ABI_Chapter_11_Commission_Field_Hearing05_21_2013_final

ABI Commission to Study the Reform of Chapter 11 May 21, 2013 Field Hearing National Association of Credit Managers Las Vegas, NV Geoff Berman: My name is Geoff Berman I'd like to welcome you on behalf of the co-chairs of the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11 I first want to thank NACM for hosting this hearing today, in particular, Robin Schauseil and Darnell Foster for their enthusiastic support and help throughout Thanks also to the members of the Avoiding Powers Advisory Committee, including its co-chair, Bruce Nathan, for coordinating with the witnesses for this hearing We will hear from a number of witnesses today on issues important to trade creditors and credit professionals, including preference rules, the rule of unsecured creditor companies, reclamation [claims], and administrative priority claims under section 503(b)(9) of the Bankruptcy Code Trade creditors provide vital financing to American businesses and have long had the incentive to work with financially distressed customers The Commission is aware of a growing sentiment among trade creditors that the Bankruptcy Code has become imbalanced as to the treatment of trade creditors in favor of the debtor and secured lenders We expect that today's witnesses, all senior credit professionals at some of our nation's leading companies, will provide key insight into how the Code might be revised to better balance the interest of trade creditor stakeholders We thank you all, the audience, for attending and being part of this today Let me introduce who is here From my left is Michelle Harner She is the Commission's reporter, Associate Dean and Professor of Law at the Francis King Carey School of Law in the University of Maryland In the middle is Steve Hedberg, [*] who is with Aequitas Capital On the far right in front is Bruce Nathan Bruce is one of the co-chairs of the Avoiding Powers Committee and with the Lowenstein Sandler firm Up here with me on my far right is Bill Brandt Bill is the president and chief executive officer of Development Specialists, one of the nation's leading turnaround consulting firms On my immediate right is Deborah Williamson, lawyer with Cox Smith out of San Antonio, Texas Deborah is one of the ABI's early presidents and has been * Language clarified in transcription process integral in a lot of the work that the Commission has done around the country on a number of topics On my left is the immediate past president of the ABI, Jim Markus, who is with Block Markus in Denver Why the need for reform and why now? It's been over 30 years since the Bankruptcy Code was enacted, and a consensus has emerged that the current law needs an overhaul Some would contend that the Bankruptcy Code of '78 offered a balance between creditor and debtor interest, establishing what was often described as a level playing field Detractors contend that the '78 Code was too debtor-friendly, that it led to long and inefficient cases, and that it provided too much discretion to bankruptcy judges For better or worse, most of the changes to the Code since 1978 have exempted categories of claimants or transactions from the reach of bankruptcy law, have added additional categories of administrative or priority claims, thus burdening the already strained liquidity of distressed companies, have limited or eliminated the discretion of the courts in administering chapter 11 cases, and have provided for shorter time periods and faster, more truncated cases Supporters of the Code contend that many of the changes to the Code throughout the years have not helped further the goal of restructuring or have unintended consequences However, arguing about who is right or wrong in terms of the recent history of the Code is, in this juncture, largely beside the point Primarily, the world, including the financial environment and the operation of the market, has simply changed, and the Code, even as amended, was not designed to deal with these changes For the most part, a series of external factors drive the need for a rethinking of chapter 11 Since the Code's enactment, there has been a marked increase in the use of secured credit, placing secure debt at all levels of capital structure Many of the 1978 Code provisions assume presence of asset value beyond secured debt and asset value is often not present in many of today's chapter 11 cases The debt and capital structures of most companies are more complex, with multiple levels of secured and unsecured debt, often governed by equally complex inter-creditor agreements This is not to say that there is anything wrong with the growth of collateralized debt per se Indeed, that growth brought credit to many companies who could not have attained it otherwise However, the 1978 Code's baseline assumption of value above the amount of liens on assets was challenged, if not cast asunder * Language clarified in transcription process The growth of distressed debt markets and claims trading introduced another factor not present when the 1978 Code was enacted, a factor which challenges certain other premises underlying the Code Again, in many ways, this development was a net positive, providing creditors with means of monetizing claims more quickly rather than awaiting the outcome of sometimes lengthy cases However, the rapidity of the development of these markets also created collateral consequences that the 1978 Code was simply not designed to deal with Many of today's companies are less dependent on hard assets, real estate, machinery, equipment or inventory and more dependent on contracts and intellectual property as principal assets The '78 Code does not clearly provide for efficient treatment of such cases and affected counterparties Debtors are more often multinational companies, with the means of production and other operations offshore, bringing international law and the choice of law implications Today's debtor is likely to be a group of related, often interdependent, entities The impacts of these changes on the efficacy of the current restructuring regime have been dramatic The way both courts and commentators discuss the purpose of chapter 11 has also changed Early decisions and the legislative history of the 1978 Code emphasized the primary purposes of the Code were rehabilitation of businesses and the preservation of jobs and tax bases at the state, local, and federal level As time passed, these purposes competed with the maximization of value as an equal, if not competing goal More recent discussions of the purpose of chapter 11 tend to emphasize the value maximization to the exclusion of other goals This development also calls for a fresh assessment of the purposes and goals of the U.S restructuring regime Moreover, given the added complexity and a statute that often does not have the tools or clear answers to deal with the problems that arise, even the cases that reorganize seem to cost more Reorganization may be less efficient, but it is more costly Practitioners and the courts have achieved amazing and creative results despite the statute's shortcomings However, recognition that the world has changed in significant ways since the enactment of this Code in 1978 and the related concerns bring a restructuring community to consider the need for a prompt and thorough reevaluation of the Code in light of these changes A better set of tools is required What is the ABI Commission? The charge of the Commission is nothing less than the study of the need for comprehensive chapter 11 reform, by which we mean the consideration of starting from scratch and reinventing the statute Accordingly, the Commission's mission statement is equally ambitious * Language clarified in transcription process In light of the expansion of the use of secured credit, the growth of distresseddebt markets, and other externalities that have affected the effectiveness of the current Bankruptcy Code, the Commission will study and propose reforms to Chapter 11 and related statutory provisions that will better balance the goals of effectuating the effective reorganization of business debtors, with the attendant preservation and expansion of jobs and the maximization and realization of asset values for all creditors and stakeholders More than a year ago, I tasked the Commission's co-chairs, Robert Keach and Al Togut, to assist me in assembling a working group of the best and brightest from among chapter 11 practitioners, academics, bankers, and Congress, to study the possible business bankruptcy law reforms With the ABI Commission, we feel we have accomplished