August - In This Issue
Legislation & Regulation
Legal Issues
International Activities
CFA in the News
CFA NYSE Networking Event

The latest information on CFA's Advocacy, Legal and Public Relations activities.

CFA Advocacy Committee Welcomes New Members
Advocacy Committee Chairperson Jill Zellmer, of GE Capital, is pleased to welcome Dan Stella of PNC Business Credit,  Desta Gebre-Medhin-Huff of Union Bank and Gary Samson of  McGuireWoods to the Committee. Both Dan and Desta  have also joined the Committee's Subcommittee on OCC and ABL Issues.  Gary will also serve on the Subcommittee on Bankruptcy Legislation.

Employees of all CFA member organizations and Education Foundation board members are encouraged to get involved in the Advocacy Committee activities. Please contact Brian Cove at [email protected] if you'd like more information on becoming part of CFA's advocacy program.
Legislation & Regulation 
Small Business Bankruptcy Bill Problematic for Secured Lenders
Legislation has been introduced in the United States Senate by Senator Sheldon Whitehouse (D-RI) that would amend the federal Bankruptcy Code to make the Chapter 11 bankruptcy process less onerous for small businesses.
Stating that the Chapter 11 process is too costly for small business, Whitehouse introduced the Small Business Job Preservation Act (S. 3675) which would supplement Chapter 11 with an alternative reorganization process  geared toward small, family-owned businesses. This Chapter 11S would allow small business owners to retain ownership, while permitting payments to creditors over time. It would also provide for a standing trustee to oversee the reorganization to ensure that all interests are taken into consideration, reduce administrative costs, which can be prohibitively high in Chapter 11, and increase budgetary flexibility by allowing administrative expenses, such as attorneys' fees, to be paid over time. As proposed, the provisions of the bill would apply to businesses with up to $7,500,000 of debt.
The CFA Advocacy Committee Subcommittee on Bankruptcy Legislation , chaired by David Grende,  has  requested the CFA Co-General Counsel Richard Kohn of Goldberg Kohn and Jonathan Helfat of Otterbourg Steindler Houston & Rosen coordinate an analysis of the bill and to draft a list of CFA's concerns. The Co-General Counsel  were aided in this effort by Gary Samson  and William Kiekhofer of McGuireWoods, Ron Barliant and Randall Klein of Goldberg Kohn and Doug Taber and Jill Zellmer of GE Capital.
Based on the analysis of this group,  CFA believes that the overall impact of the legislation would be to reduce the availability, and increase the cost, of secured credit to small businesses that would be covered by the bill at the very time when such businesses, and the U.S. economy as a whole, can least afford it.  While the bill may preserve certain jobs for some failing businesses by facilitating their reorganization in certain limited respects, it will have a serious negative impact upon the preservation of jobs, and the creation of new jobs, for many businesses because it will inhibit financing for such businesses.  There are two main reasons for this.  First, the bill significantly cuts back on the rights and protections that secured creditors have under current bankruptcy law when providing financing to small businesses, thereby increasing the risk of such financing.  Second, secured lenders will be reluctant to expose themselves to the uncertainty and unpredictability of the untested bankruptcy regime established by the bill, in which their rights could be affected in unexpected ways.  As a result, CFA believes that secured creditors will be incentivized to redirect their loans away from small businesses that could be covered by the bill, and to focus their resources instead on larger prospective borrowers that would not qualify for protection under the proposal.  Alternatively, secured lenders will increase the cost of credit extended to small businesses to reflect the perceived increased risks created by the legislation. 
At the same time, this proposal would discourage financing, both on a secured and an unsecured basis, to small business enterprises that are in bankruptcy, thereby reducing the chances that they will survive and that jobs will be preserved and created. 
CFA's specific issues with the legislation are outlined here. It is expected that the Senate Judiciary Committee will consider the bill in mid-September. CFA has instructed its lobbying firm, Butera & Andrews, to express the Association's concerns about the legislation to key Senators and their staff.
Legal Issues
Court Accepts CFA Brief in TOUSA Case
On July 31, the Bankruptcy Court in the Southern District of Florida approved CFA's motion for permission to file an amicus curiae brief in the TOUSA bankruptcy case. TOUSA, the Florida homebuilder, filed for bankruptcy protection under Chapter 11 in January, 2008. After a thirteen day trial in the Southern District of Florida, Judge John K. Olson issued a decision in October, 2009 that set aside over $400 million in claims by secured lenders as fraudulent conveyances.
At issue in this case is the enforceability of fraudulent conveyance "savings clauses." These clauses, which have been widely used by lenders for decades in corporate guarantees and co-borrowing arrangements (especially in "upstream" and "sidestream" guarantees), provide in essence that, if the guarantee or co-borrowing obligation is deemed to be a fraudulent conveyance under Section 548 of the Bankruptcy Code or applicable state fraudulent conveyance law, the obligation owing under the guarantee or co-borrowing arrangement is automatically reduced to a level where it would not constitute a fraudulent conveyance. In the first decision of its kind, Judge Olson ruled that savings clauses are unenforceable.
TOUSA's secured lenders, including Citicorp, NA and Wells Fargo have appealed the decision. Because of the ruling's potential impact on lenders' ability to limit the impact of fraudulent conveyance rulings on their financing agreements, the CFA filed its amicus brief on June 8, maintaining that savings clauses, which emerge from a strong tradition of savings clauses that are routinely enforced in other commercial contexts (such as usury savings clauses), are clearly enforceable as a matter of law, and that declaring them to be unenforceable will create a significant additional risk for lenders and thus have an adverse impact on the cost and availability of credit to borrowers.
CFA's brief, drafted by the Association's Co-General Counsel Richard Kohn of Goldberg Kohn and Jonathan Helfat of Otterbourg, Steindler, Houston & Rosen, can be viewed in its entirety by clicking here.
International Activities
CFA Explores Possibility of Working with IFG
Representatives of CFA recently met with the Chairman and Executive Director of the International Factors Group (IFG) to discuss ways in which the two organizations can work cooperatively to promote the factoring and ABL industries. 
Participants in the meeting included Erik Timmermans, IFG's Executive Director and Cengiz Ucbasaran, IFG's Chairman and General Manager/CEO of Garanti Factoring CFA was represented by President Keith Karako, First Vice President John Fox, Chief Executive Officer Andrej Suskavcevic and Chief Operating Officer Brian Cove. 

