ExtraCredit - Credit Insurance Newsletter
 |
||
ExtraCredit Dear Credit Professional, This newsletter contains information to benefit credit and risk management professionals, and is being sent to you as a contact of Trade Risk Group, a leading specialty broker of credit insurance. BANKRUPTCY AND ECONOMIC NEWS IMPACT
OF KATRINA ON THE US ECONOMY BANKRUPTCY
ACT'S AFFECT ON BUSINESS Strict new rules place financial and other limits on the corporate practice of offering retention bonuses to executives who stick with a company during restructuring. Moreover, those executives now must prove that they have a competing job offer to be eligible for retention pay. Bankrupt companies must now move more quickly. Their exclusive right to file a reorganization plan may no longer be extended beyond 18 months. That may be plenty of time for most overleveraged companies, but not for unplanned "free-fall" cases. This may harm companies with significant operational issues like airlines, for example, or heavy manufacturing companies that have to negotiate with unions. Companies like these may find themselves pressed for time before predatory creditors submit their own plans. A provision that gives firms just 210 days to accept or reject a lease without the landlord's consent is likely to put a time crunch on troubled retailers as well. The act also deleted "investment banker" from the list of those whose conflict of interest make them ineligible to advise bankrupt firms. As a result, even if they previously underwrote the failed company's securities, investment banks may now compete with boutique firms to act as restructuring advisors. Jim Williams, director of BDO Seidman's Financial Recovery Services, worries that the code is moving away from its traditional emphasis on restructuring and toward asset sales. "The notion that Chapter 11 was designed presumptively to permit the restructuring of existing business will be a quaint concept", he says. "Now, Chapter 11 is going to be primarily an M&A tool." - CFO Magazine COFACE
RELEASES SECTOR RISK ANALYSIS CHEMICALS - downgraded from "A" to "A-". Business activity turned sharply down in the first half of this year. That downturn is attributable to the world industrial activity slowdown and a destocking phenomenon, affecting Europe the most. Moreover, the financial health of downstream companies has suffered from the fact that their margins have been squeezed between high staple commodity prices and difficulties encountered in passing on cost increases to customers. PHARMACEUTICALS - downgraded from "A+" to "A". The pharmaceutical industry's problems are not immediate, but are nonetheless quite real: patent expirations for blockbuster drugs, the growing market share of generic sales, increased cost of therapeutic risk prevention, and controls on spending by social protection institutions. STEEL - negatively watchlisted at "A". World prices have gradually declined since spring due to a marked slowdown of world demand (a rise of 3.7% is expected in 2005, as compared to a 10% increase in 2004) and China's switch from net importer to net exporter status. While the industry will likely reach a production equilibrium state by year-end, weaker prices in conjunction with continued cost increases (iron ore, coke, and energy) will affect company earnings. Other Sector ratings: AIR TRANSPORT:
C- DELPHI
CORP.'S BANKRUPTCY LOOKING MORE LIKELY Delphi has had cumulative net losses of $5.7 billion over the last 4 quarters, and has lost money in three out of the last four years. The reason for the losses is simple: In the midst of strong consumer demand for vehicles, Delphi's costs, particularly for labor in the US, are out of whack because of union contracts that pay workers and retirees some of the world's most generous health-care, pension, and other benefits. In speeches last week, CEO Steve Miller seemed to be setting the stage for the type of bankruptcy he intends to conduct if needed. AFTERSHOCK SOFT
LANDING HITS
THE FAN OTHER
NOTABLE BANKRUPTCIES CREDIT MANAGEMENT BASICS STOPPING GOODS IN TRANSIT Let's say that you have just released a shipment to a customer, and the goods will be in transit for a few days. However, the day after you ship, you are informed that the customer has financial problems, may be insolvent, and will probably not be able to pay for this shipment. What do you do? What if the goods had already been delivered? Is there a difference if your buyer has already filed for bankruptcy? The law governing the relationship between buyers and sellers is the Uniform Commercial Code (UCC). Under the UCC, when you discover that a buyer is insolvent, you can stop the delivery of goods which are in transit. So, in this situation, you can stop the goods which are in transit. When the goods have already been delivered to the buyer's location, you can still recover them by making a demand for recovery within 10 days of the goods' delivery. This reclamation seems straight forward, but it is not, as it is subject to the jurisdiction of the Bankruptcy Court. The Court may decide that the goods are needed for the restructuring of the buyer, in which case you should be granted a priority for payment in bankruptcy proceedings rather than a return of the goods. Be aware that many buyers will have a UCC filing in their home state which will grant their lenders a security interest in their inventories of finished goods and raw materials. These filings will generally have a clause that gives the lender a security interest in "after acquired property", which would effectively take place when title passes to the buyer. Your only chance of recovering goods is to strictly comply with the notification requirements of the UCC and the Bankruptcy Code. - James Hopkins; "Credit Today" September 2005
BUSINESS ETIQUETTE IN MEXICO - PART 1 North Americans doing business in Mexico should be aware of some particulars of Mexican business culture, as follows: MAKING
APPOINTMENTS Many Mexicans treat appointments with foreigners as tentative until they know that their person is actually in Mexico. When you arrive, call to confirm the appointment or send a confirming fax. Punctuality is not much of a priority in Mexican business culture. For business meetings, Mexicans generally try to match their North American counterpart by being on time. For social events, however, arrive at least 30 minutes late. An important word for foreigners to understand is "manana", which can mean "morning", "tomorrow", or simply "later". One should understand also that a Mexican, not wanting to be unkind, may substitute "manana" for "no". CONVERSATION Mexicans are often curious about comparing the relative prices of items sold in Mexico and other countries. Don't be surprised if you are asked about the price of certain goods in your home country. In future issues, we'll discuss other topics such as Addressing Others, Gift Giving, and Entertaining. CREDIT INSURANCE NEWS MARKET
CONDITIONS TRADE RISK GROUP NEWS FOCUS ON: Publishing Industry Trade Risk Group has developed a particular expertise in brokering credit insurance policies for the publishing industry. The publishing industry presents some unique challenges for underwriters, and TRG has developed a template for structuring policies that meets the needs of both the Insured and the underwriters. If you are in this industry and you would like to talk with us about your needs, please call Kevin van Norstrand at 845.229.8078. TRG
LOOKING FOR PRODUCERS THOUGHT AT THE BOTTOM Excellence is an art won by training and habituation. We are what we repeatedly do. Excellence, then, is not an act, but a habit. - Aristotle |
 |
|
| | Credit Insurance | International Credit Reports | Client Support | Resource Center | Company Information | Contact Us | | |
| ©1999-2006 Trade Risk Group. All Rights Reserved. | |