During the great recession of 2008, the recovery of the U.S. economy hinged on the idea that certain institutions were just too big to fail. Bailouts ensued and the recovery effort was long and arduous. Today, the COVID-19 pandemic poses a different kind of threat to the U.S. economy, grinding the wheels of commerce to a crawl, forcing millions of businesses to temporarily close and lay off workers. The Federal Government passed the CARES act, including the $349 billion Paycheck Protection Program. These bold relief efforts, while helpful to many, came too late as a flood of businesses sought bankruptcy protection through the courts.  With only a few states planning to loosen social distancing and safe at home restrictions, the courts are being forced to improvise. So in this post, we spoke to an attorney, Scott Blakely about a couple of unique cases involving iconic American retail brands. The first Tent Sale   Over 60 years ago, Michigan entrepreneur Art Van Elsander opened the first of seven Art Van furniture outlets. By the time they opened their seventh store, cash flow was an issue. On the brink of bankruptcy they came up with a novel idea — erecting a huge tent in the parking lots of the stores to attract crowds of shoppers, and drive-up cash flow, hatching the first-ever “Tent Sale.”  Art Van Furniture ran tv ads all the time and were a major sponsor of America’s Thanksgiving Parade.  In the 1990s when the parade organizers ran into financial difficulty Art Van Elsander wrote a $250,000 personal check so that the parade could go on. Art Van Elsander passed away in 2018. Fast forward to early March 2020, Art Van Furniture had grown to become a $1.4 billion retail juggernaut with 141 stores and 3,700 employees. By March 8th, battered by tariffs on Chinese furniture imports, Art Van Furniture filed for Chapter 11.  Under Chapter 11 bankruptcy, debtors are left in control of the business and provided an injunction that prevents creditors from collecting debts or recovering collateral.  Three days after filing, the World Health Organization declared the novel coronavirus to be a pandemic, and on March 13th the Trump administration declared a national emergency, forcing non-essential businesses to close. 🚨 BREAKING 🚨 "We have therefore made the assessment that #COVID19 can be characterized as a pandemic"-@DrTedros #coronavirus pic.twitter.com/JqdsM2051A — World Health Organization (WHO) (@WHO) March 11, 2020 The two announcements crippled Art Van’s ability to conduct a tent sale so they filed a request of the court to convert their case from Chapter 11 to Chapter 7. Under Chapter 7, the management of the company loses control and a trustee is appointed by the court. Under Chapter 7 the chances of debt recovery are greatly reduced. In Art Van Furniture’s case, remaining shut down during the COVID-19 pandemic would result in expenses eclipsing any potential revenues generated for creditors. Their hand was forced, and the courts took action. We asked our legal expert Scott Blakeley to give us his take and here’s what he said: “In Art Van’s case, the pandemic destroyed a strategy to operate to prepare for the sale of all its assets as a going concern to Levin Furniture’s former owner, so as to capture that value to distribute to unsecured creditors.  Art Van’s alternate strategy to pause the Chapter 11 proceedings until the pandemic passed was not workable as it could not meet the accruing administrative expenses.  Rather, Art Van was forced to implement a going out of business strategy for all of its stores.  In the initial days of the store closing sales, deposits from inventory sales dropped from $23 million to just $8 million in their final week." "Continued negotiations with creditors to pause Chapter 11 proceedings and conserve cash to meet fee obligations and pay former employees also fell through. In the middle of proceedings, the Judge ordered Art Van to freeze any spending in order to have the company declare amounts owed to employees. By then, however, employees joined in suing the retailer. With no revenue coming in and no amounts to cover employee pay and health care, the Judge declared that Art Van could not choose to pay employees at the expense of other creditors without a court order. With no other options, Art Van filed their request to convert the case to a Chapter 7, handing over the decision to the Trustee and Bankruptcy Court. In Art Van’s case, the Trustee is hoping to open stores again, but that pathway is unclear given the stay-at-home orders of states.  Unsecured creditors are not expected to receive a distribution.” Landlords cry foul over Modell’s bankruptcy pause Morris A. Modell opened the first Modell’s Sporting Goods on Cortland Street in Lower Manhattan in 1889. On March 11th, 2020 that run ended when they filed for Chapter 11 bankruptcy protection, announcing they would be closing all 134 stores, citing declining interest in sporting apparel. They had planned an orderly liquidation to proceed through the month of April and sell a portion of their stores. But the Government imposed closure of non-essential businesses hampered those efforts so on March 23rd Modell’s requested and were granted a period of suspense in their bankruptcy case until April 30th, citing a rarely used Section 305 provision. Ordinarily, rent must be paid to the landlord post-bankruptcy, with the exception of a limited grace period for cause, and COVID-19 would be such a case.  So landlords in this case got the short end of the stick, they cannot collect rent or evict. Scott Blakeley offers the following assessment of what happened with Modell’s: “With its chapter 11 filing, Modell’s was forced to liquidate its assets through going–out–of–business (GOB) sales at its retail locations.  However, COVID-19 restrictions shuttered the GOB sales. Modell’s motioned the bankruptcy court to suspend the GOB sales given the COVID crisis and the resulting stay-at-home orders.  The court order allowed Modell’s to suspend payments to landlords for post-petition rent since the retailer could not conduct their GOB sales at the stores.  Other retailers in chapter 11 are likely to follow Modell’s strategy to suspend post-petition payments to landlords as social isolation orders continue. Given Covid-19 and stay at home orders, debtors and even creditors may benefit at some level (other than landlords) from the suspension of chapter 11 as debtors can preserve the value of their business as it stays in place, lenders can preserve the value of their collateral by not being forced to seek a premature sale or liquidation, and unsecured creditors may increase the likelihood of a distribution through enhanced values of GOB sales.  The chapter 11 case suspension is expected to extend through May 30th, but landlords are expected to oppose.” Scott Blakeley is the founder of Blakeley, LLP, a noted expert in the field of creditors’ rights, commercial law, e-commerce, and bankruptcy law. Scott regularly speaks to industry groups around the country and via monthly webcasts on the topics of creditors' rights and bankruptcy.  