this task The Commission members are listed on the screen to my right I won't take the time to go through all of them again A number of them are here today As I mentioned, the Commission is ably assisted by its reporter, an eminent bankruptcy scholar in her own right, Michelle Harner, Associate Dean, Professor of Law, and co-director of the Business Law Program at the University of Maryland Francis King Carey School of Law Professor Harner oversees the work of the advisory committees, provides critical research assistance, records the deliberations of the Commission, and will assist in the production of the Commission's final work product The work of the Commission is also underwritten by grants from the ABI Anthony H.N Schnelling Endowment Fund and by the ABI We also wish to acknowledge the tireless and dedicated efforts of Sam Gerdano, who is here with us today, who has helped in the organization of these field hearings on top of everything else ABI does The Commission, in a series of meetings, selected a number of topics for initial study For each topic, the Commission has selected an advisory committee of distinguished judges, academics, practitioners to assist the Commission in the study of each of those topics, to research the topic and possible reforms, and, where warranted, to develop arguments for reform alternatives Over 150 of the best minds from the judiciary, academia, the bar, financial advisory services, and the worlds of finance and banking have all agreed to serve on these committees, and like the Commissioners, all so without charge to the ABI or the Commission This is a volunteer effort These committees are organized and now in the midst their important work The topics of these committees are on the screen The Commission is also addressing other issues at the Commission-level as well * Language clarified in transcription process The field hearings are a function that the Commission realized that, despite the breadth of knowledge and expertise on the Commission and the advisory committees, many others around the country, from the bar, judiciary, academics, financial professions, business and people like yourselves with NACM, have critical information, experience, knowledge, data, and ideas to contribute to this important process Accordingly, with this wealth of knowledge, and information, the Commission decided to hold field hearings around the country to hear and collect testimony on various issues The ABI Commission held six public field hearings in 2012, Washington, D.C., New York, San Diego, Boston, Phoenix, and Tucson In those hearings, the commissioners heard testimony and asked questions of more than 20 witnesses from various organizations, industries affected by potential restructuring reform The witness testimony covered various topics, including secured lending, the effect of reform on the credit markets, claims trading, the interface of procedural rules and substantive restructuring reform, sales of businesses via chapter 11, and a number of other topics The testimony has been illuminating on a number of fronts Among other insights, the Commission has heard that it must consider the impact of reforms on the broader market for credit for both distressed and healthy companies The Commission is fully mindful of that guidance The Commission will hold at least eight field hearings in 2013 We've already conducted hearings this year addressing valuation, labor and benefits issues, fees, and middle market companies In addition to today's hearings, additional hearings are scheduled for Chicago, New York, Atlanta, and Austin, Texas Those hearings will cover topics such as governance, sales in chapter 11, administrative claims, and burdens on liquidity The Commission is also soliciting and accepting written submissions on all issues We hope to hear from every interest affected by potential restructuring reform Armed with this information, the Commissioners will discuss each topic, debate and search for consensus for reform The final result will be a comprehensive report, part blueprint for reform and part catalog of open issues and current options to be considered in updating chapter 11 At the end of the day, the Commission's work may lead to consideration of reform legislation but legislation that is fully informed by the careful and thorough process of the Commission and the input of the entire insolvency community We could not be more excited and energized about both the quality and quantity of the contributions of the community to date and the future of this study, and this hearing is a great component of that * Language clarified in transcription process If anyone is interested in the witness statements that are part of this hearing today, there are copies of every witness statement at the back table You're welcome to take one at the end of the session or whenever you need to leave Our first panel today is dealing with [section] 503(b)(9) and related issues Our witnesses are Joseph McNamara, director of financial services and business operations from Samsung Electronics U.S.A.; Paul Calahan, credit manager at Cargill, Inc.; Sandra Schirmang, senior director of credit, Kraft Foods Global, Inc.; and two attorney advisers, Deborah Thorne and Jeffrey Carlino I don't know who is going first from the panelists, so let me turn it over to the witnesses Thank you Paul Calahan: I'm Paul Calahan, and first of all, I'd like to acknowledge the Commission for their time and efforts to allow credit professionals an opportunity to express their thoughts and concerns about the Bankruptcy Code and the bankruptcy process I also would like to acknowledge the ABI members who will be able to view this hearing later today on their website I serve as a senior credit consultant for Cargill Inc., and, prior to that, I was divisional manager of credit for Continental Grain Company I have worked in the agricultural industry for 37 years Cargill is the leading agricultural company in the world, with sales of $135 billion and employment of 137,000 people Cargill is heavily concentrated in the food chain for both livestock as well as human consumption I serve as a senior credit consultant for two major business units at Cargill, with aggregate sales of more than $20 billion I serve on Cargill's Financial Risk Committee where all requests for extensions of credit greater than $25 million must be approved I've been a member of NACM for 36 years I had served in the past on NACM's Legislative & Government Affairs Committee and I have lobbied for bankruptcy reform In the area of reclamation [claims] during the past years, the Bankruptcy Code and the economic environment has made it more difficult for unsecured creditors to realize fair payment of their claims For this reason, when I evaluate a distressed debtor, we become more restrictive in the extension of credit and credit terms Frequently, we withdraw credit altogether when we identify a distressed debtor or a potential payment risk Years ago, we could rely upon the reclamation [claims] for deliveries made within 10 days of the bankruptcy filing Reclamation was designed as a remedy to protect sellers of goods from buyers purchasing goods when the buyers were insolvent or planning on filing bankruptcy or some other form of insolvency * Language clarified in transcription process proceeding Reclamation was really intended to prevent fraud against good-faith sellers Unfortunately, [a] reclamation [claim] is no longer a remedy that protects sellers of goods Reclamation claims are usually denied because debtors had secured lenders who exercised their right to have liens over all their inventories The distressed debtor typically does not have the inventory at the time the reclamation [claim] is even made, or the inventory subject to reclamation [claim], in our case, is commingled with other similar products and is not easily identifiable For example, from the inception of Bankruptcy Abuse Prevention and Consumer Act, my department has experienced 300 bankruptcies, with exposure of $19.2 million subject to claims of reclamations in 43 of those cases It is generally our practice to file reclamation demands in each case where deliveries were made 10 days prior to petition date In each case, Cargill did not recover any goods or receive any recovery of any kind in those 43 reclamation demands Generally, that was the result of lenders exercising their lien rights on inventories and that goods were consumed It's not uncommon in our industry that distressed debtors are not able to keep large amounts of inventory and use very quickly what they