Recovery: Trends, Tips, Tools Presented to The Philadelphia Surety Claims Association Todd Kazlow President

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 of 28 major metropolitan areas had increasing unsold home inventories in the 3 rd quarter of 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 transfers Credit Reports Judgments, liens Litigation Bankruptcy UCC searches Financial relationships Other company ownerships

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

PERSISTENT, PROFESSIONAL PURSUIT