></ul><ul><li>Debtor has Interest in Collateral </li></ul><ul><li>Value Extended to Debtor </li></ul><ul><ul><li>Trade credit extension </li></ul></ul><ul><ul><li>Forbearance from collection </li></ul></ul>
  38. 38. CONSENSUAL SECURITY INTEREST – CREATION <ul><li>Name of Debtor </li></ul><ul><ul><li>Correct legal name </li></ul></ul><ul><ul><li>How to verify? </li></ul></ul><ul><li>Authority of Signer </li></ul>
  39. 39. CONSENSUAL SECURITY INTEREST – PERFECTION <ul><li>Perfection </li></ul><ul><ul><li>Usually by filing UCC Financing Statement </li></ul></ul><ul><ul><ul><li>See UCC Financing Statement – Supp. Tab B at pp.14–15 </li></ul></ul></ul><ul><ul><ul><li>Does not require Debtor’s signature </li></ul></ul></ul><ul><ul><ul><li>File by Debtor’s correct legal name </li></ul></ul></ul><ul><ul><ul><ul><li>Impact of filing against wrong name? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Impact of filing against trade name? </li></ul></ul></ul></ul>
  40. 40. CONSENSUAL SECURITY INTEREST – PERFECTION <ul><li>Where to file UCC </li></ul><ul><ul><li>State of Debtor’s location </li></ul></ul><ul><ul><ul><li>State of registration for corporation or limited liability company </li></ul></ul></ul><ul><ul><ul><li>State of principal place of business for unregistered entity – general partnership </li></ul></ul></ul><ul><ul><ul><li>State of residence for individual </li></ul></ul></ul><ul><ul><li>Usually with Secretary of State, but check! </li></ul></ul><ul><ul><ul><li>Couple of states provide for local UCC filing </li></ul></ul></ul>
  41. 41. CONSENSUAL SECURITY INTEREST – PERFECTION <ul><li>Longevity of UCC Financing Statement </li></ul><ul><ul><li>Not perpetual </li></ul></ul><ul><ul><li>General rule: 5 years </li></ul></ul><ul><ul><ul><li>May vary by state </li></ul></ul></ul><ul><li>UCC Continued by Filing Continuation </li></ul><ul><ul><li>Must be filed within 6 months prior to expiration </li></ul></ul><ul><ul><li>See UCC Amendment – Supp. Tab B at p.16 </li></ul></ul>
  42. 42. CONSENSUAL SECURITY INTEREST – PERFECTION <ul><li>Amending UCC </li></ul><ul><ul><li>Debtor name change </li></ul></ul><ul><ul><ul><li>Old name seriously misleading </li></ul></ul></ul><ul><ul><li>Adding/deleting collateral </li></ul></ul><ul><ul><li>Address changes </li></ul></ul><ul><li>UCC Amendment Form </li></ul><ul><ul><li>For name changes, must file within 4 months to relate back </li></ul></ul><ul><ul><li>See UCC Amendment – Supp. Tab B at p.16 </li></ul></ul>
  43. 43. CONSENSUAL SECURITY INTEREST – PRIORITY <ul><li>How to Find Competing Security Interests/Liens </li></ul><ul><ul><li>Do UCC/Lien Search </li></ul></ul><ul><ul><li>Where? </li></ul></ul><ul><ul><ul><li>State of Debtor’s location </li></ul></ul></ul><ul><ul><ul><li>State where Debtor’s physical assets are located </li></ul></ul></ul><ul><ul><ul><li>State of Debtor’s principal place of business </li></ul></ul></ul>
  44. 44. CONSENSUAL SECURITY INTEREST – PRIORITY <ul><li>Priority Rules </li></ul><ul><ul><li>First to perfect </li></ul></ul><ul><li>Exceptions with Priority Over First to Perfect </li></ul><ul><ul><ul><li>Purchase Money Security Interests </li></ul></ul></ul><ul><ul><ul><li>Consignments </li></ul></ul></ul><ul><ul><ul><li>IRS and Certain Other Statutory Liens </li></ul></ul></ul>
  45. 45. CONSENSUAL SECURITY INTEREST – PURCHASE MONEY SECURITY INTEREST <ul><li>Purchase Money Security Interest (“PMSI”) </li></ul><ul><ul><li>See PMSI Agreement – Supp. Tab B at pp. 4–13 </li></ul></ul><ul><ul><li>Security interest granted to seller of goods to secure purchase price </li></ul></ul><ul><ul><li>Requires compliance with UCC Article 9 </li></ul></ul><ul><ul><li>Priority over prior perfected security interest in inventory by following UCC Article 9 rules for PMSI superpriority status </li></ul></ul>
  46. 46. CONSENSUAL SECURITY INTEREST – PURCHASE MONEY SECURITY INTEREST <ul><li>UCC Article 9 Rules for Superpriority Status </li></ul><ul><ul><li>PMSI Security Agreement signed or authenticated by Debtor </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><ul><li>UCC filing within 20 days of receipt by Debtor </li></ul></ul></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><ul><li>UCC Filing before Debtor’s receipt of goods </li></ul></ul></ul><ul><ul><ul><li>Authenticated written notification to prior secured inventory creditors </li></ul></ul></ul><ul><ul><ul><li>See PMSI Notice – Supp. Tab B at p. 13 </li></ul></ul></ul><ul><ul><ul><ul><li>Good for 5 years </li></ul></ul></ul></ul>
  47. 47. CONSIGNMENT <ul><li>Consignment </li></ul><ul><ul><li>Delivery of goods having a value of at least $1,000 to merchant for sale provided: </li></ul></ul><ul><ul><ul><li>No security interest created in consigned goods </li></ul></ul></ul><ul><ul><ul><li>Goods not consumer goods prior to delivery; and </li></ul></ul></ul><ul><ul><ul><li>Merchant deals in goods of that kind under name other than that of consigner, is not auctioneer and is not generally not known by creditors to be substantially engaged in selling goods of others </li></ul></ul></ul><ul><ul><li>Requires UCC filing and compliance with UCC Article 9 </li></ul></ul><ul><ul><li>Priority over prior perfected security interest in inventory by following UCC Article 9 PMSI rules for superpriority status </li></ul></ul>
  48. 48. GUARANTY Creditor (Seller) Guaranty Legal Right of Subrogation Debtor (Buyer) Parties and Contracts/Obligations Guarantor
  49. 49. GUARANTY <ul><li>Sample Form – Supp. Tab C at pp. 17–20 </li></ul><ul><li>Frequent Form of Credit Support </li></ul><ul><li>Backstop </li></ul><ul><ul><li>Creditworthiness/Guarantor Assets </li></ul></ul><ul><ul><li>Guarantor Financial Statements </li></ul></ul><ul><li>Increases Likelihood of Obligor’s Payment of Claim </li></ul>
  50. 50. GUARANTY – POTENTIAL GUARANTORS <ul><li>Consideration Necessary </li></ul><ul><li>Guarantor’s Ownership of Business </li></ul><ul><li>Guarantor’s Active Participant in Business </li></ul><ul><li>Parent </li></ul><ul><li>Subsidiary </li></ul><ul><li>Affiliate </li></ul>
  51. 51. GUARANTY <ul><li>Guarantor’s Undertaking </li></ul><ul><ul><li>Guaranty of payment – yes </li></ul></ul><ul><ul><ul><li>Creditor can look to guarantor without exhausting collection efforts against customer </li></ul></ul></ul><ul><ul><li>Guaranty of collection – no! </li></ul></ul><ul><ul><ul><li>Creditor must exhaust collection efforts against customer prior to proceeding against guarantor </li></ul></ul></ul><ul><ul><li>Other types of guarantees </li></ul></ul>
  52. 52. GUARANTY <ul><li>Limits </li></ul><ul><ul><li>Dollar amount </li></ul></ul><ul><ul><li>Duration </li></ul></ul><ul><ul><li>Very dangerous! </li></ul></ul><ul><ul><li>Collateral? </li></ul></ul>
