Lessons from a creditors' committee.(Credit Words: REAL-LIFE STORIES OF VICTORY AND DEFEAT CONTEST WINNERS)(Viewpoint essay)

Almost 10 years ago, I was the chair of a small unsecured creditors' committee of manufacturers. The experience reinforced my belief that sales and credit can work well together--and produce a surprise or two and some humor as well.

In the late 1990s I worked for a large northeastern vision care company with the divisional line of business sunglasses and fashion eyewear. Part of my assignment was administering credit and collection management to a network of domestic wholesale distributors, eyeglass vendors and big-box retailers. One of these, a small retail optical chain in the southern U.S., had run into hard times, and surprised us somewhat with a Chapter 11 filing. Allegedly, bad weather had affected sales and their bank had called in the financing package. Because our products were featured brands, our company was the largest creditor outside of the banks, so I was tasked with setting up the unsecured creditors' committee and all the administrative duties that went with it.

The division of my employer that sold the product was in the process of being divested and sold to a new foreign parent, so all but absolutely essential travel related to the sale was highly restricted. The first 341 meeting of creditors was soon to take place in Texas, and I knew that it would be impossible to gain approval to go. Not a great way to start off as chair of the creditors' committee.

Our VP of finance and I discussed the travel ban and who m our company who was located in Texas might be able to attend the 341 meeting in my place. Our regional sales manager in that area turned out to be a highly-educated. solidly logical "go to" sort of guy who had the meeting date free and had the reputation of previously handling special assignments well for our senior management.

I called the U.S. Bankruptcy Court Trustee in the case, explained our travel ban dilemma and that we had a substitute that should serve us well with preparation from me, and that I would take over afterward. The trustee was a bit reserved about it, but said that as long as our representative didn't hold up the proceeding with improper questions or a lack of knowledge it should be OK.

So, our regional sales manager and I spent several hours on the phone over the next two weeks and held a "'commercial credit/Chapter 11" primer session. During the first week, I gathered together various materials (including excerpts from the NACM's Principles of Business Credit), overnighted the package to him and we discussed the mechanics and concepts of the Chapter 11 bankruptcy process. The second week I sent a similar package that contained background documents on the specific customer that had filed for protection and I familiarized him with the credit screening, payment turn stats and the sudden drop in regular payments that preceded the filing. Our sales manager absorbed all of this like a sponge. I could tell he enjoyed the challenge. He told me he was "ready to go" and anxious to experience this new task.

A few weeks later I was in the middle of a hectic day--the kind that just rains down with one "I need it now" issue after another--and I received a call from the Texas bankruptcy trustee. I had been so busy that day I had forgotten the 341 meeting had just taken place. I asked her how my "shill" had done, and expected that because she had ...