have In the case of Vera Sun, an ethanol producer, they filed bankruptcy in 2008 in the State of Delaware We served a reclamation demand to recover 10 cars of ethanol with a value of $1.2 million three days prior to the bankruptcy petition date At the time Cargill delivered the 10 cars of ethanol to Vera Sun, Vera Sun had stopped producing ethanol and was buying ethanol from other suppliers to honor their commitments to their buyers We filed a reclamation [claim] immediately, but because the cars had shipped and been re-consigned to a third party for Vera Sun's account, we were not successful in reclaiming those goods, and Cargill lost $1.2 million The last major successful collection of a reclamation [claim] was in the early '80s, when Lane Processing, an Arkansas poultry company, filed bankruptcy We filed a reclamation [claim] for a corn train that we had sold them with an approximate value of $800,000, and we were successful in obtaining those monies While a reclamation [claim] is really no longer helpful in recovering inventory shipped just prior to the bankruptcy filing, the addition of [section] 503(b)(9) in 2005 did assist sellers of goods delivered to the debtor on the eve of bankruptcy Section 503(b)(9) has encouraged Cargill to sell on credit to potential debtors, knowing that the deliveries made within 20 days will be protected with an administrative claim We often modify our credit terms knowing that our exposure will be somewhat protected and mitigated by [section] 503(b)(9) As Hostess Brands edged closer to their second filing, Cargill was managing our exposure very closely and continued to extend credit to Hostess Brands, knowing * Language clarified in transcription process that we had [section] 503(b)(9) available to us At the time of Hostess Brands' second filing, Cargill was owed $1.6 million, of which, $1.2 million was covered by [section] 503(b)(9) Without the availability of 503(b)(9) administrative claim, we would have withdrawn credit to Hostess Brands Section 503(b)(9) has provided needed protection for unsecured trade creditors selling goods and likewise has enabled many potential debtors to continue in business Why should secured creditors or secured lenders agree with the clause? Simply, [section] 503(b)(9) allows trade creditors to deliver value to the debtor's business It is trade credit that often allows a debtor to maximize the going concern of the debtor's business This, in turn, helps lenders protect the value of their collateral When a distressed debtor is having liquidity problems, it is oftentimes trade credit that keeps and allows that business to continue Section 503(b)(9) allows unsecured creditors of goods to continue to work with the distressed debtor knowing that the [section] 503(b)(9) clause is a means to mitigate risk Without the provision, typically, the response is to reduce or to withdraw credit Currently, Cargill is working with a company that is not yet and hopefully will not file bankruptcy For this reason, I will not mention their name The company is a major retail chain and may have been in the process of restructuring their debt as well as selling assets Cargill has trimmed their credit line discounting by $8,000,000, and as we speak, we're owed twice that Section 503(b)(9) has been critical to our negotiations as well as our developing our strategy Very simply, as important as this customer is to Cargill, we will not knowingly throw away millions of dollars to a distressed debtor Without the protection offered by [section] 503(b)(9), shipments would have stopped, and store shelves would not be replenished To get you a flavor of what empty store shelves look like When Hostess Brand shut their doors here a few months ago, store shelves went empty because they were not replaced by goods of other companies, they just remained empty Bread and snack foods were not on shelves where they once were In comparison, when disasters or storms are forecast, people will frequently go and stock up their refrigerators and their shelves with goods [*] Another example where section 503(b)(9) made a difference was in the Townsends case 2011 was the worst year for the poultry industry in their history Anything and everything that could go wrong did The poultry industry, for some years, has struggled with over capacity, over supply, the inability to pass on higher ingredient cost to their buyers Many poultry companies expanded into the wrong areas and leveraged their balance sheets All these factors, including the * Language clarified in transcription process decline of exports, made losses astronomical into the industry, and Townsends was no exception Townsends was one of many poultry companies that would file bankruptcy in 2011 Townsends was a poultry company located in the Southeast, and they have been distressed for some time They hired outside consultants to determine what their options were, which would eventually lead to a bankruptcy filing When they filed bankruptcy, Cargill was owed $1.3 million Cargill was concerned about recovery, as were the lenders who were owed approximately $73 million and were believed to be undersecured on their loans There was near unanimous perception that Townsends was administratively bankrupt At the time Townsends filed bankruptcy, the prevailing view was that the debtor's business was worth $30 million less than what the lender's claim was In addition to that, they also filed for immediate liquidation Cargill and other creditors were concerned with the chapter 11 filing because it would potentially allow the lender to recover a better recovery on the sale of the assets and of a higher return than if they had not foreclosed on the property outside of bankruptcy I participated on the Creditors' Committee, and as a committee, we retained professionals To make a longer story short, the lenders did not want to carve out any monies for [section] 503(b)(9) claims or administrative claims for goods sold or services provided to the debtor during the chapter 11 proceeding case Lenders were concerned that if the assets weren't sold quickly, administrative expenses would exceed dip financing by millions of dollars The committee objected to the financing and negotiated a settlement that assured the payment of chapter 11 administrative claims and provided a graduated scale to recover 503(b)(9) claims To give you an idea of the graduated scales, the business sold for X dollars, 503(b)(9) claimants would receive Y dollars; if sold for A, it would receive B dollars This was up to $15 million and if the assets were sold for $63 million The recovery in the Townsends case was beyond everyone's expectations because the assets sold for a lot more Because of [section] 503(b)(9), Cargill recovered $1.2 million, nearly its entire [section] 503(b)(9) claim There was another favorable aspect of the Townsends case in that creditors were permitted to include their [section] 503(b)(9) claims in their proof of claim form Creditors were permitted to assert their Section 503(b)(9) claims in their proof of claim because there was a court order permitting them to so Creditors should be allowed to this in every bankruptcy case so it is easier and less expensive on the estate rather than having to assert the [section] 503(b)(9) claims in court * Language clarified in transcription process Unfortunately, there is nothing in the Bankruptcy Code or in the Rules of Procedure that allows creditors to include their [section] 503(b)(9) claims in their proof of claim This has created a lot of uncertainty on how creditors should be asserting their section 503(b)(9) claims in bankruptcy cases Townsends also illustrates the value that a strong creditors' committee can bring to a case, particularly in the case that was at risk of administrative insolvency Frequently, there is discussion that creditors' committees increase the cost of chapter 11 proceedings The voice for unsecured creditors is clearly needed and provides a valuable insight to the court and to other parties Creditors' committees frequently explore transactions and underlying conduct which may not have any interest to the debtor's management and maybe not even to the secured lenders but by pursuing the assets, the committee brings value to the unsecured creditors and maybe just even to the underwater secured lender Other important contributions of creditors' committee is that they provide an essential role in the representation of all unsecured creditors, and they bring balance to the proceedings that ensure a more equitable administration of the estate for all classes of creditors To strip