  53. 53. GUARANTY <ul><li>Personal/Individual Guarantees </li></ul><ul><ul><li>Spousal Guarantees – ECOA/Federal Reserve Regulation B Limits </li></ul></ul><ul><ul><ul><li>General rule: cannot request spousal guaranty </li></ul></ul></ul><ul><ul><ul><li>Spouse can offer guaranty </li></ul></ul></ul><ul><ul><ul><li>Spousal guaranty in following circumstances: </li></ul></ul></ul><ul><ul><ul><ul><li>Spouse officer/principal </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Joint principal-spouse ownership of property </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Community property state </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Principal/spouse reside there </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Reliance on jointly owned property located there </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Instrument must be necessary to make community property available to satisfy debt </li></ul></ul></ul></ul></ul>
  54. 54. GUARANTY <ul><li>Guarantor Execution </li></ul><ul><ul><li>Notarize/witness signature </li></ul></ul><ul><ul><li>Make sure individual guarantor is signing in personal capacity (no title!!) </li></ul></ul><ul><li>Corporate/LLC/Partnership Guaranty </li></ul><ul><ul><li>Evidence of authority of Corporate/LLC/ Partnership signatory </li></ul></ul><ul><ul><li>Acknowledgement/notary </li></ul></ul>
  55. 55. <ul><li>Fraudulent Conveyance Risk </li></ul><ul><ul><li>Downstream Guaranty </li></ul></ul><ul><ul><ul><li>Parent guaranty subsidiary obligation </li></ul></ul></ul><ul><ul><li>Cross Stream Guaranty </li></ul></ul><ul><ul><ul><li>Affiliate guaranty – affiliate obligation </li></ul></ul></ul><ul><ul><li>Upstream Guaranty </li></ul></ul><ul><ul><ul><li>Subsidiary guarantee – parent obligation </li></ul></ul></ul>GUARANTY BY AFFILIATED COMPANIES
  56. 56. GUARANTY – RECOMMENDED PROVISIONS <ul><li>Guaranty Form – Supp. Tab C at p. 17 </li></ul><ul><li>Absolute/Unconditional Guaranty of Payment </li></ul><ul><li>No Offset – Waiver of Customer Defenses </li></ul>
  57. 57. GUARANTY – RECOMMENDED PROVISIONS <ul><li>Waiver of Guarantor Defenses </li></ul><ul><ul><li>Extending time of payment without compromising primary indebtedness of customer </li></ul></ul><ul><ul><li>Exchanging or releasing collateral </li></ul></ul><ul><ul><li>Failing to perfect security interest or preserve collateral </li></ul></ul><ul><ul><li>Releasing/settling with other guarantor(s) </li></ul></ul><ul><ul><li>Other guarantor/surety defenses </li></ul></ul>
  58. 58. GUARANTY – RECOMMENDED PROVISIONS <ul><li>Jury Trial Waiver </li></ul><ul><li>Consent to Jurisdiction </li></ul><ul><li>Governing Law </li></ul><ul><li>Payment of Attorneys’ Fees/Costs </li></ul>
  59. 59. GUARANTY – RECOMMENDED PROVISIONS <ul><li>Account Stated </li></ul><ul><li>Creditor’s Books and Records as Prima Facie Proof of Claim </li></ul><ul><li>Termination </li></ul><ul><ul><li>Mechanics </li></ul></ul><ul><ul><li>Effective date </li></ul></ul>
  60. 60. GUARANTY <ul><li>Preference Reinstatement Provision </li></ul>It is intended by the Guarantor that all payments to you in reduction of the Obligations shall be valid, indefeasible and unassailable. If after receipt of any payment of, or proceeds of any collateral applied (or intended to be applied) to the payment of, all or any part of the Obligations, you are for any reason compelled to surrender or voluntarily surrender, such payment or proceeds to any person, (a) because such payment or application of proceeds is or may be avoided, invalidated, declared fraudulent, act aside, determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds; or (b) for any other reason, including without limitation (i) any judgment, decree or order of any Court or administrative body having jurisdiction over you or any of your property, or (ii) any settlement or compromise of any such claim effected by you with any such claimant (including the Customer), then the Obligations or part thereof intended to be satisfied shall be reinstated and continue and this Guaranty shall continue in full force as if such payment or proceeds had not been received by you, notwithstanding any revocation thereof or the cancellation of any note or other instrument evidencing any Obligation or otherwise; and the Guarantor shall be liable to pay to you and hereby does indemnify you and hold you harmless for, the amount of such payment or proceeds so surrendered and all expenses (including all attorneys’ fees, court costs and expenses attributable thereto) incurred by you in the defense of any claim made against you that any payment or proceeds received by you in respect of all or any part of the Obligations must be surrendered. The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of the Customer by virtue of any payment, court order or any federal or state law.
  61. 61. CREDIT INSURANCE <ul><li>Insures Against Debtor’s Insolvency </li></ul><ul><ul><li>Debtor’s payment default not arising from dispute </li></ul></ul><ul><ul><li>Debtor’s bankruptcy filing </li></ul></ul><ul><ul><li>Other examples </li></ul></ul>
  62. 62. CREDIT INSURANCE <ul><li>Policy Amount </li></ul><ul><ul><li>Maximum amount insurer will pay </li></ul></ul><ul><li>Premium </li></ul><ul><ul><li>Amount paid for policy </li></ul></ul><ul><li>Policy Deductible </li></ul><ul><ul><li>Amount of aggregate “first loss” for which insured is responsible on insured accounts </li></ul></ul><ul><li>Co-Insurance </li></ul><ul><ul><li>% amount of covered loss for insured account for which insured is responsible </li></ul></ul>
  63. 63. CREDIT INSURANCE <ul><li>Credit Limits on a Given Insured Account </li></ul><ul><li>Claims Procedures </li></ul><ul><ul><li>Deadline for notifying insurer after learning of insured account’s insolvency </li></ul></ul><ul><ul><li>Maximum claim filing period </li></ul></ul><ul><ul><ul><li>Latest date insured may file a claim </li></ul></ul></ul><ul><ul><li>Timing of insurer’s payment of claim </li></ul></ul>
  64. 64. CREDIT INSURANCE  HANDLING OF CLAIMS VS. DEBTOR <ul><li>Can insured handle collection claim against insured account? </li></ul><ul><li>Recoveries From Insured Account </li></ul><ul><ul><li>Allocation between insurer and insured </li></ul></ul>
  65. 65. <ul><li>Buyer’s Agreement to Buy the Claim in the Future at Agreed-Upon Price </li></ul><ul><ul><li>Purchase price could be 100% of the claim or less </li></ul></ul><ul><ul><li>Protects against customer’s default/ bankruptcy filing </li></ul></ul><ul><ul><li>Shifts credit risk from vendor to third party </li></ul></ul>PUT AGREEMENTS
  66. 66. <ul><li>Creditor Must Pay a Nonrefundable Fee </li></ul><ul><li>Could Cover Pre-Petition and/or Chapter 11 Administrative Claim </li></ul><ul><li>Offers an Inducement to Creditors to Continue Extending Credit to Financially Troubled Companies In and Out of Chapter 11 </li></ul>PUT AGREEMENTS
