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Bankruptcy Protection

It is with interest any serious entrepreneur can observe the recent bankruptcy filing of US retail giant K-Mart, and the fact they can seek court protection yet continue to operate their massive stores, obtain US$2B fresh debtor in possession financing, and aggressively continue plans to open Trinidad 's largest super store comprising almost all facets of consumer requirements. Over 1M such bankruptcies are filed in the US annually in a country, which places great value and respect on the contribution of businesses large and small on its economy.

The science of American Business is broad-mindedness, and liberalism with laws, which benefit numerous downstream industries, creates employment, reduces crime, and eliminates social ills. While this country of 280 million strives to maintain 4% unemployment, our country of 1.3 million averages 20% and numerous uncontrolled social ills. America and all other open-minded nation know very well if their economy, and inevitably their country are to flourish, it is pivotal to make available the relevant tools to the players.

Countries steeped in doing just the opposite are always in lack, raising taxes while cutting back on limited social programs, inevitably opening avenues for crime, corruption, moral breakdown and a never-ending albatross of increasing ills and hardships on its citizens. America is so abundant and prosperous because of its vastly different views that its generosity is a way of life through aid for countries of foolish leaders worldwide.

If you are a serious entrepreneur in Trinidad where lending laws are favorable only to the lender using hammers of destruction against the borrower, well crapaud smoke your pipe. Picture Ram Kirpalani starting off in his 20's with a one door hole in the wall operation and growing over 30 years into the country's largest trader, creating employment and reducing social evil, paying a multitude of taxes and supporting many downstream businesses.

Suddenly the country experiences an economic crisis forcing Mr. Ram to seek help beyond his parochial bankers. Where can he turn to save his empire?

The destructive Trinidad culture is that he has nowhere to turn as any member of the banking cartel has the exclusive right to move with stealth and deceit by sending in their receiver to take over the entrepreneur's entire operations. Receivers, acting as agents for the banks more often operate as mercenaries oblivious to shareholder's value or investment in the supposedly “failed” enterprise. Their primary function is to liquidate if not destroy the business in the shortest possible time, at whatever price, as the lender bank have and use with impunity their prerogative to sue the borrower for any shortfalls.

Since the entrepreneur would have seen early signs of deteriorating cash flow, he would by now have used up all savings, and mortgaged his family residence to the tilt, possibly buying time hoping economic circumstances would soon be favorable. The lending bank would actually encourage him to do this to show as they put it “how serious and committed he is to the project”. By this time the once prosperous entrepreneur is now in a state of penuriousness while his once accommodating banker executes writs and judgments, feeding derogatory and unquestionable information to other banks who would not touch you no matter how brilliant you turnaround ideas, as they seek payment first. Even if you pay them and seek their support later, all they can remind you is when you “failed” previously. After a receiver's swoop, I have witnessed where Christmas trees from the flattened business ended up at three bank branches while the bank sought to recover its 1986 “balance” without ever giving a breakdown of how the $550,000 Company was sold for $73,000 paying the receiver $38,000 from the proceeds.

Local pawn broker lenders in a country priding itself as the financial capital of the Caribbean know nothing about turnarounds, creative financing, debtor or lender in possession financing, even a credit grading system, and there is no way Donald Trump or Federated department stores who own Macy and other fine stores, and numerous other successful turnaround companies could have ever re-organize in Trinidad. We cannot expect to prosper by continually allowing 5 Mom & Pop banks to unilaterally dominate our business landscape and stymie our growth and development. Aggressive global players with a successful track record must be invited to catapult our business climate and stimulate the economy. inclusive of a liberal home ownership policy more as a necessity than as a favor, following which a secondary financial market must be created for higher risk clients who can still obtain financing, allowing them to succeed when the banks say no. From its inception, PIRG has been seeking changes to our archaic, wicked and destructive views on what we know as scary bankruptcy wherein the individual or Company is dead for life, whatever the mitigating circumstances. Our culture is that we do not trust ourselves, are low in self-esteem thus making it difficult to trust others, so we view everyone else but ourselves as smart men.

Private and Corporate citizens must now have a basic right to petition a bankruptcy Court to protect assets and reorganize their affairs from gullible, arrogant, and impatient lenders rushing to declare massive profits, if the debtor see themselves having a reasonable time to turn their fortunes around, under the watchful guidance of a court appointed trustee with broad powers, fair to both borrower and lender. In an ever increasing credit card society where debt management or credit counseling is foolishly not considered in the interest of the credit grantor, we may be pleased with our circumstances today, but are quite unsure of our status tomorrow. The benefits of A Bankruptcy Protection Act would be beneficial for the overall good of the entire country.

Who would have thought Enron, America's 7 th largest corporation would seek court protection, albeit the court appointed trustee may very well after its due diligence, wind up this once powerful and prosperous energy titan. Then again, maybe not.

Trevor Hosten
Chairman
PIRG (Public Interest Research Group).