away any rights and/or representation for unsecured creditors would deny unsecured creditors any role in chapter 11 cases Creditors' committees bring balance to the proceeding and will challenge the status quo positions of the debtor, the secured lender, and/or other insiders where appropriate I'm currently involved in a bankruptcy proceeding with John and Catherine Burger The Burgers have five limited liability companies, of which four filed bankruptcy at the same time The meetings were conducted by phone with the judge, the debtor, secured lenders, and some unsecured creditors Before anyone convened in person, the lenders had decided that they would not fund the creditors' committee From that point, the committee could not find any attorney to represent the committee, with only a hope of being paid by the estate Briefly, some issues that appeared in that case include a debtor and his wife operating five limited liability companies They did not keep separate books They operated all of their businesses out of one single bank account They commingled their assets They had audited financials that were overstated and not only were they not able to pay Cargill and other unsecured creditors, it's our belief they had no intention to pay Cargill and others Although the committee was formed, because the committee was not funded and professionals could not retain counsel to raise such issues as fraud, insider trading, the likelihood of improperly perfected security interest on some assets, officer/director insurance, the reconstruction of the debtor's books over the last * Language clarified in transcription process 10 In addition to those preference demands or lawsuits with which I had been personally involved, I have served on more than two dozen creditors' committees, many of which I chaired I strongly feel that section 547 of the Bankruptcy Code needs reform One of the major underlying issues is that the preference defense defined in the Code are open to interpretation and quite frankly not even interpreted and applied the same way within the same jurisdiction, let alone federally Consequently, this has given birth to an entire industry focused on extracting additional funds from the creditors who supported the debtor while they struggled and tried to survive The recovered funds for the most part not benefit the debtor, or even the creditors The funds instead are primarily paid to those seeking the recovery A study by the National Bankruptcy Review Commission found that over 90% of all preference recoveries go to pay for recovery cost ABI's own study in the late '90s showed that credit providers felt 75% of the time they never or rarely saw an increase in distribution as a result of recovery preferences, and only 22% felt they did sometimes Credit managers, by nature, are very analytical and we like to make calculated decisions The preference statute, as it stands now, is very unpredictable, and as such, it's difficult for a credit manager to gauge if their decision to help a distressed customer will ultimately result in a preference action against them The sheer magnitude of the way that credit preferences can be interpreted and applied can make it very expensive to defend a preference There's no fixed firm guideline What is permissible in one jurisdiction is not allowed in another Even two different bankruptcy practitioners within the same jurisdiction can have opposing views and both be right How then can a typical creditor defend against a preference recovery if the rules are cloudy and inconsistent? The reality is this actually serves to discourage a creditor from working with a debtor that might otherwise been able to help The original intent of the preference recovery, equality of distribution, has been lost The concept of leveling the playing field, requiring those few creditors who seemingly receive preferential payments over other like creditors should surrender those funds back to the pool of same creditors, just isn't the reality Instead, generally speaking, the only parties who benefit from preference recoveries are those professionals handling the matter In all of the cases I have been involved in, or any of those where I've closely watched through the filings, I have never seen any of the trade creditor preference recoveries going to unsecured creditors' pool for distribution I donated my share to that fund Of the nearly $3 million I returned in one case, I didn't even see $3 * Language clarified in transcription process 36 I sell raw material used in manufacturing, little plastic pellets that go into anything, from underwear to carpet to tires When a customer of mine has financial difficulties, it's not uncommon for me to work with them to allow additional time to pay, either as it sells my goods or on an extended repayment plan that allows the debtor to run their business through a period of temporary cash flow constraints This not only helps the debtor stay alive and keep the lights on but also allows my company to continue to build a strong business relationship In all honesty, sometimes this strategy pays off, but sometimes, I just end up with a higher balance due and opening myself up to potential preference exposure should the debtor ultimately fail Because of fear that payment will have to be given back, some creditors, in order to preserve their own company's assets, will make a business decision not to continue to sell to a troubled business rather than try and find a way to get them enough product to keep them in business This lack of willingness to work with the debtor may protect the creditor but also may serve as a catalyst to eventual business failure to the debtor Yet, the whole time I'm working with the debtor, allowing slower payments in order to keep the debtor in business, I have to keep weighing the potential impact of a subsequent chapter 11 or chapter 7, where a demand for repayment will be made to me because those payments were not ordinary Even a formal adjustment of terms for quantifiable valid business reasons has worked against me When I receive the letter asking for recovery of preference, or worse, a notice of a complaint being filed, I'm presumed guilty until proven innocent, and to prove my innocence is going to be costly and time-consuming, and in some cases, more risky and more uncertain outcome than selling to the distressed debtor in the beginning Trying to define "ordinary" is like trying to define "blue." There are many different shades and interpretations The law should be looking at intent I totally understand it's not black and white, but there has to be reasonableness We have product that takes up to a month to get cross-country by rail car In order to protect myself from a potential preference attack, it would require me to demand cash in advance from a troubled customer However, common sense tells me that my customer can't and shouldn't have to pay us and then wait for weeks to get their product If they had those extra weeks of cash flow, we probably wouldn't be discussing them being distressed in the first place So I ship my goods to the customer to keep them operating, I get paid as soon as they can, and, then, up to 27 months later, I receive a preference demand to give the money back There is nothing in the statute that enables the concept of intention to come into play There is nothing in the statute that even allows the customer to pay to their own cash flow improvements without putting those payments at risk of being classified as potential preference For example, if they * Language clarified in transcription process 37 slow pay me during the summer months but have improved cash flow in the fall, I have to hope they don't file chapter 11 in the winter, or those improved cash flow and better payments opens me up for increased preference exposure In my experience, a big disconnect in preparing an ordinary course defense is trying to present my data so it can be understood by a non-business-oriented interpreter or someone not familiar with the peculiarities of my industry or billing cycles in general For example, not all terms are net 30 days In some instances, we work on something called "prox terms." Proximal means "next," so this means that I am paid on a specific day of the next month I could have invoices paid on terms that are up to 30 days apart in days outstanding If I am paid on the fifth of the second month, I'm paid on invoices 35- to 65-days-old In this case, for ordinary, I evaluate the number of days beyond terms Payment terms also frequently are used at the end of the month as a measure, meaning payments