  67. 67. <ul><li>Is Debtor identified properly? </li></ul><ul><ul><li>Multiple entity risk </li></ul></ul><ul><li>Amount of Coverage Limits Buyer’s Exposure  Total Accounts Receivable Buyer is Obligated to Purchase </li></ul><ul><li>How to determine assigned accounts if Buyer is not obligated to purchase entire claim? </li></ul><ul><li>Expiration of Coverage </li></ul>PUT AGREEMENTS
  68. 68. <ul><li>Put Event must occur for creditor to compel sale of claim </li></ul><ul><li>A Deadline for the Occurrence of Put Events is Usually Specified, After Which the Put Expires </li></ul><ul><li>Make sure Put Events work, particularly for administrative claims </li></ul>PUT AGREEMENTS – PUT EVENTS
  69. 69. PUT AGREEMENTS – PRE-PETITION CLAIM PUT EVENTS <ul><li>Bankruptcy filing </li></ul><ul><li>Moratorium of payment of claims </li></ul><ul><li>Failure to pay claim: hard to get </li></ul>
  70. 70. PUT AGREEMENTS CHAPTER 11 ADMINISTRATIVE CLAIM – PUT EVENTS <ul><li>Conversion of Chapter 11 case to Chapter 7 </li></ul><ul><li>Confirmation of Chapter 11 plan of liquidation </li></ul><ul><li>Moratorium in payment of trade claims </li></ul><ul><li>Failure to pay claim  hard to get </li></ul>
  71. 71. PUT AGREEMENTS <ul><li>Closing Conditions Upon Occurrence of Put Event </li></ul><ul><li>Be Sure Closing Conditions are Likely to Occur and Understand Potential Expense of Satisfying Requirements </li></ul>
  72. 72. PUT AGREEMENTS <ul><li>Closing Conditions </li></ul><ul><ul><li>Filing of schedules listing claim as undisputed, not contingent or unliquidated in the correct amount </li></ul></ul><ul><ul><ul><li>A frequent condition for put of pre-petition unsecured claims </li></ul></ul></ul><ul><ul><ul><li>As a general rule, this condition cannot be satisfied for put of administrative claims  no provision in Bankruptcy Code for filing schedules of unpaid administrative claims </li></ul></ul></ul>
  73. 73. PUT AGREEMENTS <ul><li>Closing Conditions (cont’d) </li></ul><ul><ul><li>Debtor’s acknowledgment of claim amount – not within creditor’s control </li></ul></ul><ul><ul><li>Court order allowing claim in the correct amount  this could be expensive to obtain </li></ul></ul><ul><ul><li>Is there a deadline for creditor to close upon occurrence of a Put Event? </li></ul></ul>
  74. 74. <ul><li>Ascertain Purchaser’s Financial Condition </li></ul><ul><ul><li>Put Replaces Unsecured Obligation of Debtor with Unsecured Obligation of Buyer or Designee </li></ul></ul><ul><ul><li>Creditworthiness of buyer </li></ul></ul><ul><ul><ul><li>Creditor should get financial info about buyer to confirm buyer’s ability to pay purchase price for the claim when put is exercised </li></ul></ul></ul>PUT AGREEMENTS
  75. 75. <ul><li>Is Put Agreement assignable? </li></ul><ul><ul><li>Risk of financially weaker assignee </li></ul></ul><ul><ul><li>Put Agreement should either not be assignable or should be assignable to an assignee acceptable to creditor </li></ul></ul>PUT AGREEMENTS
  76. 76. PUT AGREEMENTS: ASSIGNMENT OF CLAIM AGREEMENT <ul><li>Carefully Review Provisions </li></ul><ul><ul><li>There could be outs for a disgruntled purchaser in declining market </li></ul></ul><ul><li>More Fully Explored in Sale of Claims Section </li></ul>
  77. 77. SALE OF CLAIMS: SELLER GOALS <ul><li>Immediate Cash Realization </li></ul><ul><li>Avoids Risk of Smaller Distribution </li></ul><ul><li>Avoids Risk of Delayed Distribution </li></ul><ul><li>Avoids Risk of Distribution in Less Liquid, More Speculative Assets, Such as Stock </li></ul>
  78. 78. SALE OF CLAIMS: PURCHASER GOALS <ul><li>Profit Motive </li></ul><ul><ul><li>Difference between anticipated dividend and purchase price </li></ul></ul><ul><li>Gaining Control Over the Debtor </li></ul>
  79. 79. SALE OF CLAIMS: MECHANICS <ul><li>Claims are Typically Sold at a Discount </li></ul><ul><li>Claims Could be Sold Before or After Bankruptcy Filing </li></ul>
  80. 80. SALE OF CLAIMS: MECHANICS <ul><li>Claims Sold During Bankruptcy Case Are Governed By Bankruptcy Rule 3001(e) </li></ul><ul><ul><li>If claim was sold before filing of proof of claim, buyer can file the proof of claim without court intervention </li></ul></ul><ul><ul><li>If claim was sold after filing of proof of claim, the following procedure applies: </li></ul></ul><ul><ul><ul><li>Buyer files evidence of sale with the bankruptcy court </li></ul></ul></ul><ul><ul><ul><li>Court clerk must give seller notice of the sale and seller has 20 days to object to the sale </li></ul></ul></ul><ul><ul><ul><li>If no timely objection, clerk notes sale on court records </li></ul></ul></ul>
  81. 81. SALE OF CLAIMS: OFFER <ul><li>Usually a Written Offer </li></ul><ul><li>Based on % of Claim </li></ul><ul><li>Investigating claims market for reasonable selling price? </li></ul>
  82. 82. SALE OF CLAIMS: EVALUATING OFFER <ul><li>How to find out if there is a “higher and better” offer for the claim? </li></ul><ul><li>Check other prospective buyers for their price </li></ul><ul><li>Check bankruptcy case docket for relevant information </li></ul>
  83. 83. SALE OF CLAIMS: EVALUATING OFFER <ul><li>Bankruptcy pleadings may disclose likely distribution on unsecured claims [Pacer] </li></ul><ul><ul><li>First Day Papers </li></ul></ul><ul><ul><li>DIP Financing Motion </li></ul></ul><ul><ul><li>Schedules </li></ul></ul><ul><ul><li>Asset Sale Motions </li></ul></ul><ul><ul><li>Plan and Disclosure Statement </li></ul></ul><ul><li>Notices of Sales of Claims </li></ul><ul><li>Check Debtor’s/Creditors’ Committee’s Websites </li></ul>
  84. 84. SALE OF CLAIMS: COMMITMENT LETTER <ul><li>Locks in Sale Price </li></ul><ul><li>Sets Deadline for Seller to Finalize Sale, the Passage of Which, Without a Final Sale, Gives Buyer an Out </li></ul><ul><ul><li>Is there a similar deadline for buyer? </li></ul></ul><ul><ul><li>Risk of buyer locking in seller indefinitely </li></ul></ul>
  85. 85. SALE OF CLAIMS: COMMITMENT LETTER <ul><li>Carefully Review the Commitment Letter for Zingers </li></ul><ul><li>Do Not Execute Commitment Letter or Agree to Price Without First Reviewing Form of Assignment of Claim Agreement to Make Sure Sale is a Likelihood </li></ul><ul><li>Try To Dispense With Commitment Letter and Negotiate Assignment Agreement </li></ul>
  86. 86. SALE OF CLAIMS: ASSIGNMENT OF CLAIM AGREEMENT <ul><li>Timing of Payment of Purchase Price </li></ul><ul><ul><li>Immediate payment of undisputed portion </li></ul></ul><ul><ul><li>No reference to timing of payment could mean trouble! </li></ul></ul><ul><ul><li>Payment conditioned on Buyer’s acceptance without time deadline could mean trouble! </li></ul></ul>