Experian® today announced Ascend Commercial Suite™ for financial institutions specializing in commercial lending as well as insurance carriers to drive growth while reducing risk. The suite includes Experian’s Ascend Analytical Sandbox™ configurations and a new Ascend Commercial Benchmarking Dashboard™ that provides access to industry-leading data on small and midsize businesses. “Experian is committed to creating opportunities for businesses to succeed,” said Hiq Lee, president of Experian’s Business Information Services. “During uncertain times, making fast, accurate decisions is critical for lenders so they can continue to extend credit responsibly to the businesses that need it most. Experian’s Ascend Commercial Suite enables clients to access world-class advanced analytics, AI, machine learning, and benchmarking tools so they can make real-time decisions that can ultimately help businesses on the road to recovery ahead.” Experian’s Ascend Analytical Sandbox is an industry-leading cloud-based data and analytics solution that offers flexibility in addressing lenders’ needs and offers instant access to up to 19 years of data. The secure hybrid-cloud environment allows users to combine their own data sets with Experian’s exclusive data assets, including consumer credit, commercial credit, nontraditional, auto, and more. Small and midsize business lenders, as well as insurance carriers, can seamlessly blend commercial and consumer small business data to get a 360-degree view of their overall small business portfolio to more easily identify risks and opportunities. It’s a one-stop-shop for insights, model development, and results measurement. The Ascend Commercial Benchmarking Dashboard delivers a comprehensive visual dashboard view of credit risk data and Small Business Financial Exchange™ (SBFE) Data exclusively for SBFE members. Clients can compare their portfolios against industry performance and analyze new market segments for potential growth and expansion. The insights available through the Ascend Commercial Suite can be viewed and shared through interactive dashboards and customizable reports. Additional use cases include: Portfolio performance and monitoring: Lenders can harness the power of Experian data to better monitor performance and quickly identify areas of strength or concern on visual dashboards without having to run custom reports every month. Model development and validation: Clients can monitor existing models and develop new models in order to improve risk profiles of new accounts and improve existing accounts. Blended analysis: Small business lenders relying on personal guarantees can use both consumer and business data to determine a customer or potential customer’s overall risk. Marketing analytics and acquisition: Lenders’ campaign information and results combined with Experian’s Credit Risk Database help them understand performance and improve marketing and segmentation. Decisioning for risk assessment and segmentation: Lenders and insurance carriers can optimize risk decisioning and segmentation strategies using analytical tools on one platform, which provides quick and efficient access to multiple integrated data sets. Reject inferencing: Lenders can load application data and use SBFE trade-level data to understand how declines performed if customers obtained credit elsewhere. Custom attributes to better analyze portfolios: With SBFE Data, lenders can create their own custom attributes or use Experian’s highly predictive set of attributes. Experian’s Ascend Commercial Suite is built on the Experian Ascend Technology Platform™. Launched in 2017, the Experian Ascend Technology Platform is recognized as one of the most successful launches in Experian’s history. It’s currently being used by the top financial institutions globally including the United Kingdom, South Africa, Brazil and Asia Pacific. Experian’s Ascend Analytical Sandbox was also selected in 2019 as the winner of the “Best Overall Analytics Platform” award by FinTech Breakthrough, an independent organization that recognizes the top companies, technologies and products in the global fintech market. To learn more about Experian’s Ascend Commercial Suite, please visit: https://www.experian.com/business-information/ascend-commercial-suite.