are due at a particular month or X days from the end of the month Again, a simple days-to-pay calculation will not work in an ordinary course defense Also, to add complexity to an already complex environment, if a company like mine sells different products, it is quite possible that each product is sold at a different term because of industry competition I have some customers to whom I sell three or four different products, and each product is a different term One definition of "ordinary" does not work in this situation Industries that offer seasonal data have an entirely different definition and profile of "ordinary." I have to prove that the fluctuations, which appear out of the ordinary to the trustee, are, in fact, ordinary in my business and in my industry Yet, despite the change to the statute in 2005, eliminating the three-pronged defense, I still have to convince the trustee that my payments were ordinary and there appears to be a fluctuation I will ultimately need an expert to analyze the types of terms and payments in my industry Alternately, if I don't immediately retain an expert to try and cause the trustee to understand my ordinary course of business analysis, I'm barraged with requests for more and more documentation I've had a couple of people tell me it is in the recovery professional's best interest to ask for all this data Many get paid based on a percentage of what they collect, and if they make it difficult enough for me, I will give up the fight and accept their assessment I view this as harassment So if I don't succeed in convincing the trustee to withdraw the preference demand or action, what happens then? I have to weigh the cost of hiring an expert to prove that my ordinary course analysis is correct, or I have to pay what amounts to ransom, and that expert will base their opinion not just on my company history but will attempt to analyze the industry * Language clarified in transcription process 38 Here is the rub: what industry am I in? Are you going to compare the use of plastic pellets in the tire industry or the use of in the lingerie industry? It's all extremely subjective and very costly trying to defend if you have to bring in an expert witness and accountants to support your position The trustee knows it's going to get expensive to me to continue to defend and is counting on a monetary settlement just to get rid of them Even the calculation of new value defense can be problematic We can spend hours arguing the paid/unpaid argument, let alone shipments that may or may not qualify for [section] 503(b)(9) Suffice to say there is no consistency in the interpretation or enforcement of the rule While a new value defense on paper looks like the easiest thing to prove, I've had attorneys or firms for recovery go so far as to ask me to provide the time stamp of the exact time truck left the facility versus the exact time the check hit the bank, totally abusive requests Was this really new value if they left at AM with the truck and the check wasn't deposited until 10 AM? I'm told this is not new value The truck would never have been allowed to leave our facility if we did not have a check in hand Yet, I've lost on that one Nine times out of 10, the personnel at the loading dock doesn't time stamp it immediately or even have time stamps right there To be more efficient, they often process shipping tickets in batches at various times of the day, or potentially even once a day Is it fair for me to give up my preference defense because of this? This stringent interpretation would require us to give up the efficiencies of batch processing or hire additional resources to process each shipment one at a time Do I have to go to the dock and interview people who stamped the check to determine what time the process in the receipt was really made? A customer, in order to maintain cash flow, needs to get product that goes directly into a machine that's ready to process it Although it started with some of the larger manufacturers in the automotive and aerospace industries, now, more and more of the smaller manufacturers are using just-in-time inventory processes To wait until their check is in the bank to release their shipment could cause their material to be delayed to the point their lines are shut down or machines sit idle Neither condition is beneficial, especially to an already distressed debtor This customer may always pay me on Friday but now needs the product by Thursday If I refuse to deliver until payment comes in, the customer could lose time, perhaps a whole production week, or worse, lose their customer On top of all of this is the timing for bringing a preference action The Code stipulates that the action would be brought within two years of the date of filing with certain exceptions Within that two years, some companies change * Language clarified in transcription process 39 computers or accounting systems, lose records, see people who have first-hand knowledge of the collection practices, leave the company, or their memories fade In a case like Delphi, where the preference actions were filed under seal and only disclosed to the creditors a year or more later, the ability to recreate accurate data becomes even more difficult and expensive This, coupled with the backwards, guilty-until-proven-innocent approach, puts an undue burden on the creditor I am a firm believer that an active creditors' committee brings value to the estate and is helpful in bringing a more efficient resolution to the case I see a strong correlation between the lack of an active creditors' committee and an increase in unjustifiable attempts at recovery of purported potential preferences By having a debtor's business practices vetted by the committee, they can usually work with their finance professionals to help identify the truly extraordinary payments to insiders or creditors This is far more cost effective than the shotgun approach that targets everyone in the 90-day ledger and requires extra work and cost to all I can only speak from my experience, but in the many cases where there has not been due diligence on the part of the recovery agent or proper regard for ordinary, they have typically been cases without an active creditors' committee The business professionals who voluntarily serve on creditors' committee bring the voice of reason and reasonableness to the process They help direct the recovery effort in areas where there truly may be potential preferential payments because they are more likely to understand the debtors' business and industries Without the creditors' committee pursing the right decisions, we have businesses out there shotgunning it and trying to collect money I have served on at least one committee where the committee, upon a thorough analysis, decided not to pursue those preferences, essentially deciding not to beat up on the creditors In one case, the committee looked at a data dump of payments sent out in 90 days and found approximately 200 different recipients Upon examining the information, everything looked pretty normal Perhaps one or two guys got paid slightly different from the rest, but those payments were insignificant and could have been due to negotiated terms The committee was quickly able to determine that the cost to investigate would have been exceeded by any potential recovery To hire a preference recovery firm to go through the debtor's records and attempt to recover all 200 payments, the estate would have spent far more than it could have ever hoped to recover Because the committee is made up of business professionals who had a working knowledge of the debtor's business, they are frequently able to spot some abnormalities with respect to related entities that warrant a second look This has resulted in a fairly substantial recovery from insider transfers, in my experience * Language clarified in transcription process 40 I believe the creditors' committee brings strong business sense and the realization when the costs are not going to be recovered based on what you're going to find Simply put, those on a good committee are more likely to truly understand the debtor's business In that instance, the creditors' committee becomes an asset, and the unsecured creditors who've already lost their money don't have to spend more to defend against any additional unnecessary claw back and have the assets at the debtor's estate wasted on unnecessary fishing expeditions In one case with an active committee, we were able to market some of the debtor's patents and intellectual property to bring a sizable recovery to the estate I served on another