Volume 1, Number 3 • To study and make recommendations on the rights of unsecured trade creditors in bankruptcy.
Overcoming
Obstacles To Unsecured Creditors
Committee Participation
Written By Joseph Myers
Today’s corporate
credit executive faces many
challenges. Topping the
list is finding a means
of accepting orders so as
to build top-line sales
and improve overall profitability,
without increasing debt.
Continuing to function efficiently
given the fact that a majority
of firms, because of corporate
downsizing, put their credit/accounts
receivable departments in
the “overhead”
category is another example.
Such departments are over-utilized,
understaffed and, in most
cases, comprised of personnel
who are significantly underpaid.
Many, if not most of these problems can be effectively addressed by hiring a third-party consulting firm with a creditor’s rights practice (such as that maintained by Clear Thinking Group) or a similar service offering. Working cooperatively with such a firm enables companies to support the supply chain and permits their corporate credit executives to join creditors’ committees, without excessively expending valuable time and resources.
A consulting entity can play a variety of critical roles in a chapter 11 reorganization scenario. This typically starts with attending the organizational meeting of the client’s creditors and representing it throughout the reorganization process. The firm will also advise the U.S. Trustee’s office of its client’s inability to attend the meeting due to time and fiscal constraints. A questionnaire and proxy document are sent to the trustee prior to the committee formation.
Regardless of whether a company and/or its consultant are chosen to serve on an unsecured creditors committee, the consultant (or proxy holder) should send a comprehensive report of the above-mentioned meeting to a designated individual within the client’s (creditor's) organization. If chosen to represent the client on the committee, the consulting entity will, in its capacity as proxy, play an active role in the selection of professionals to represent the entire creditor class.
At all times, experts employed by the consulting operation should represent each of its clients in a highly competent, professional manner. It behooves creditors to ensure that a minimum of one individual providing such services is a Certified Credit Executive (CCE). Access to an individual with the designation of Certified Expert Witness frequently proves beneficial as well.
Of utmost importance as well is a demonstrated ability to ensure the fulfillment of fiduciary duties by creditors’ committee members under 11 USC, §1103. The latter provides that such a committee may:
— Consult with the debtor;
— Investigate the account conduct, assets, liabilities and financial condition of the debtor;
— Examine the operation of the debtor’s business and the desirability of continuing such business;
— Consider any other matter that may be relevant to the formulation or application of a reorganization plan;
— Participate in the formulation of a reorganization plan;
— Advise those creditors it represents about determinations it has made regarding any plan formulated;
— Collect and file with the appropriate court acceptance or rejection of a plan;
— Request the appointment of a trustee or examiner under Section 1104 of the U.S. Bankruptcy Code, should neither a trustee nor an examiner have previously been appointed in a case; and
— Perform such services as are in the interest of those represented.
Consistent with these provisions, consulting organizations such as Clear Thinking Group can serve creditors in a number of capacities. Examples include Chief Litigation Officer, Litigation Trustee, Liquidation Trustee, Plan Administrator and Disbursement Agent.
In the end, corporate credit executives can, so to speak, “have their cake and eat it too” by reaching out to a third-party consultant for assistance in protecting the assets of their companies. Fees for service vary depending upon the nature of the case and its location, but can afford an excellent return on investment.
Joseph Myers is a Principal and Managing Director of Clear Thinking Group, a Hillsborough, N.J.-based consulting firm, where he directs the Creditors Rights Practice Group. He has over 35 years of experience in credit management and corporate finance in the consumer products manufacturing, building trades, pharmaceutical, and communications industries, holding executive positions with such companies as Royal Doulton, Polo Ralph Lauren, Bernard Chaus, Escada, Jim Walter Corp., Triangle Wire and Cable, and Warnaco. A CCE (Certified Credit Executive) and Certified Expert Witness, he most recently served as Manager of the Turnaround Insolvency Department at Global Credit Services.
OTHER
STORIES
IN THIS ISSUE:
Cybergenics:
En Banc Restores
the Status Quo by Allowing
Creditors' Committees to
Pursue Derivative Claims