NACM's most recent monthly survey, asking "Have you ever served on a creditors' committee?," illustrated the broad array of opinions regarding the worth of these committees in a bankruptcy case, with some saying their attendance helped their company get a better claim in the proceedings and others arguing that a credit professional's time is better spent elsewhere. As early estimates were quite low, a somewhat surprising 29.6% of participants said that they had served on a creditors' committee, while the remaining 70.4% said they had not.
One of the most oft-repeated refrains in the survey comments was that, although creditors' committees are often time consuming, they can also be invaluable to a credit professional looking for a more hands-on understanding of bankruptcy. "It was a very enlightening experience and taught me more about the bankruptcy process," said one respondent. "I've served on many through the years," said another. "I have found that they can be very beneficial. They help you understand the financial position of the debtor, which in turn helps to determine how you want to proceed with the debtor and determine how to reserve for the amounts due."
Still, while many considered creditors' committees to be valuable learning tools, as a means to collecting more from a bankrupt debtor, many respondents found the committee experience to be somewhat lacking. "Most times, serving on the committee really does not get you anywhere with regards to assisting in recovering unsecured creditor funds," said one participant. "However, as a form of experience, each intermediate or senior credit person should at least sit on a committee, purely for the experience."
"Based on the returns we have received on large public bankruptcies, it appears that even a well run, involved creditors' committee can provide only marginal utility to unsecured creditors," said another participant. "In my opinion the reward/time ratio precludes involvement."
Respondents ran the gamut between first-time committee members to seasoned pros with many committee co-chairmanships and chairmanships under their belts. "The first and largest creditors' committee I served on involved a very large coal company filing bankruptcy. It was a great learning experience and was very, very time consuming," said one respondent. "We were able to improve the position of unsecured creditors through our negotiations with the secured creditors and with the debtor and their bank. It was just at the time that the preferred vendor concept was being explored legally, so that also came into play for most on the creditors' committee."
"In a sense, we created a 'preferred' class of unsecured creditors using this theory, which saved several additional companies from filing bankruptcy as a result," they added.
NACM's new March survey deals with the stimulus package and is now live on www.nacm.org.
Jacob Barron, NACM staff writer