It was agreed by everyone involved in the meeting that the two organizations should work to identify areas in which the groups can work together cooperatively. Areas to be explored for joint activities include education and training programs and lobbying/advocacy. It is expected that representatives from both groups will continue these discussions during CFA's Annual Convention in Chicago in October.
CFA in the News
CFA's Public Relations program actively educates journalists about asset-based lending and factoring and their role in supporting U.S. businesses. Here are some highlights of the results of CFA's Public Relations efforts since the July edition of CFA Public Affairs Update.

A press release announcing the results of CFA's Asset Based Lending Index  for the 2nd Quarter of 2010 was issued on August 10. To date, the press release has been picked up by 342 online and print media outlets, including Yahoo! Finance, Marketwatch,,, Reuters, as well as local business and news publications in 53 markets throughout the US and Canada.  Additionally, as a result of the release, CFA is arranging interviews for CFA members in Dallas, Minneapolis, San Jose and Chicago. To see the release, click here.

On August 12, The Hill, a newspaper that covers politics, the U.S. Congress and public policy, ran a story about CFA's upcoming annual convention and keynote speaker George W. Bush. The story also provided some general background on ABL. To read the story, click here.

The September issue of the RMA Journal featured an article titled "Asset Based Lending Worth Another Look". This article provides an overview of ABL as a viable financing option for all companies, not just a last resort for companies in need of capital. The article cites statistics from CFA's industry surveys and includes comments from CFA's CEO, Andrej Suskavcevic.