  87. 87. <ul><li>Amount of Price </li></ul><ul><ul><li>% of undisputed/scheduled claim amount </li></ul></ul><ul><ul><ul><li>Should be immediately payable </li></ul></ul></ul><ul><ul><li>Treatment and payment of disputed portion of claim following allowance </li></ul></ul><ul><ul><ul><li>Agreement to pay % of allowed claim amount </li></ul></ul></ul><ul><ul><ul><li>Option to pay % when claims allowed  A NO-NO FOR CLAIMS SELLER! </li></ul></ul></ul><ul><ul><ul><li>Is disputed portion of claim sold or retained by seller? </li></ul></ul></ul>SALE OF CLAIMS: ASSIGNMENT OF CLAIM AGREEMENT
  88. 88. <ul><li>Representations by Seller </li></ul><ul><ul><li>Review carefully  there could be outs for a disgruntled purchaser in declining market </li></ul></ul><ul><ul><li>Examples: </li></ul></ul><ul><ul><ul><li>Claim not disputed or subject to defense, offset or counterclaim. Does that include disputed portion of claim for which buyer paid nothing? </li></ul></ul></ul><ul><ul><ul><li>Claim paid at the same time and in same tender as other like-priority (general unsecured) claims </li></ul></ul></ul><ul><ul><ul><li>No preference risk </li></ul></ul></ul>SALE OF CLAIMS: ASSIGNMENT OF CLAIM AGREEMENT
  89. 89. <ul><li>Buyer Should be Obligated to Notify Seller of Objection to Claim and Seller Should be Given Ample Opportunity to Contest Objection </li></ul><ul><li>Reclamation Claim and/or 20 Day Administrative Claim in Favor of Sellers of Goods </li></ul><ul><ul><li>Higher purchase price? </li></ul></ul><ul><ul><li>Carved out of the sale? </li></ul></ul>SALE OF CLAIMS: ASSIGNMENT OF CLAIM AGREEMENT
  90. 90. <ul><li>Treatment of Preference Recovery </li></ul><ul><li>Seller’s Obligation to Repurchase Claim in the Event of Breach of Any Warranty/Representation or Other Breach of the Agreement </li></ul><ul><ul><li>Interest usually charged from date of execution of the agreement [should accrue from date of seller’s receipt of purchase price] </li></ul></ul><ul><ul><li>Interest rate could be very high </li></ul></ul><ul><ul><li>Interest rate usually subject to negotiation </li></ul></ul>SALE OF CLAIMS: ASSIGNMENT OF CLAIM AGREEMENT
  91. 91. TRUST FUND RIGHTS <ul><li>Trust Fund Rights Trump Secured Creditor Status </li></ul><ul><li>Perishable Agricultural Commodities Act (PACA) Claims Have Trust Fund Status </li></ul><ul><li>PACA Creates Federal Statutory Trust For Benefit of Unpaid Suppliers of Perishable Agricultural Commodities </li></ul>
  92. 92. PACA TRUST FUND CLAIMS <ul><li>Perishable Agricultural Commodities Include: </li></ul><ul><ul><li>“ Fresh fruits and vegetables of every kind or character whether or not frozen or packed in ice or cherries in brine” </li></ul></ul><ul><li>Does Not Cover Goods That Have Been Processed and Have Undergone a Change From Their Natural State </li></ul>
  93. 93. PACA TRUST FUND CLAIMS <ul><li>PACA Rights Only Valid if All of the Following Elements Satisfied: </li></ul><ul><ul><li>Transaction involves perishable agricultural commodities </li></ul></ul><ul><ul><li>Purchaser of commodities is a commission merchant, broker or dealer </li></ul></ul><ul><ul><li>Transaction involves interstate or foreign commerce </li></ul></ul><ul><ul><li>Seller has not received full payment </li></ul></ul>
  94. 94. PACA TRUST FUND CLAIMS <ul><li>Assets Subject to the Trust Include: </li></ul><ul><ul><li>Buyer’s perishable agricultural commodities </li></ul></ul><ul><ul><li>Food products derived from the produce </li></ul></ul><ul><ul><li>Accounts receivable of the commodities and food products </li></ul></ul><ul><ul><li>Cash proceeds of the commodities and food products </li></ul></ul>
  95. 95. PACA TRUST FUND CLAIMS <ul><li>Notice Requirements: </li></ul><ul><ul><li>Seller must send written notice of PACA trust to purchaser within 30 days after: </li></ul></ul><ul><ul><ul><li>Expiration of time for payment under USDA regulations; or </li></ul></ul></ul><ul><ul><ul><li>Expiration of time as agreed to by parities </li></ul></ul></ul><ul><ul><ul><ul><li>Not to exceed 30 days after buyer’s receipt and acceptance of goods; or 30 days from seller’s receipt of notice of dishonor of payment </li></ul></ul></ul></ul>
  96. 96. PACA TRUST FUND CLAIMS <ul><li>Notice Requirements Can Be Satisfied by Including the Following on Seller’s Invoice: </li></ul><ul><ul><li>“ The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by Sec. 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. Sec. 499(e)(c))” </li></ul></ul>
  97. 97. PACA TRUST FUND CLAIMS <ul><li>PACA Creates a Non-Segregated Floating Trust in Seller’s Assets </li></ul><ul><li>No Tracing Requirement </li></ul><ul><li>Sales of PACA Goods Can Be Commingled With Receipts of Non-PACA Assets </li></ul>
  98. 98. PACA TRUST FUND CLAIMS <ul><li>PACA Beneficiaries Have Priority Over Other Creditor Constituencies </li></ul><ul><ul><li>Creditors with a perfected floating lien in all accounts receivable and inventory </li></ul></ul><ul><ul><li>Priority creditors </li></ul></ul><ul><ul><li>Prepetition general unsecured creditors </li></ul></ul>
  99. 99. PACA TRUST FUND CLAIMS <ul><li>Upon Buyer’s Bankruptcy Filing the Bankruptcy Court Has Control Over PACA Trust Funds </li></ul><ul><ul><li>Seller must commence suit in bankruptcy court for payment of PACA claim </li></ul></ul><ul><ul><li>Notice must be given to other creditors with interest in the Debtor’s assets </li></ul></ul><ul><ul><li>If seller satisfies all PACA requirements, claim will be paid ahead of other creditors </li></ul></ul>
  100. 100. BUILDERS TRUST FUNDS <ul><li>Certain States Have Builders or Construction Trust Fund Statutes That Create Trust Fund in Favor of Subcontractors, Suppliers and Other Providers of Goods and Services for Improvement of Real Property </li></ul><ul><ul><li>Arizona, Colorado, Delaware, Maryland, Michigan, New Jersey, New York, Oklahoma, Tennessee, Texas and Wisconsin </li></ul></ul><ul><li>Payments by Owner/General Contractor to General Contractor/Subcontractor Impressed With Trust Fund Status for Benefit of Subcontractors, Suppliers and Other Providers of Goods and Services on Job That Generates the Payment </li></ul>
  101. 101. BUILDERS TRUST FUNDS <ul><li>In Contrast to Mechanics’ Lien, Builders Trust Fund Arises Automatically With No Notice or Filing Requirement </li></ul><ul><li>As a General Rule, Builders Trust Fund Beneficiaries Have Priority Over Prior Perfected Security Interest in Debtor’s Accounts Receivable </li></ul><ul><li>Trust Fund Beneficiaries Have Tracing Obligation </li></ul>
  102. 102. STATE AND FEDERAL LAW LIENS <ul><li>Mechanics’/Materialmans’ Lien </li></ul><ul><ul><li>Lien on real property for labor and/or materials provided to Debtor for improvement of real property </li></ul></ul><ul><ul><li>States vary on manner in which lien arises/attaches and deadlines </li></ul></ul><ul><ul><li>Many states allow for delayed perfection that relates back to attachment/creation of lien </li></ul></ul><ul><ul><ul><li>Most states require recording in designated office for real estate filings </li></ul></ul></ul><ul><ul><li>Most states require and set deadlines for commencement of lawsuit to foreclose on lien </li></ul></ul>
