Enforcing Vendor Financing Agreements in Bankruptcy: Characterization, Assignability, Lender/Counterparty Obligations

This program is cancelled

A live 90-minute CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Wednesday, October 19, 2022 (in 13 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT


This CLE webinar will discuss the uncertain and disparate treatment of vendor financing agreements in bankruptcy: whether they are assumable executory contracts or financial accommodation contracts; how the characterization affects the lender's funding duties; and a counterparty's obligations to perform post-petition, including the right to seek different payment terms.

Description

Under an inventory financing program agreement, a lender and a manufacturer agree that the lender will provide financing to the manufacturer's third-party dealers to enable them to purchase for resale the goods produced by the specific manufacturer. These arrangements are standard for a variety of equipment classes and across industries.

If the manufacturer files bankruptcy, it is unclear whether the inventory financing program agreement is an executory contract that can be assumed and assigned or whether it is a "financial accommodation" contract that cannot be assumed. The answer can significantly affect the lender and the debtor/manufacturer in bankruptcy.

Neither "executory contract" nor "financial accommodation" is defined by the Bankruptcy Code, and the agreements are often intentionally ambiguous so that the parties can argue either way. The contracts typically provide financing to the dealers, not directly to the manufacturer/debtor, so whether the agreement is "for the benefit of" the manufacturer/debtor is debatable.

Listen as this experienced panel of finance and bankruptcy lawyers guides counsel through the treatment of vendor financing agreements and bankruptcy.

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Outline

  1. Overview of inventory financing program agreements
  2. Applicable Bankruptcy Code sections
  3. Standards for ascertaining if an agreement is a financial accommodation agreement
  4. Risks or benefits to lenders if an agreement is or is not a financial accommodation
  5. Obligations of counterparties under the different types of agreements
    1. Executory contract
    2. Financial accommodation contract

Benefits

The panel will review these and other critical questions:

  • Can a lender be forced to perform under the inventory financing program agreement, including making new loans to the dealers?
  • When is an extension of credit or the financial accommodation merely "incidental" to a contract for the sale of goods or services?
  • Is the debtor a third-party beneficiary of an inventory financing program agreement?
  • Can the debtor assume and assign an inventory finance agreement?

Faculty

Richman, Claire Ann
Claire Ann Richman

Partner
Steinhilber Swanson

Ms. Richman is a partner in the bankruptcy and insolvency group of Steinhilber Swanson LLP in Madison, WI. In...  |  Read More

Richman, Michael
Michael P. Richman

Partner
Steinhilber Swanson

Mr. Richman focuses on representing Chapter 11 debtors and creditors' committees and advises on virtually every...  |  Read More