Although the focus of credit professionals traditionally has been on customer credit risk, a second focus of growing importance has emerged over the last decade: supplier due diligence, with an increasing emphasis on financial status. With increasing frequency, credit professionals are being tasked with identifying and evaluating the risks posed not only by customers' financial standing and performance, but that of suppliers as well. Particularly where both upstream and downstream manufacturing and distribution supply chains rely on just-in-time sourcing, the unexpected failure of a major supplier can be even more catastrophic than a customer insolvency. With Chapter 11 filings expected to continue their 2024 surge as a result of high interest rates, economic uncertainty, overleveraged zombie companies, a weakening consumer, an upcoming wall of Covid-era refinancing maturities, headwinds facing certain industries and geopolitical tensions, these concerns have moved to the forefront with respect to both customers and suppliers.
Thankfully, the analytical tools of the credit discipline translate directly into customer and supplier evaluation. This program will discuss in detail the early warning signs that a customer or supplier is approaching (or in) financial difficulty and the sources of information to help identify and assess those warning signs. The speakers will then highlight the available tools, that if properly used available to help credit professionals mitigate the risk of loss arising from the bankruptcy of a customer or supplier, such as letters of credit, guarantees, performance bonds, materialman's liens and construction/builders trust funds, consignment, purchase money security interests, setoff and recoupment rights, credit insurance, receivable put options, and standby commitments. The speakers will also focus on the need for trade creditors to review their existing contracts with customers and suppliers—before distress happens—and fix any issues that could result in the loss of these protections and otherwise understand their rights in the event of a bankruptcy. Finally, the speakers will discuss the benefits of enforcing Uniform Commercial Code remedies, such as stoppage of delivery and adequate assurance rights.
Speakers: Bruce Nathan, Partner, and Andrew Behlmann, Partner, Lowenstein Sandler LLP, Bankruptcy and Restructuring