  103. 103. STATE AND FEDERAL LAW LIENS <ul><li>Artisans’/Processors’/Die-Makers’/Repairmens’ Liens </li></ul><ul><ul><li>Most states require possession of goods for perfection </li></ul></ul><ul><ul><li>Some states allow for filing notice within specified time period to perfect certain liens </li></ul></ul><ul><li>Landlords’ Lien </li></ul><ul><li>Warehouse Lien </li></ul><ul><li>Tax/Erisa Lien </li></ul><ul><li>Supp. Tab D at pp. 31–36 </li></ul>
  104. 104. <ul><li>Right of Creditor to Credit Amount Owed to Debtor Against Any Amount Debtor Owed Creditor </li></ul><ul><li>Creditor Self Help Measure </li></ul>SETOFF
  105. 105. SETOFF <ul><li>Example: Prior to Debtor’s Bankruptcy Filing: </li></ul><ul><ul><li>Creditor provided goods on credit to Debtor with respect to which Debtor owes $50,000 to creditor </li></ul></ul><ul><ul><li>Debtor provided services to creditor with respect to which Creditor Owes $50,000 to Debtor </li></ul></ul><ul><ul><li>Setoff allows creditor to reduce creditor’s pre-bankruptcy indebtedness to Debtor by creditor’s pre-bankruptcy claim against Debtor for a net obligation of “0” owing by creditor to Debtor </li></ul></ul>
  106. 106. SETOFF <ul><li>State Law Right </li></ul><ul><ul><li>Conditioned upon satisfying the following: </li></ul></ul><ul><ul><ul><li>Obligation to be setoff must be Debtor’s property </li></ul></ul></ul><ul><ul><ul><li>Existing indebtedness is due and owing; and </li></ul></ul></ul><ul><ul><ul><li>Mutuality of obligation between the Debtor and creditor </li></ul></ul></ul><ul><li>Avoids absurd and unfair result of making A pay B when B owes A </li></ul>
  107. 107. SETOFF <ul><li>The Bankruptcy Code Does Not Grant Setoff Rights Per Se </li></ul><ul><li>Bankruptcy Code Section 553 Recognizes and Preserves Creditor’s State Law Setoff Rights </li></ul><ul><li>Section 553 Also Establishes Limits on a Creditor’s Ability to Exercise its Setoff Rights </li></ul><ul><li>Bankruptcy Code Section 506(a) Treats Valid Setoff Rights as a Secured Claim </li></ul>
  108. 108. SETOFF <ul><li>Automatic Stay Arising Under Bankruptcy Code Section 362 Prevents a Creditor From Unilaterally Exercising Setoff Rights Subsequent to Debtor’s Bankruptcy Filing </li></ul><ul><ul><li>The creditor must obtain a bankruptcy court order granting relief from the automatic stay to permit setoff </li></ul></ul>
  109. 109. SETOFF <ul><li>Section 553’s Limitations on the Right to Exercise Setoff </li></ul><ul><ul><li>“ Mutuality” </li></ul></ul><ul><ul><ul><li>The debts must have been between the same parties acting in the same right or capacity </li></ul></ul></ul><ul><ul><ul><li>Mutual debts must both be pre-petition or post-petition </li></ul></ul></ul><ul><ul><ul><li>Does not require that obligations arise from same contract or transaction </li></ul></ul></ul><ul><ul><ul><li>Example of mutuality: A owes B on a personal loan that occurred prepetition. B owes A for services A rendered for B prepetition. </li></ul></ul></ul><ul><ul><ul><li>Example where the debts would lack mutuality: A is indebted to B for a personal loan. B is indebted to A in A’s capacity as a trustee for a trust. </li></ul></ul></ul>
  110. 110. SETOFF <ul><li>Risks of “Triangular Setoff” </li></ul><ul><ul><li>Creditor dealing with multiple affiliated debtors </li></ul></ul><ul><ul><li>A’s obligations to Company B cannot be setoff against affiliated Company C’s indebtedness to A, unless otherwise permitted by agreement between A, B, and C </li></ul></ul>
  111. 111. SETOFF <ul><li>Following sample language for Setoff Agreement to allow Triangular Setoff: </li></ul>“ XYZ Papers Inc., and its direct and indirect affiliates, divisions and subsidiaries including, but not limited to, XYZ Papers Holdings Inc., XYZ Canada Inc., XYZ Limited and XYZ NH LLC (hereinafter collectively “XYZ”) and ABC Inc. and its direct or indirect affiliates, divisions or subsidiaries including, but not limited to, ABC Inc. (collectively “ABC”) agree that notwithstanding anything to the contrary contained herein or contained in any other contract, agreement or document, XYZ may offset any debt owing by XYZ to ABC against any debt owing by ABC to XYZ.” Note: The agreement, at least as to the paragraph above, must be signed by all ABC and XYZ entities that do business with each other.
  112. 112. SETOFF <ul><li>Court Decision Rejecting Setoff Agreement as Basis for Triangular Setoff: In re SemCrude, L.P. , U.S. Bankruptcy Court, District of Delaware, 12/29/08 </li></ul><ul><li>Court Decision Rejecting Substantive Consolidation of Affiliated Debtors’ Estates as Basis for Triangular Setoff: In re Garden Ridge Corporation , U.S. District Court, Delaware, 12/29/08 </li></ul>
  113. 113. <ul><li>“ Pre-Petition” </li></ul><ul><ul><li>Setoff of pre-petition claim against pre-petition debt is governed by Bankruptcy Code Section 553 </li></ul></ul><ul><ul><li>Both the debt and the claim owed must have arisen prior to the debtor’s bankruptcy filing </li></ul></ul><ul><ul><li>Debt can be liquidated, unliquidated, unmatured or contingent when bankruptcy is filed </li></ul></ul>SETOFF
  114. 114. <ul><li>“ Post-Petition” </li></ul><ul><ul><li>The setoff of a post-petition claim against a post-petition debt is not governed by Section 553 </li></ul></ul><ul><ul><li>The general rule is that post-petition setoff rights are enforceable, subject to the creditor obtaining relief from the automatic stay </li></ul></ul>SETOFF
  115. 115. SETOFF – LIMITATIONS <ul><li>“ Disallowed” 11 U.S.C. §553(a)(1) </li></ul><ul><ul><li>Certain claims which have been disallowed under Section 502 of the Bankruptcy Code cannot be used as the basis for a setoff </li></ul></ul><ul><ul><li>Examples </li></ul></ul><ul><ul><ul><li>Exempted property claims </li></ul></ul></ul><ul><ul><ul><li>Unenforceable claims (e.g., because of usury) </li></ul></ul></ul><ul><ul><ul><li>Unconscionability or failure of consideration </li></ul></ul></ul>
  116. 116. SETOFF – LIMITATIONS <ul><li>“ Transferred” 11 U.S.C. §553(a)(2) </li></ul><ul><ul><li>Claims against a Debtor cannot be offset if: </li></ul></ul><ul><ul><ul><li>the claims were transferred, by an entity other than the Debtor, to such creditor within 90 days before the filing of Debtor’s bankruptcy; </li></ul></ul></ul><ul><ul><ul><li>Debtor was insolvent when the claim was acquired; and </li></ul></ul></ul><ul><ul><ul><li>Insolvency presumed </li></ul></ul></ul>
