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PESA Webinar Addresses Industry Bankruptcies and Preference Claim

Representatives from more than 20 companies participated in a webinar entitled “Bankruptcies and Product Prices: How Will This Affect Credit Decisions?” on November 17. The event, hosted by the PESA Credit Interchange Division (CID), and facilitated by committee member Jason Leslie, NOV, featured Carl Doré and Zach McKay, Doré Rothberg McKay, who discussed lessons learned during the industry’s latest round of bankruptcies.

Doré provided a case study, sharing various ways funds were recovered during bankruptcy litigation. He stressed the importance of filing perfect liens, described the difference in recovery between unsecured vs. mineral lien claimant and emphasized the importance of banding together in a joint representation.

Building off the best practices of that older case, McKay addressed a series of more current bankruptcy cases. The importance of filing good liens was a common theme throughout, alongside exploiting assignment and deed of trust weaknesses. McKay highlighted additional lessons to consider such as serving unsecured creditor committees, joining an ad hoc group and evaluating preference exposure (the possibility of being sued to recover payments made by the company filing bankruptcy prior to declaring bankruptcy) immediately.

The conversation then turned an examination of what’s coming in bankruptcy and focusing on the preference claim. McKay provided a brief history of the preference issue, where the concept comes from and elements of a preference claim. He reviewed three common defenses: ordinary course of business, contemporaneous exchange and subsequent new value.

McKay closed with general practice tips such as watching for signs a customer is in financial distress, requiring immediate payment instead of extending credit to the customer, asking for a deposit for future services or products, a letter of credit and a corporate guarantee.

Doré added to McKay’s tips, stressing the importance of responding early to demand letters from the Trustee or Debtor, providing documents and other information supporting your defense, using statistical analysis to support your defense, not taking the first 80% offer, negotiating, and avoiding trial.

PESA CID Committee Chair Lauri McDonald, Patterson-UTI and committee member Keva Wardell, Basic Energy Services, facilitated breakout rooms where participants dove deeper into the topics with speakers.

For more information regarding the PESA Credit Interchange Division contact Senior Director Membership Services, Peggy Helfert.

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