The Facts on Financially Distressed Customers

“Trade creditors today have more access to information than they ever have before,” said Ken Rosen, Esq., assistant vice president at Lowenstein Sandler PC. “When a big company files a bankruptcy, there aren’t a whole lot of excuses for trade creditors not to know.” 

During his recent teleconference, “Providing Senior Management the Facts on Financially Distressed Key Customers,” Rosen offered listeners a wealth of sources for information regarding a struggling customer’s finances. In today’s economic environment, sometimes the difference between getting paid and not getting paid comes down to how much information a company has prior and during a bankruptcy proceeding. “We’re all accustomed to traditional sources of information like talking to other vendors. That’s always very valuable,” he said, but for bankruptcy attorneys and turnaround professionals, "We have to remember that in the world of bankruptcy…we love to gossip. In the world that we live in today, insolvency professionals are a great source of information because they can’t keep secrets. With a well-placed phone call you can find that information out.” 

Rosen noted that while bankruptcy attorneys are often a walking encyclopedia of business information themselves, what makes a good insolvency professional worthwhile is their list of contacts. “Claims traders will purchase the claims of a trade creditor at a discount where a creditor wants to get cash. We often will call them and say ‘tell us what the market is paying for such-and-such company,’ and I’m talking about prior to bankruptcy. That gives us a good idea of what people are thinking,” said Rosen. “There’s no bankruptcy attorney, crisis manager or investment banker that wouldn’t love to hear these questions. Whoever your counsel is, buddy up to them. They have a lot of information that could be very valuable.” 

In addition to bankruptcy professionals, Rosen also pointed out that publicly available information can help a company position itself to better ride out a customer’s tough times. “I’m amazed at how much research there is in the public domain,” he said, adding that sometimes a deeper look at a struggling buyer’s local news can come in handy. “Things that would not make the press in a larger town, make the press in a small town.”

Jacob Barron, NACM staff writer

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