  117. 117. <ul><li>“ Build-Up” 11 U.S.C. §553(a)(3) </li></ul><ul><ul><li>A creditor cannot incur obligations to the Debtor within 90 days of the filing of a bankruptcy petition where the purpose of the incurrence of such obligations was to create or increase the right of setoff and the Debtor was insolvent at the time of setoff </li></ul></ul><ul><ul><li>Insolvency presumed </li></ul></ul>SETOFF – LIMITATIONS
  118. 118. <ul><li>“ Improvement in Position” 11 U.S.C. §553(b) </li></ul><ul><ul><li>Trustee or debtor-in-possession has the power to recover any improvement in the creditor’s position from the amounts set off during the 90 days preceding the filing of a bankruptcy petition </li></ul></ul>SETOFF – LIMITATIONS
  119. 119. <ul><li>On the 90th Day Before Bankruptcy Filing, Compare Creditor’s Claim with Creditor’s Debt, and Determine Extent to Which Creditor’s Claim Exceeds Debt Amount, the “Insufficiency” </li></ul><ul><li>If There Were no Insufficiency on 90th Day, Determine First Day After 90th Day (But Before Commencement of Debtor’s case) When “Insufficiency” Arose: </li></ul><ul><ul><li>Compare Creditor’s Claim with Creditor’s Debt on That Date </li></ul></ul>SETOFF: IMPROVEMENT OF POSITION-CALCULATION
  120. 120. <ul><li>Determine “Insufficiency” When Setoff Occurs </li></ul><ul><li>Improvement of Position is Reduction of “Insufficiency” When Comparing 90th Day “Insufficiency” (or Insufficiency on First Day Thereafter) with Insufficiency on Setoff Date </li></ul>SETOFF: IMPROVEMENT OF POSITION-CALCULATION
  121. 121. RECOUPMENT <ul><li>Defense to Debtor’s Claim Against a Creditor </li></ul><ul><ul><li>Recoupment allows a creditor to reduce its claim when setoff might be unavailable </li></ul></ul><ul><ul><li>Must arise from a single or integrated transaction </li></ul></ul><ul><ul><li>Inadequate for Debtor to enjoy benefits of transaction without meeting obligations </li></ul></ul>
  122. 122. RECOUPMENT <ul><li>Equitable Remedy Not Mentioned in the Bankruptcy Code </li></ul><ul><li>Bankruptcy Code Section 553’s Limits on Setoff Do Not Apply To Recoupment </li></ul><ul><li>Available to Reduce Claim Against Prepetition Debts, Post-Petition Debts, or Some Combination </li></ul><ul><li>Creditor Need Not Seek Stay Relief To Effectuate Recoupment </li></ul>
  123. 123. SETOFF AND RECOUPMENT <ul><li>Can setoff and recoupment rights be limited or eliminated in a Chapter 11 financing order or confirmed Chapter 11 plan? </li></ul><ul><ul><li>Financing Orders: beware of provisions that subordinate setoff and/or recoupment rights to the rights of the Chapter 11 secured lender </li></ul></ul><ul><ul><li>There is a division among the courts on whether a discharge under a confirmed Chapter 11 plan eradicates setoff rights </li></ul></ul><ul><ul><ul><li>Make sure plan deals with setoff rights </li></ul></ul></ul><ul><li>Priority Dispute: Setoff Rights vs. Accounts Receivable Secured Lender </li></ul><ul><ul><li>Majority Rule: Setoff rights have priority </li></ul></ul>
  124. 124. SPEAKER BIO <ul><li>Bruce S. Nathan </li></ul><ul><li>Member of the Firm </li></ul><ul><li>Tel 212.204.8686 | Fax 973.422.6851 </li></ul><ul><li>E-mail: bnathan@lowenstein.com </li></ul><ul><li>Practice </li></ul><ul><li>Bruce S. Nathan is a member of the firm's Bankruptcy, Financial Reorganization & Creditors' Rights Group. Mr. Nathan concentrates on all aspects of creditors' rights and workouts in bankruptcy, out-of-court matters and other types of insolvency cases for secured creditors, creditors' committees, unsecured creditors, trustees and other creditors. Mr. Nathan serves as counsel to the unsecured creditors’ committee in Interstate Bakeries Corporation and Advanced Marketing Services Inc. and has represented substantial creditor interests in the Enron, WorldCom, Solutia, Metromedia Fiber Network, Adelphia, Calpine, Heilig-Meyers and Linens n’ Things chapter 11 cases. </li></ul><ul><li>Mr. Nathan also negotiates and prepares letters of credit, guarantees, security, consignment, bailment, tolling, and other agreements for credit departments of institutional clients. Mr. Nathan is also involved in the negotiation and preparation of loan, letter of credit, and factoring documentation and other matters for banks, asset-based lenders and factors. </li></ul><ul><li>Education </li></ul><ul><ul><li>University of Pennsylvania School of Law (J.D., 1980) </li></ul></ul><ul><ul><li>Wharton School of Finance and Business (M.B.A., 1980) </li></ul></ul><ul><ul><li>University of Rochester (B.A., 1976), Phi Beta Kappa </li></ul></ul>
  125. 125. SPEAKER BIO <ul><li>Affiliations </li></ul><ul><ul><li>New York State Bar Association </li></ul></ul><ul><ul><li>American Bar Association </li></ul></ul><ul><ul><ul><li>Commercial Financial Services Committee </li></ul></ul></ul><ul><ul><ul><li>Business Bankruptcy Committee </li></ul></ul></ul><ul><ul><li>American Bankruptcy Institute </li></ul></ul><ul><ul><ul><li>Member, Board of Directors </li></ul></ul></ul><ul><ul><ul><li>Contributing Editor, American Bankruptcy Institute Journal - &quot;Last in Line&quot; Column </li></ul></ul></ul><ul><ul><ul><li>Lead Editor, &quot;Second Circuit Cases Update&quot; </li></ul></ul></ul><ul><ul><ul><li>Former Co-Chair, Unsecured Trade Creditors' Committee </li></ul></ul></ul><ul><ul><ul><li>Speaker at 2007 Annual Spring Meeting: &quot;Fifty Ways to Leave Your Debtor: Lesser Known Remedies For Jilted Creditors&quot; </li></ul></ul></ul><ul><ul><ul><li>Task Force on Preferences </li></ul></ul></ul><ul><ul><ul><li>Chair, Task Force on Reclamations </li></ul></ul></ul><ul><ul><ul><li>Uniform Commercial Code Committee and Task Force - Revised Article 9 Primer </li></ul></ul></ul><ul><ul><li>Commercial Law League of America </li></ul></ul><ul><ul><li>Association of Commercial Finance Attorneys </li></ul></ul><ul><ul><li>National Association of Credit Management </li></ul></ul><ul><ul><ul><li>Contributor to Business Credit - National Association of Credit Management Magazine </li></ul></ul></ul><ul><ul><ul><li>Member, Editorial Advisory Board </li></ul></ul></ul><ul><ul><ul><li>National Bankruptcy and Insolvency Group </li></ul></ul></ul><ul><ul><ul><li>Lecturer, National Association of Credit Management and Affiliates and Credit Groups on Bankruptcy, UCC Article 9, Consignments, Letter of Credit law and other credit-related issues </li></ul></ul></ul><ul><ul><li>Member of FCIB, an Association of Executives in Finance, Credit and International Business. Presented at The 4 th China International Credit and Risk Management Conference, Shenzhen, China, September 21, 2007, and FCIB Teleconference, December 13, 2007, on key provisions of People’s Republic of China’s 2006 Law on Enterprise Bankruptcy, similarities to and differences with the U.S. Bankruptcy Code, and upcoming implementation challenges </li></ul></ul><ul><ul><li>Lecturer, Executive Enterprises Inc. the Bank Lending Institute and the Banking Law Institute on Commercial Loan Workouts & UCC Issues </li></ul></ul><ul><ul><li>Contributor </li></ul></ul><ul><ul><ul><li>Credit Today </li></ul></ul></ul><ul><ul><ul><li>National Credit News </li></ul></ul></ul><ul><li>Articles/Interviews Featuring Bruce S. Nathan </li></ul><ul><ul><li>&quot;Bruce S. Nathan discusses litigation surrounding creditors committee selection in light of recent changes to the U.S. Bankruptcy Code.