For the past month, the Commercial Data Sciences team in Business Information Services has been taking precautions in response to the Coronavirus Pandemic, working from home. In the span of the past five weeks, we have seen the spread of the disease ramp up, and the death toll climbs. The impact on businesses of all sizes will be immense. In just a few days we built a robust simulator tool that helps businesses assess the impact of COVID-19 as the disease spreads. With this tool, you can: Identify risk in geographies you do business in Based on geography, review the top 5 riskiest industries for that region Apply an impact scenario so you can plan for the best and worst-case scenarios The U.S. business risk dashboard below was developed by Experian Business Information Services to help businesses better understand the impact COVID-19 may have on their commercial operation based on several key factors. This methodology combines business risk, anticipated impact on business industries and real-time COVID-19 case data to help businesses better simulate various impact scenarios down to the state level to help develop enterprise strategies. A paid version of the dashboard goes down to the county and industry level. The risk index is used as a comparative benchmark across states, counties and industries. Industry classification is used to assess the business’s level of exposure due the nature of the business. For example, businesses in the Arts, Entertainment, and Recreation industries will be more heavily impacted than businesses in Public Administration. The risk index represents the credit risk, industry risk, and COVID-19 risk on businesses across the U.S. The impact layer allows users to easily change the severity of the impact related to the combination with the credit risk, industry risk, and COVID-19 risk across regions and industries. This dashboard is meant to be a directional tool for assessing which industries and geographies are most likely to be impacted and how severe the impact will be. The risk index is not designed to be interchangeable with a traditional credit risk score. The risk index is intended to be used independently to gain insights around the potential impact of the current events on future business credit health at summarized levels including region and industry. The risk index has four different assessment scenarios ranging from low to severe. If the expectation is that various industries are affected differently, but the impact overall is minimal, then the minimal scenario should be applied. Select the other scenarios to amplify the impact.  

