Recovery: Trends, Tips, Tools

Presented to The Philadelphia Surety Claims Association

Todd KazlowPresident

Trends

• Surety recovery down 20-30% nationwide• Bankruptcy filings at record pace• Increase in Chapter 13 filings• Increase in commercial surety claims started

in early 2009• Contract surety? Last Phila Surety Claim

meeting discussed lag and potential

Real Estate

• Half of 109 economists polled last month by MacroMarkets LLC expect home prices to bottom out next year (2011) and half don’t expect the rebound until 2012

• 19 of 28 major metropolitan areas had increasing unsold home inventories in the 3rd quarter of 2010

• 10.7 months to sell current inventory; 6-8 months is considered healthy

Tips

• Start Early; at time of claim• Do your homework. What is the financial

position of the indemnitors/debtors? What are you chasing and what do you hope to gain realistically?

• Cost/benefit analysis: – Counsel does not surety to unnecessarily spend

money where results are tenuous

Tips, cont.

• Pursuit of indemnitors/debtors may not always involve pure cost/benefit analysis and may involve “business” reasons for pursuit

• Having your “eyes wide open” about finances of indemnitors, be willing to compromise early

• Don’t be, as George Bachrach phrased it in the Bond Default Manual, “seduced by the collateral”

Tips, cont.

• Bank accounts are hard to find and not a pot of gold

• Consider instead, obtaining a judgment and doing a “shot gun” bank garnishment

• Employment searches are not easy but finding employment is very helpful and a great tool

• Know the real estate market where the property is located

Tips, cont.

• Be willing to structure deals with payment plans with a view to revisit the status of the debtors at a later date

• Consider creative fee arrangements with counsel, vendors, etc.– Contingency– Blended – Fixed fee

Tools• Internet research• Data bases

– Public– Private/subscription

Real Property ownership and transfersCredit ReportsJudgments, liensLitigationBankruptcyUCC searchesFinancial relationshipsOther company ownerships

Summary

• Tough recovery conditions• Due diligence• Once committed, be focused• Continuous cost/benefit analysis• Realistic and managed expectations

•PERSISTENT, PROFESSIONAL PURSUIT