where, in our review of the secured lender's documents, we were able to determine they were not properly filed, resulting in millions that would have gone directly to the secured lender instead divided up amongst the entire unsecured creditor body Had we not found that error, there would have been no distribution to the unsecured creditors' committee Committees add significant benefit to the process The tremendous amount of expense involved in pursuing and fighting preference actions, attorneys, temporary workers to go through bills of lading pulling time stamp times, getting an expert to testify, writing checks for nuisance value, are among the many factors that drain an already deficient pot during a bankruptcy The preference statute should be changed so that the pursuer of the preference recovery, be it the trustee, the committee, or the debtor, should first prove that the payments were not in the ordinary course of business and new value was not given by the creditor Shift the paradigm from guilty until proven innocent to putting the burden of proof on the party bringing the action in the preference recovery This would limit the amount of needless and baseless preference actions that are commenced Preference recoveries would be sought only after a true and realistic analysis has been performed Most importantly, the trade creditors who already lost money to the debtor will not be compelled to spend more time and more money on these claims Again, I thank you for your time and consideration, and I look forward to answering any questions you have for me today Berman: Thank you, Ms Venable, and thank you for all the witnesses' testimony Before I open it up to questions from the other commissioners, I want to make sure that there's precaution in all of this because there are a lot of people, many up here, who have served as trustees I've served as a post-confirmation trustee Not everybody is taking a check register and filing a lawsuit I realize that that appears to be an abuse to the system, but you need to be careful, I think, that we don't create or suggest that a remedy be created for that abuse * Language clarified in transcription process 41 There are rules Bankruptcy sits in federal court Rule 9011 of the Bankruptcy Rules applies to lawyers who sign pleadings that aren't justified But saying that a trustee is just taking a check register and filing lawsuits is not typically accurate Yes, there are firms and people who that, I understand, and those may be the exceptions and cause of this whole reaction, but that's not how everybody does it I had served in a case years ago where there were 125,000 lines of activity in the 90-day period before the bankruptcy was filed The post-confirmation estate was unaffected five weeks before the deadline to file the claims There was almost no ability to analyze that information and make any decision, and so lawsuits were filed because there was no way to tow the statute of limitations That doesn't mean it's right, but those are the facts I can tell you, in that case, with over 700 lawsuits filed, none, zero went to trial Two were out on summary judgment Everything else was settled or dismissed Again, I want to make the caution here that while there are people that create the havoc that you all are concerned about, it's not everybody With that, let me open up to question, if I can, to any of you on the testifying panel Mr Demovic, you talked about it, Ms Venable, you talked about it, selling on different terms within the same claim Where that's the case, how you expect a debtor or a trustee to know what is in fact ordinary within your own sales? You want to shift the burden of proof to the trustee to know what's ordinary when you've got four or five different sets of terms Now how is that doing anything other than trying to be a bar to bringing a claim? Venable: Like I said in my testimony, some of it is changing how we look at things Instead of looking at the number of days outstanding from the invoice date, looking at the number of days past due If I sell to one customer three different terms, 30 days, 60 days, and 90 days, even though my payments may reflect 35, 65, and 95, they're paying me consistently five days past terms, I think that's a good substitute versus looking at average days of pay To your point, for somebody who isn't in industry, that's not the first way they look at it, but that's part of what we try and explain when we an ordinary course, is have them look at it through a new light Berman: So the recommendation really is to change the basis of the defense to the days past due, not the days from invoice? Venable: Absolutely That would be very helpful Nathan: Can I follow up with Geoff's question? If we were to that and we were to create some sort of presumption the transaction is ordinary, you have any thoughts, for any of you, as to whether a number of days past due would be, say, par? * Language clarified in transcription process 42 Tomlin: I think you have to look at what the industry terms are For the food industry, it's extremely short terms because it's perishable commodity, so if they have 10-day terms, is five days past due a lot or not? If it's the construction industry where maybe they're getting progress payments in 60 days, five days is miniscule What some credit practitioners have discussed is perhaps using a benchmark of twice whatever terms are If you have 10-day terms, 20 would be ordinary If you had 30-day terms, 60 might be ordinary I'm not saying that twice should be the actual number Maybe it's one and a half times, but they would be standard, and you could apply that metric against all industries Berman: Remember that years prior to the enactment of the Code, the concept was x number of days past invoice statement It was automatically deemed the preference California, it was a 45-day rule, and the dating didn't matter I think you have to be very careful even with the number of days past due concept that any safe harbor is going to run into the same problem How you define what is or isn't appropriate? Then you're going to get into the subjective of, "our industry is x number of days" and who has that information? Venable: I can tell you that in some of the defense analyses I've done in looking at just exactly that, I've looked at a whole section of a portfolio, for example, in the auto sector or whatever, and come up with a standard deviation for that and set it, whether it's seven days, 10 days, 30 days, whatever, and apply that standard deviation and see anything that falls outside of it, just like the bell curve, is not ordinary Berman: OK But how you codify that into a statute versus having that be a defense that you can prove that this industry has a standard deviation of 10 days? Ninety percent of the payments fall within the standard deviation Those should therefore be ordinary Ms Williamson? Williamson: My question was more two-pronged again [*] The first question is I've heard several of you say recovery should not go to secured creditors, and I'm looking for clarification Are you saying that recovery should not go to the pre-petition secured creditors or recovery should not go to the dip providers, or does it make a difference? Venable: I've been in cases where before the unsecured creditors' committee was even formed, all preferences had already been assigned to the pre-petition secured lender in order to get dip financing, so they had vested interest in breaking the unsecured to get more money, and there was nothing back to it My understanding was the intent of the original Code would be to put it back in the same class from which it came from Again, if we go after the unsecured creditors, let it go back into that pool and be divided equally That goes back to the equity of distribution * Language clarified in transcription process 43 Tomlin: What we find is that a credit manager, a company, is penalized for doing their job, and they may have been very diligent and are penalized by the preference action when they've really done a good job all along Then what happens is if it's given back to the estate, it goes to the secured creditors rather than the pool of everyone sitting there who has nothing So we'd like to see it go back to the unsecured creditors, at least share pro rate our own class of credit Williamson: As a follow up, my second part of that is what about the section 503(b)(9) factors? Are you saying that it should go to truly the general unsecured creditors or should it go to unsecured creditors that then hold administrative claims? Venable: In my experience, generally, [section] 