We recently sat down with Kyle Blanchard, Product Manager with Business Information Services to ask him a few questions about Experian's improved OneSearch technology. What is OneSearch? OneSearch is a lot of things at its core. OneSearch is the ability for a customer to find a business, but the story of OneSearch is much bigger than that. OneSearch is Experian's technological advancement and journey on how we're bringing all of our innovations to drive improvements for our customers. So, our customers can find businesses today, but at Experian we had to ask the question, how can we make this better? And with OneSearch, we're providing the ability for our customers to find businesses faster, and for them to find a more exact match and a more precise business every single time. What should Experian clients expect? Our clients can expect a variety of changes. Those changes won't come in terms of the products or services you're using today, but more about the experience you're having. So whether you're using BusinessIQ, or you're getting files in batch, the only experience difference you're going to feel is you're going to get better match results, more match results, and you're going to get them at a faster speed. So your experience is going to improve. This is going to be free of charge. This is just an internal improvement that we're making for you. But, every way you interface with our applications or your services will not change at all. Why does OneSearch matter to our clients? This matters a lot to our clients. Their first experience and every experience they have with us starts with finding the right business. So, we stepped back and we asked ourselves, how can we improve this experience for our customers and how can we make it better? And so, we looked at all technologies available and we did an evaluation, and what we had was a deterministic solution but where we really needed to be was a probabilistic one. But the investment that the company or that we needed to make to get there is significant. But we saw that this is an important investment to make because of the improvements that it can drive for our customers, and the improvements it could drive for our customers are wide and varied. Whether it be an improved ROI because you're finding more businesses, or a faster processing time so you can do more jobs even quicker. Why is Experian investing in innovation and technology? Experian is investing in innovation and technology for two reasons. One, it's part of our culture, we're always investing in innovation and technology, whether it be this probabilistic search match algorithm, whether it be machine learning or whether it be A.I. We're always trying to innovate and always trying to drive new best practices in technology. Finally, we know the importance from our customer perspective. This is fundamental to their experience. And not only that, we recently partnered with Forrester to do a research study and found that over 85% of risk managers are looking to improve their risk management practices. 75% of those are willing to invest and purchase a solution within the next year. So we know how important this is to our customers, and the only way to get there is to innovate and always drive new technology. Learn More About OneSearch

This weeks guest post is by Katie Keitch, VP of Commercial Services at InsideARM. InsideARM is a media company who specializes in training for credit management professionals. To receive future articles, sign up to the InsideARM newsletter.

This weeks guest post is by Katie Keitch, VP of Commercial Services at InsideARM. InsideARM is a media company that specializes in training for credit management professionals. To receive future articles sign up to the InsideARM newsletter.

The credit industry works very differently than it did even a few years ago. In recent years, new technology and the availability of analytics means that credit departments have much more information to make decisions. When both commercial and consumer data is used together, departments unlock a lot of powerful data that can be combined for more accurate decisions.

In this week's guest post,  Scott Blakeley shares perspectives on a growing trend in business – Terms Pushback (TPB). Scott is the founder of Blakeley, LLP, a noted expert in the field of creditors’ rights, commercial law, e-commerce and bankruptcy law. Scott regularly speaks to industry groups around the country and via monthly webcasts on the topics of creditors rights and bankruptcy.

  Experian and Moody’s Analytics have just released the Q2 2019 Main Street Report. The report brings deep insight into the overall financial well-being of the small-business landscape, as well as providing commentary on what certain trends mean for lenders and small businesses.

Experian has just released the Women in Business credit study, which is a three year study of around 2.8 million credit files for small business owners, and one of the key findings in this study was that, women business owners in particular, are reliant upon personal forms of credit, and they may be at a disadvantage through this practice. So we wanted to talk to some women business owners about business credit. First up is Sara Evans from Sevans Strategy.

Experian and Moody’s Analytics have just released the Q1 2019 Main Street Report. The report brings deep insight into the overall financial well-being of the small-business landscape, as well as providing commentary on what certain trends mean for lenders and small businesses.

Serving commercial Property & Casualty insurers is a major objective of 3rd parties in the analytics and data space. This industry vertical is one in which standard credit tools already apply to the carrier’s challenge in managing claims risk; there is continued investment within and beyond the industry in developing innovative tools for this purpose. However, a smooth roll out of such tools at scale requires a comprehensive understanding of the regulatory process and its constraints.