Credit pros gather to hear educational speakers
By Clint Engel -- Furniture Today, June 22, 2009
Charlotte, N.C. — With a recession in full swing, members of the Furniture Manufacturers Credit Assn. met here for their spring Educational Meeting.
Speakers discussed topics ranging from the legal issues surrounding credit problems to a new service that aims to bring retailers and manufacturers together before all is lost in bankruptcy.
Ed Borowsky, CEO of the Triad Turnaround Group, told FMCA members at the two-day event in the Omni Hotel here the grim facts: that the industry is facing the worst economy in more than 50 years; that creditors' returns on claims after a retailer files for bankruptcy are dismally small; and that the situation is only going to get worse unless retailers and suppliers start working together on turnaround plans for struggling stores before it's too late.
Borowsky, formerly with liquidator The High Point Group, formed the consulting firm Triad Turnaround Group last year. The firm aims to help troubled retailers restructure their businesses and avoid bankruptcy by creating custom workout plans that have the blessing of both creditors and the retailer's secured lenders.
Participating vendors have to agree to establish "set asides" on current debt and continue shipping, but in return they get a percentage of the retailer's net sales to apply toward that debt and a share of annual net profits.
Perhaps more importantly, the retailer's chances of survival increase, keeping important channels of distribution open for future sales and ending the cycle of bankruptcy, liquidation and claim recoveries that amount to pennies on the dollar at best.
Borowsky has been busy building the core of an industry-savvy review board that would oversee the retailers' operations and provide transparency to the retailers' books. Among those who have agreed to participate on the board are Judy Thompson, a bankruptcy attorney with Poyner Spruill in Charlotte, who has worked closely with the industry; and Paul Purcell, former vice president of credit administration for Stanley, Pulaski and Pennsylvania House and now vice president of administration and chief financial officer of Amelia Home by Coe.
Contacted after the meeting, Dave Carpenter, director of credit services for La-Z-Boy High Point and current FMCA president, said the turnaround firm's work could be "a viable option to bankruptcy as Chapter 11 recoveries usually average less than 5% of the original loss."
"Given the state of the economy for furniture retail, the concept of implementing a turnaround business plan to remain in business, and generate a profit, is a better alternative to a GOB or liquidation of the company," he said.
Other speakers here delved into technical areas of credit, including Tom Gray, senior industry analyst of Global Credit Services, who talked about key drivers of credit — or the tools and information credit managers need to extend credit comfortably. Attorney Jan Samet answered credit managers' legal questions they "always wanted to know but were afraid to ask."
And Jerry Bailey, executive sales and education services manager for NCS, which specializes in secured transaction filings, discussed Uniform Commercial Code filings and how they can help furniture suppliers avoid potential losses.
Also, Kathy Edwards, president of Global Business Solutions, talked about simplifying the credit processes on exports while maintaining credit protection.
"In these economic times, members are glad to belong to an organization like FMCA to help them network with other suppliers, gain valuable dealer information and collect on those accounts that stop paying," said Jim Bumgarner, FMCA's executive vice president.
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