Credit Manager Webinar February 13, 2009. Overview »Security Interests »Mechanic’s Liens...

Credit Manager Webinar

February 13, 2009

Overview

» Security Interests» Mechanic’s Liens» Bankruptcy» Additional Lease Credit Criteria

Credit Manager Webinar | Overview

Credit Manager Webinar | February 13, 2009

Security Interests

» Three keys –– 1. Security Agreement

– Standard YESCO Agreement– Customer Contract Clause

– 2. Attachment– Collateral exists - we make a sign

– 3. Perfection– UCC-1– Fixture Filing

Credit Manager Webinar | Security Interests


Security Interests

» Perfection– A matter of PRIORITY– Purchase Money Security Interest (PMSI)

– 20 day rule

– We should file immediately upon the acceptance of the agreement.



Security Interests – Perfection Continued

» UCC-1 versus Fixture Filing» Is a sign a fixture?

– Maybe …– Massive Pylon?– Simple letters?– Monument sign?

– Adaptation, annexation, intent (in NV)– Fixtures in NV for sales tax purposes



Current Procedure



StateContract Type

ContractAmount

File UCC-1?

File Fixture Filing?

Nevada

Tax LeaseFinance LeaseConditional Sale

Less than $100K

NoAs deemed necessary

by Credit Manager

Nevada


More than $100K

No Yes—Mandatory

All Except NV


Less than $100K

Yes—MandatoryAs deemed necessary

by Credit Manager

All Except NV


More than $100K

Yes—Mandatory Yes—Mandatory

New Procedure



StateContract Type

ContractAmount

File UCC-1?

File Fixture Filing?

Nevada


Less than $75K

Yes, unless determined

unnecessary by credit manger



Nevada


More than $75K



Yes—Mandatory

All StatesExcept NV


Less than $75K Yes—MandatoryAs deemed necessary

by Credit Manager

All States Except NV


More than $75K Yes—Mandatory Yes—Mandatory

All States Cash SaleYes—if significant $ remains owing

after delivery

Mandatory—if more than $75K remains owing after delivery

Mechanic’s Liens

» Optional – use as needed.» General lien against all real estate

– Not specific to our sign (unlike security interest)– No right of repossession (unlike security interest)– No “first priority” like a PMSI

» Upside– Can leverage payment– Can provide additional equity as security in bankruptcy

(will discuss later)

» Downside– Is a sign “real property?”– Unlikely to foreclose and receive actual benefit

» NEVER USE “IN LEIU OF” SECURITY INTEREST

Credit Manager Webinar | Mechanics Liens


Bankruptcy

» Secured Claims– Secured creditors are generally paid up to

the value of the collateral, the remainder is an unsecured claim

– Valuation is complex

» Preference Payments– Payments made within 90 days in some

cases can be brought back into the bankruptcy estate

– Exception for payments “in the ordinary course of business”

– Granting a security interest can be considered a “payment”

Credit Manager Webinar | Bankruptcy


Bankruptcy Continued

» Executory Contracts and Unexpired Leases– Executory contract - performance under the

contract still remains – generally excludes debt payments

– Maintenance agreement – probably yes– Tax lease – probably yes– Outdoor Advertising – probably yes– Finance Lease ??? Maintenance probably yes,

lease portion probably not – result is uncertain– Trustee can accept or reject these contracts,

if rejected, then we have an unsecured claim for the breach, if we do not have a security interest or mechanics lien.

Credit Manager Webinar | Bankruptcy


Additional Lease Credit Criteria

» All leases >$500k to be approved by corporate

» 1.25 Minimum Cash Flow Coverage Ratio– (Net Income + Depr. & Amort.) / (Current

portion of Long-Term Debt + Annual Lease Expense)

» Cash Sale Price must be less than 25% Equity

Credit Manager Webinar | Additional Lease Credit Criteria


Credit Manager Webinar February 13, 2009. Overview »Security Interests »Mechanic’s Liens...

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