503(b)(9) creditors also have an unsecured debt also, so they too would benefit But looking at [section] 503(b)(9) as an [*] administrative claim, I would think it would go back into distribution, and so at the end of the day, when we're dividing up the pool, the class of unsecured [creditors] should go to recovery of unsecured [claims] Williamson: Thank you In case we forget, because we're asking some questions that maybe were not included in your statements, we reiterate what Geoff said earlier, we welcome written statements If you want to provide, or if anyone wants to provides additional written statements particularly to the questions that we've raised, we welcome them, and so keep that also in mind Nathan: But just to clarify, Ms Venable, if payments go back into the estate, are you saying it should go to all administrative creditors of [section] 503(b)(9) class? Venable: No, I'm saying they should go to class If they're recoveries from the unsecured class, they should go back to any distribution to the unsecured class Berman: Again, but which unsecured? Are you including 503(b)(9) creditors as unsecured? Are we including priority wage and tax claims, or are we talking general unsecured creditor? Venable: If [demands are] recovered from general unsecured creditors, then they would go back to general unsecured creditors That's my opinion Hedberg: Can I ask one extra question on the premise of what you're suggesting? Especially if a dip lender post-petition is extending credit post-petition that’s allowing the debtor to operate post-petition and presumably funding goods and services delivered post-petition, and that position deteriorates, as post-petition it often does empirically, they would just get in worse condition over time maybe results in liquidation or something like that They've been setting credit post-petition Under your theory, it would not participate in any preference recovery at all even though they funded the debtor post-petition because they happened to extend credit at the wrong time, wrong place? * Language clarified in transcription process 44 Venable: In my experience, a lot of times, the secured lender also has a portion of unsecured debt, so they would recover from it that way But for post-petition debt they extend, again, this is my own personal opinion, they're going into it with their eyes wide open They're extending new debt to an already distressed debtor Hedberg: But the protections for that as they're taking post-petition lien on preference recovery and taking a super priority claim in administrative case, so they'd get those recoveries, is you're carving that out You're basically saying you're going in with your eyes open You don't get access to any of those recoveries A secondary benefit may be less incentive to pursue certain claims [*] that may result from it [*] There may be fallouts from it, but I'm just trying to balance the relative rights of certain involuntary post-petition conduct versus the pre-petition conduct that arise in a potential recovery Venable: Like I said, unfortunately, sometimes all of this is decided before the committee is formed What I'd like to propose is if there is going to be an assignment preferences, it be done after committees form so that the committee can have a voice and perhaps negotiate some sort of carve-outs Berman: Mr Markus? Markus: Thanks I have a couple of follow-up … by the way, thanks for your very insightful views on these issues I really want to focus on this notion of, that there seems to be this idea of Geoff as a liquidating trustee or I as a Chapter 11 trustee somehow need to make this subjective evaluation Good trustees try to use the hand that they have available, but sometimes, there is not a lot What type of evaluation are you proposing you want to see being made before a trustee files an action? Is it just a letter that says, "We've identified these payments that seem extraordinary Please explain why," or you want more than that? Venable: First of all, some of my comments are directed more at some of the preference recovery firms that are little more than bill collectors [*] I've seen letters, demand letters for recovery preference made out for petty cash, so that tells me that somebody didn't quite look thoroughly Is it possible to look at inventory record and say, "Gee, I got brought into this company about the same time I'm paying" and use some of that? I don't know if it's more for work by the trustee, but essentially, especially some of these recovery firms that are incentivized on payments for the pound of flesh they can extract [*] An example, I had one that, in addition to the time the check was received, I'm trying to prove ordinary course, and their stance was I've harassed the debtor into paying me because I have an automated system that, four days past due, would contact the debtor Every four days, we contact the debtor Their stance was that other customers in some industry I wasn't contacting at four days past due every four days This was when they went past due, so why would I contact them if they * Language clarified in transcription process 45 weren't past due, and I lost on that because I wasn't contacting a non-delinquent debtor every four days like I was with delinquent debtor I think there has to be some reasonable method Again, I think a lot of my comments are directed more towards some of these for-profit recovery firms than the trustees who, to your point, have limited resources, but certainly, there are firms that can run some of these numbers through checking inventory records and payments record and see if there's some sort of correlation Markus: One thing I have not seen anybody make comment on, which was surprising, is the notion of a prevailing party standard on fee shifting That is, a hold-up firm, you're not using your words but I use it, you called it being the target of a hold-up Wouldn't that be a disincentive for a hold-up to take me to trials if there was a shift in fees for those truly egregious hold-ups, not Rule 11, but they sued you for $30 million and recovered one? Venable: That's a double-edged sword I've already gambled on the debtor I don't need to gamble again on should I lose the preference and have to pay my preference and their fees as well or a portion of their fees It shifts a lot of the legal system as far as recovering I think though, in my own personal opinion, there should be some governing body or some supervision over some sort of sanction if they bring frivolous and not necessarily suits to the point of filing a suit, possibly a complaint, or some of these demands There should be somewhere where we can go to appeal possibly to a trustee or something and say, "This is unreasonable They need to stop." But I don't think saying that now we have to roll the dice and gamble and have to pay additional not only my preference recovery but then also additional fees Tomlin: I'd like to add to your question as to which party, where you go to determine what ordinary course is If that is brought to the creditors' committee, assuming that one is formed, and the preference demands are not made prior to creation of a creditors' committee that oftentimes, it can go to that committee who is very familiar with the industry and/or the debtor who can determine and give a basis to the trustee of the creditors makes you determine what ordinary course might be, and then they are the ones who would perform that due diligence to look at the cost/benefit analysis Williamson: A question, and maybe this might be an appropriate venue, I'm told, with how we struggle with burdens coming forward I'd ask you to consider what it were if the trustee or the claims have had the burden to come forward with a lack of ordinary course, a lack of value or burden of proof that all the time is on the recipient of the payment Just like we with solvency, with the burden to come forward, and lack solvency, lies with the recipient, but the burden of proof is all the time on claim It's just an idea * Language clarified in transcription process 46 Demovic: One point I'd like to bring up deals with Mr Markus' point about communicating Let me just go back because I've been doing this a while Maybe a number of years ago, you could contact and you could take the chance of talking to somebody, and then you resolve these issues Now, with the scope of the size of all these claims involved, I can't put my company at risk by taking the burden on myself and making a wrong decision or making some technical error in dealing with a suit or an action by the trustee I have got to take action by