&quot; Dow Jones , August 9, 2006 </li></ul></ul><ul><li>  </li></ul><ul><li>Publications </li></ul><ul><ul><li>“ Effective Seller Remedies When Confronting a Financially Distressed Buyer Prior to Bankruptcy” Bruce Nathan, Business Credit , February 2009 </li></ul></ul><ul><ul><li>“ Recent Court Decisions on Consignments and Other Security Arrangements: The Benefits of Aggressive Creditor Action and the Pitfalls of Failing to Document Properly” Bruce Nathan, Business Credit , January 2009 </li></ul></ul><ul><ul><li>&quot;Builders Trust Fund Payments: A Defense to Preference Exposure&quot; Bruce Nathan, Business Credit , November/December 2008 </li></ul></ul><ul><ul><li>&quot;Courts Remain Split Over Whether a Debtor’s Credit Card Payment is an Avoidable Preference&quot; Bruce Nathan, American Bankruptcy Institute Journal , October 2008 </li></ul></ul><ul><ul><li>&quot;Release of State Mechanic's and Other Lien Law Rights As a Defense to Preference Claims? Yes and No!&quot; Bruce Nathan, Business Credit , October 2008 </li></ul></ul><ul><ul><li>&quot;Overseas Bear Stearns Hedge Funds Denied Chapter 15 Relief&quot; Bruce Nathan, Richard Corbi, Business Credit , July/August 2008 </li></ul></ul><ul><ul><li>&quot;Mechanic’s Liens and the Bankruptcy Code&quot; Bruce Nathan, Business Credit , June 2008 </li></ul></ul><ul><ul><li>&quot;Is a Debtor’s Credit Card Payment a Preference? &quot; Bruce Nathan, Business Credit , May 2008 </li></ul></ul><ul><ul><li>&quot;PACA Trust Destroyed by Written Agreement Extending Payment Terms&quot; Bruce Nathan, Business Credit , April 2008 </li></ul></ul><ul><ul><li>&quot;State Law Artisans’ Lien Rights Defeat Preference Exposure -The Saga Continues&quot; Bruce Nathan, Business Credit , March 2008 </li></ul></ul><ul><ul><li>&quot;The Critical Vendor Roller Coaster&quot; Bruce Nathan, Business Credit , February 2008 </li></ul></ul><ul><ul><li>&quot;Section 503(b)(9) Goods Supplier Priority - More Recent Developments&quot; Bruce Nathan, Business Credit , January 2008 </li></ul></ul><ul><ul><li>&quot;Beware of Claims Bar Dates for Section 503(b)(9) Administrative Priority Claims in Favor of Goods Suppliers&quot; Bruce Nathan, Business Credit , November/December 2007 </li></ul></ul>
  126. 126. SPEAKER BIO <ul><ul><li>&quot;Are State Preference Laws Preempted by the United States Bankruptcy Code? Not Necessarily!&quot; Bruce Nathan, Scott Cargill, The Credit and Financial Management Review, Volume 13, Number 4 , Fourth Quarter 2007 </li></ul></ul><ul><ul><li>&quot;The Risks of a Single Creditor Involuntary Bankruptcy Petition; Tread Extra Carefully!&quot; Bruce Nathan, Business Credit , October 2007 </li></ul></ul><ul><ul><li>&quot;A Preference Dynamic Duo: State Law Lien Rights Defeat Preference Claim While Payment by Credit Card Does Not!&quot; Bruce Nathan, Business Credit , September 2007 </li></ul></ul><ul><ul><li>&quot;Credit Transactions May Be Eligible for the Section 547 (c)(1) Contemporaneous Exchange for New Value Defense to Preference Exposure: The Third Circuit Court of Appeals Speaks&quot; Bruce Nathan, Business Credit , July/August 2007 </li></ul></ul><ul><ul><li>&quot;Recent Favorable Preference Rulings for Construction Material and Service Suppliers&quot; Bruce Nathan, Business Credit , June 2007 </li></ul></ul><ul><ul><li>&quot;Preference Checklist&quot; Bruce Nathan, Business Credit , June 2007 </li></ul></ul><ul><ul><li>&quot;Recent Case Law Development Under the 2005 Amendments to the Bankruptcy Code—Part II&quot; Bruce Nathan, Scott Cargill, Business Credit Journal of NACM Oregon , May 2007 </li></ul></ul><ul><ul><li>&quot;Paid for New Value Really Does Count: An Update on the New Value Defense and Other Preference Issues&quot; Bruce Nathan, Business Credit , May 2007 </li></ul></ul><ul><ul><li>&quot;Recent Case Law Development Under the 2005 Amendments to the Bankruptcy Code—Part 1&quot; Bruce Nathan, Scott Cargill, Business Credit Journal of NACM Oregon , April 2007 </li></ul></ul><ul><ul><li>&quot;Reclamation Rights Under BAPCPA: The Same Old Story&quot; Bruce Nathan, Business Credit , April 2007 </li></ul></ul><ul><ul><li>&quot;The New 20-Day Administrative Claim in Favor of Goods Suppliers: Yes to Priority; No to Immediate Payment&quot; Bruce Nathan, Business Credit , March 2007 </li></ul></ul><ul><ul><li>&quot;The ABCs of Legal Issues Encountered by Credit Professionals&quot; Bruce Nathan, Business Credit , February 2007 </li></ul></ul><ul><ul><li>&quot;Joint Check Arrangement Does Not Protect Against Preference Exposure&quot; Bruce Nathan, Business Credit , January 2007 </li></ul></ul><ul><ul><li>&quot;Bailment Or Consignment: It Makes A Difference!&quot; Bruce Nathan, Business Credit , November/December 2006 </li></ul></ul><ul><ul><li>&quot;The BAPCPA Ordinary Course Of Business Defense To Preference Claims: At Last, A Court Speaks&quot; Bruce Nathan, Business Credit , October 2006 </li></ul></ul><ul><ul><li>&quot;A Trade Creditor's Post-Petition Obligations Under An Unexpired Executory Contract Prior To Assumption Or Rejection: The Muddled State Of The Law&quot; Bruce Nathan, Business Credit , September 2006 </li></ul></ul><ul><ul><li>&quot;Being Fully Secured Defeats Preference Exposure&quot; Bruce Nathan, Business Credit , July/August 2006 </li></ul></ul><ul><ul><li>&quot;Involuntary Bankruptcy Petition Upheld: Media Providers’ Claims Against Advertising Agency NOT Subject To Bona Fide Dispute&quot; Bruce Nathan, Business Credit , June 2006 </li></ul></ul><ul><ul><li>&quot;Manual of Credit And Commercial Laws&quot; Bruce Nathan, National Association of Credit Management (97th Edition) , 2006 </li></ul></ul><ul><ul><li>&quot;Reclamation Manual/Sellers' Rights of Reclamation, Stoppage of Delivery and New Administrative Claim&quot; Bruce Nathan, American Bankruptcy Institute , 2006 </li></ul></ul><ul><ul><li>&quot;Sales of Trade Claims: The Rewards and The Risks&quot; Bruce Nathan, Business Credit , May 2006 </li></ul></ul><ul><ul><li>&quot;The New Creditors’ Committee Disclosure And Solicitation Obligations: The Refco Blueprint!&quot; Bruce Nathan, Business Credit , April 2006 </li></ul></ul><ul><ul><li>&quot;Getting The Biggest Bang For Your New Value Preference Defense Buck&quot; Bruce Nathan, Business Credit , March 2006 </li></ul></ul><ul><ul><li>&quot;Purchase Money Security Interest Suppliers Beware: Tracing Collateral Proceeds Is No Sure Thing&quot; Bruce Nathan, Business Credit , February 2006 </li></ul></ul><ul><ul><li>&quot;The Impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 on Real Property Lessors and Owners and Other Bankruptcy Law Developments&quot; Bruce Buechler, Bruce Nathan, New York State Bar Association Leasing Committee Program , January 18, 2006 </li></ul></ul><ul><ul><li>&quot;A Trade Creditor’s Setoff Rights In Bankruptcy: No Slam Dunk&quot; Bruce Nathan, Business Credit , January 2006 </li></ul></ul><ul><ul><li>&quot;Critical Vendor' Status Is No Escape From PREFERENCE Risk&quot; Bruce Nathan, Business Credit , November/December 2005 </li></ul></ul>