using an attorney, a professional in that field, an expert to protect the company It just puts me at risk personally and puts my company at risk as well It would be nice if you could just talk to somebody, and maybe it's pie in the sky, and say, "Yeah, let's just work this out and let's just move on." Berman: Again, I can't state it often enough, it's who you're dealing with I understand when you're dealing with the firms that specialize in this and you're trying to get through to somebody and you get to some first-year person who hasn’t got a clue what you're talking about That's not true for everybody who does this There is still something to be said about the old-fashioned way of reaching out and talking to people It's understood But if they're not doing it, then you got to what you got to I started many, many years ago, as Robin Schauseil knows, I started at the NACM system in 1980 at the largest affiliate out in southern California This hasn't changed any U.S credit managers have a greater opportunity to gather the information as soon as you get the notice of a bankruptcy than anybody is going to have this, that you get the notice of a bankruptcy, go pool your records so that if and when you get that preference demand, you're not going back and recreating your record sheet I've been on that soapbox for over 30 years, and most people look at me like I'm talking Greek when I say it Tomlin: I'd like to speak a little bit of a different language, not quite agree, but it's true that as soon as a bankruptcy is filed, we have the immediate records, but we only have our immediate records, and we don't have the debtor's records, and we don't know how they're paying other creditors Berman: But the Code changed with BAPCPA so that the ordinary course defense didn't go from having to prove both as between the debtor and the creditor and in the industry If all you have to prove is that it was ordinary between you and the debtor, you've got that Tomlin: That's true Berman: Mr Brandt? Tomlin: But the debtor does as well They know how they paid you They know what the invoice terms were and how they conducted their business * Language clarified in transcription process 47 Demovic: To your point, we that As soon as something happens, we have to start gathering all information specifically to protect ourselves down the road It's not just in looking at our payment records altogether It's all the other documentation as well It goes to the point where we have to it every time, and as a point was mentioned from other people, you only have limited resources within the company to be able to these things, so unfortunately, you have to it when you have to it But my point being that if there is some way, and I don't know exactly how we would it, but a system for some of this work upfront, it would be helpful Brandt: Picking up from my comments, my thought about this hasn't changed any One of the things that I've been dealing with is the search for an equilibrium I'm not stuck in the Code anymore When we began talking about preferences, we began talking about the '80s and '90s But unsecured credit was the novelty, if you will, that got most of this into the bankruptcy arena Now, I will agree, preferences seem to be an anachronism largely done now for the benefit of secured lenders and to fund their cases I start from the premise that I'm not sure that preferences, at least to non-insiders, should exist anymore, which is a rather striking position to take from the outside But in spending my time in the Senate and House staff side, I would tell you that there are two courts that Americans see more than any other courts First, there's traffic court, and the second is bankruptcy court In terms of bankruptcy court in the parlance of traffic court, preferences of "see the movie" motion that we always see, for those of you who haven't been to traffic court, that got out, "see the movie" is a term of art for one of the punishments that may be meted out by one of the judges [*] I'm not sure that preferences that run for the benefit of secured lenders make any sense anymore I think the preferences run for the benefit in equal steering of unsecured creditors 20 years ago did make sense, but like everything else, the equilibrium needs to be reset I am troubled immeasurably by the issue of the cost to defend One of the thoughts I had in doing this was with tribunals spread around the country perhaps run by the U.S Trustees Office or even the NACM on an administrative basis where if you were sued in Delaware and you're in California, the matter is heard as an administrative matter by the NACM in California, and the trustee has to come out and it, if we're still talking about keeping some kind of preferences If you had that kind of tribunal system, where you no longer had it in bankruptcy court so have no need to hire a lawyer but have them focus on some kind of legal tribunal system, would that be something at least that might preserve, in your mind, the ability to have preferences in the Code? Williamson: And on a related issue, because we have newcomers, we said at the very beginning that there is an integrated system, if indeed, taking Bill's idea, that there was no preferences for non-insiders or non-non-insider preferences for 90 days, what would that to the dip market? We don't know But certainly, we may have * Language clarified in transcription process 48 the ability, the resources to actually an analysis of that or gather some data because some courts will not even an analysis and some How does that impact the ability of dip financing because no one wants to take away the potential benefit and kill the customer But when we're looking at solutions, we also need to see, if we can, gather information that would help us see how it fits Brandt: It does trouble us that collateral for a dip loan is preferences I'm at the position where maybe they shouldn't be either assignable or assailable As others have suggested, that if there is a distribution, a rising of preferences, should they stay in the Code, maybe we go with the unsecured credits not for the benefit of both the secured and unsecured But your position on some of that? I'm moving yes Berman: Unequivocal yes? Venable: Like I've said, I strongly feel that the recovery should go back to the class from which they came Brandt: Will the NACM be willing to establish a series of tribunals or work with a group that did where these matters were heard locally? So if it's a Delaware case and you’re in in San Bernardino, it’s heard in San Bernardino? [*] Hedberg: Just really to follow up on the law of unintended consequences here on a couple of fronts, I'm just curious and wondering back to the option of eliminating preferences altogether for non-insider claims There is a prophylactic purpose for the preference statute outside of bankruptcy that gets lost in that It stops a run on the debtor that puts the debtor out of business prematurely and kills with it the trade creditor as well as the debtor That's a little disconcerting A lot of compositions with creditors, you deliberately make lump-sum payments to the entire creditor class the best you can so that as you work the thing out, you got a minimum 90-day preference where normal people are going to sit on their hands and enter discussions with you on a longer term workout, which again preserves the benefit for the body I just want to make sure that … Brandt: When was the last time you did a composition? Hedberg: I did a composi- … well, let's see Back when I was practicing all those months ago, I did a composition of creditors probably four years ago, five years ago inside of a case Brandt: And they are now where because of the nature of secured lending Hedberg: Though I would submit that they and receiverships are coming back especially because of [section] 503(b)(9) You're seeing more and more receiverships because people try to avoid the [section] 503(b)(9) indications I think you're * Language clarified in transcription process 49 seeing more potential compositions and more receiverships out there as a result But yeah, they're still fairly rare Berman: With that, I'm going to have to intercede because I'm being told we're up against the deadline On behalf of the ABI, of which I serve as a chair this year, and the Commission to Study the Reform of Chapter 11, I want to thank everyone who testified today I want to thank everyone who sat in the audience and participated here This had been very helpful and very enlightening With that, this field hearing is adjourned * Language clarified in transcription process 50