  127. 127. SPEAKER BIO <ul><ul><li>&quot;Section 506(c) Waiver Enforceable; Good News for DIPs and Other Secured Lenders&quot; Bruce Nathan, American Bankruptcy Institute Journal , October 2005 </li></ul></ul><ul><ul><li>&quot;Real Estate Material and Services Suppliers, Rejoice!&quot; Bruce Nathan, Business Credit , October 2005 </li></ul></ul><ul><ul><li>&quot;A Preference Defense Quartet: Four Recent Court Decisions To Mull Over&quot; Bruce Nathan, Business Credit , September 2005 </li></ul></ul><ul><ul><li>&quot;A Standby Letter of Credit Payment Within the Preference Period is Not a Preference&quot; Bruce Nathan, Business Credit , June 2005 </li></ul></ul><ul><ul><li>&quot;Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: A Summary of the Provisions Affecting Derivative Agreements&quot; Bruce Nathan, Scott Cargill, Lowenstein Sandler Bankruptcy Alert , May 6, 2005 </li></ul></ul><ul><ul><li>&quot;Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: Landmark Business and Other Bankruptcy Changes&quot; Bruce Nathan, Scott Cargill, Joseph M. Yar, Esq., Lowenstein Sandler Bankruptcy Alert , May 5, 2005 </li></ul></ul><ul><ul><li>&quot;Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: Significant Business Bankruptcy Changes in Store for Trade Creditors&quot; Bruce Nathan, Wanda Borges, Esq., Business Credit , May 2005 </li></ul></ul><ul><ul><li>&quot;Sherwood Partners Threatens Viability of State Law Preference&quot; Bruce Nathan, American Bankruptcy Institute Journal , May 2005 </li></ul></ul><ul><ul><li>&quot;Critical Vendor Orders After Kmart: A New Lease on Life&quot; Bruce Nathan, Business Credit , May 2005 </li></ul></ul><ul><ul><li>&quot;Reclamation Rights vs. Floating Inventory Lien: A Victory At Last!&quot; Bruce Nathan, Business Credit , April 2005 </li></ul></ul><ul><ul><li>&quot;State Law Preference Actions: A Thing Of The Past?&quot; Bruce Nathan, Scott Cargill, Business Credit , March 2005 </li></ul></ul><ul><ul><li>&quot;Be Careful When Taking Regular Checks For Lien Release Or Cash Transactions: A Commentary On The JWJ Contracting Co., Case&quot; Bruce Nathan, Business Credit , March 2005 </li></ul></ul><ul><ul><li>&quot;The Dirty Little Secret Of Critical Vendor Orders: The Hidden Preference Risk That Lurks!&quot; Bruce Nathan, Business Credit , February 2005 </li></ul></ul><ul><ul><li>&quot;Reclamation Rights Trumped by UCC's Floating Inventory Security Interest&quot; Bruce Nathan, American Bankruptcy Institute Journal , November 2004 </li></ul></ul><ul><ul><li>&quot;Battered And Coated French Fries As A Fresh Vegetable Eligible For PACA Protection: Are You Kidding?&quot; Bruce Nathan, Business Credit , November/December 2004 </li></ul></ul><ul><ul><li>&quot;Standby Letters of Credit and the Strict Compliance Standard: The Case of the Overstated Sight Draft&quot; Bruce Nathan, Business Credit , October 2004 </li></ul></ul><ul><ul><li>&quot;A New Defense Against Preference Claims?&quot; Bruce Nathan, Scott Cargill, Credit Today , October 2004 </li></ul></ul><ul><ul><li>&quot;Are Reclamation Claims Heading for Oblivion Where the Debtor Has a Secured Inventory Lender?&quot; Bruce Nathan, Business Credit , September 2004 </li></ul></ul><ul><ul><li>&quot;&quot;Critical Vendor&quot; Payments Denied by Kmart Ruling - Part 2&quot; Bruce Nathan, Scott Cargill, National Credit News , July-August 2004 </li></ul></ul><ul><ul><li>&quot;PACA Rights Destroyed by Oral Agreement Extending Payment Terms&quot; Bruce Nathan, Business Credit , June 2004 </li></ul></ul><ul><ul><li>&quot;Critical Vendor Payments Denied by Kmart Ruling - Part 1&quot; Bruce Nathan, Scott Cargill, National Credit News , June 2004 </li></ul></ul><ul><ul><li>&quot;Section 502(d) Preclusion of Preference Claims: A New Defense or a Dry Hole?&quot; Bruce Nathan, American Bankruptcy Institute Journal , May 2004 </li></ul></ul><ul><ul><li>&quot;Can Sanctions Be Imposed For Improperly Prosecuted Preference Actions?&quot; Bruce Nathan, Business Credit , May 2004 </li></ul></ul><ul><ul><li>&quot;Critical Vendor Payments Denied by Kmart Ruling&quot; Bruce Nathan, Scott Cargill, Lowenstein Sandler , April 2004 </li></ul></ul><ul><ul><li>&quot;Consignment the Right Way: File a UCC Financing Statement&quot; Bruce Nathan, Business Credit , April 2004 </li></ul></ul><ul><ul><li>&quot;Extra, From the Appellate Corner - Hot Off the Presses: Delaware Appellate Court Affirms Priority of Trade Creditor's Stoppage of Delivery Rights Over Buyer's Inventory Secured Lender&quot; Bruce Nathan, Business Credit , March 2004 </li></ul></ul><ul><ul><li>&quot;Are Reclamation Rights Preserved Where Debtor's Secured Dip Lender Pays Off Pre-Petition Secured Inventory Lender? Yes and No!&quot; Bruce Nathan, Business Credit , March 2004 </li></ul></ul><ul><ul><li>&quot;Preferences, Reclamation and PACA in One Case: A Three-Ring Circus&quot; Bruce Nathan, Business Credit , February 2004 </li></ul></ul><ul><ul><li>&quot;PACA Trust Survives E-Mail Exchange Extending Payment Terms&quot; Bruce Nathan, Business Credit , January 2004 </li></ul></ul>
  128. 128. SPEAKER BIO <ul><ul><li>&quot;The Ordinary-course-of-business Defense to Preference Claims: First-time Transactions Count Too!&quot; Bruce Nathan, American Bankruptcy Institute Journal , November 2003 </li></ul></ul><ul><ul><li>&quot;A New Limit on Reclamation Claims: The Latest on the Goods on Hand Requirement&quot; Bruce Nathan, Business Credit , November/December 2003 </li></ul></ul><ul><ul><li>&quot;A New Limit on the New Value Preference Defense&quot; Bruce Nathan, Business Credit , October 2003 </li></ul></ul><ul><ul><li>&quot;Trade Creditors Beware: Providing Post-Petition Goods and Services to a Chapter 11 Debtor Under a Pre-Petition Contract Without Protection Can Be Toxic to Collectibility&quot; Bruce Nathan, Business Credit , September 2003 </li></ul></ul><ul><ul><li>&quot;Letter of Credit Beneficiary Beats Issuing Bank Based on Conforming Documents and Untimely and Improper Dishonor&quot; Bruce Nathan, Business Credit , July/August 2003 </li></ul></ul><ul><li>  </li></ul><ul><li>Bar Admissions </li></ul><ul><ul><li>1981, New York </li></ul></ul>

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