Pedaling As Fast As They Can

Why companies will need to work harder for credit.

Karen M. Kroll

CFO Magazine

March 1, 2008

FADE IN: a bankruptcy court in downtown Manhattan, late January, minutes before the close of business. The equity markets have taken a nosedive, and nervous bankers are putting pressure on executives of Quebecor World, and Judge James Peck. The commercial-printing company is just days away from running out of cash. One of a team of lawyers sprints in with a document detailing $750 million in debtor-in-possession financing for the company. Quebecor World attorneys ask for an extra 15 minutes to review the 40-page agreement. Nothing doing, say lawyers for the company's lenders. You have until 5 P.M.

Welcome to the new rough-and-tumble world of corporate finance, where banks' markedly different posture on lending money is affecting businesses of all stripes — not just those in default.

During the last quarter of 2007, one-third of banks hardened credit standards for midsize and large businesses, according to the Federal Reserve's senior loan officer survey, and two-fifths increased loan spreads over their cost of funds. Not one of 56 eased standards. The January numbers are the highest since the first quarter of 2002, when 45 percent of banks tightened terms and conditions.

CFOs have run this gauntlet before — higher financing costs, choosier lenders, the scramble to renew loans ahead of further market souring. But in the last credit crunch, in 2001, high corporate default rates and fraud spurred the retrenchment. This time, the problems have arisen within the financial sector itself, making this market contraction fundamentally different.

"The crunch today resulted from poor lending decisions," and that has been exacerbated by the securitization of the loans, says Coleen Pantalone, associate professor of finance at Northeastern University. In other words, banks have structural issues to work through. So they will be even more cautious than they were seven years ago, she says, especially with non-investment-grade credits. But it also means CFOs have to start taking a hard look at the financial conditions of banks, to protect their options for accessing capital.

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Law prof comments on deep division on Supreme Court surrounding lethal injections

If you are interested in the Supreme Court's deep division over lethal injection, I thought you might be interested in hearing some preliminary thoughts from Scott Howe, a professor of criminal law at the Chapman University School of Law (Prof. Howe’s bio can be found here: http://www.chapman.edu/law/faculty/howe.asp). Please let me know if you’d like to speak with him:

Braze v. Rees is potentially a very significant case. Although this case from Kentucky does not focus on whether the death penalty itself is permissible, it is a very important case in terms of determining when executions will go forward again. Virtually all of the executing states now use lethal injection as the sole form of execution, and all of the states that execute large numbers of inmates use it. Virtually every executing state follows the same basic 3-drug procedure challenged in this case. Therefore, if the Court concludes that this procedure/technique (as currently conducted) is inadequate, these states will have to reform before they can proceed with executions. Reforms of that sort may take at least several months to accomplish. Because of this case, executions have already been stayed around the country since the end of September.

It’s about the possibility of torture. Although many people are not very sympathetic to the idea that a capital murderer is entitled to a pain-free execution, the inmate here is not really arguing that he’s entitled to no pain. Instead, the argument is that the three-drug cocktail can amount to something that might appropriately be called torture in some cases. The first drug administered is a short-term anesthetic. The second drug administered is a paralytic agent. The third drug administered stops the heart. If the first drug wears off before the third one takes effect, the pain is excruciating. Moreover, the inmate is paralyzed and therefore cannot express the pain. In fact, the American Veterinary Association has banned this three-drug approach for putting down animals because of the potential for unnecessary pain.

A central problem is our lack of knowledge- The real problem is that we (the public) don’t know very much about what is going on. There have been a number of botched lethal injections where it appears that the inmate was not unconscious and even having pain. However, because the inmate can’t express the pain, it is hard to know how much pain a particular inmate may be experiencing. States have also been unwilling to reveal very much about the procedures followed, the qualifications of the persons conducting the executions, or the autopsy reports in questioned cases.

The problems with further delay versus a quick decision. Some of the Justices at the argument suggested the need to send the case back down to the Kentucky state court for further fact-finding regarding some of the relevant issues, including the possibilities for alternative methods of execution. It is very doubtful that states would want to go back to using the electric chair or the gas chamber. But, there are other possibilities to the current approach. The problem with sending the case back for further litigation is that it would likely tie up executions for many more months.
The problem with going forward quickly is the relative lack of information in the record of this case.

The Court will likely be closely divided. Given reports about the argument, there is some sense that Justice Kennedy could be the swing vote again.

Projecting success

As consumers’ love for online video builds, retailers fine-tune their rich media strategies

By Paul Demery

Watching the development of online video as a merchandising, marketing, branding and customer relationship-building tool is like watching a fast-paced movie that mixes fast-forwards to new technology with flashes from the past in the basic rules of marketing.

Tools and strategies are more readily available today than just a year ago for creating and distributing videos on retail e-commerce sites as well as through video-sharing sites like YouTube and a growing number of specialty content portals, where video content can coincide with Buy buttons to drive direct sales as well as support brand marketing campaigns.

Circuit City, for instance, has identified a two-part mission for CircuitCity.com: to serve as an engaging online store to build on its sharp growth in online sales and as a source of consumer education to support multi-channel sales, Lesperance says.

Product tours and demos

It is working with three video program vendors—WebCollage Inc., Easy2 Technologies, and SellPoint Inc.—to present product tours and demos from manufacturers. And it’s developing how-to videos using its own high-definition camcorder to shoot videos of tech staff and salespeople showing, for example, how to add memory to a laptop.

“One of our goals is to bring the customer as close as possible to having an in-store experience without having to leave the house,” says Rob Roy, a video content specialist at Circuit City.

To read this entire article, please visit: http://www.paradigmshiftpr.com/projectingsuccess.htm

Congress requests Clemens investigation

In a letter to the Justice Department, a House committee says there are 'significant questions' over the star pitcher's steroids testimony to warrant an inquiry.

By Bill Shaikin, Los Angeles Times Staff WriterFebruary 28, 2008

Roger Clemens was referred to the Justice Department for a perjury investigation Wednesday in a bipartisan letter that cites repeated contradictions in Clemens' sworn testimony and alleges he "may have intentionally misled" Congress by denying he ever used steroids or human growth hormone.

Katherine Darmer, a Chapman University law professor and former federal prosecutor, called the referral proper.

"If they didn't refer this, it would look like they were giving favorable treatment to a successful athlete who is well-liked by some," Darmer said."This has an even-handedness to it. He made so many blatant misstatements that contradict not only McNamee, who some people don't think has any credibility, but Pettitte, who has no incentive to contradict Clemens."

If you'd like to read this entire story, please visit: http://www.paradigmshiftpr.com/congressrequests.htm

Lying on Resumes

I thought you might be interested in some of the thoughts of Lynne Sarikas, director of the MBA Career Center at the Northeastern University College of Business Administration, on the issue of lying on a resume:

Employers:

• More and more employers are doing employment and degree verification. They are either calling themselves or using an outside agency to do the verification. Organizations are more cautious and would rather find out up front. Obviously any falsifications result in withdrawal of the offer.


• We see more employers also doing online checking. They google the person at a minimum but several are also checking facebook and other social networking sites and will withdraw offers for inappropriate conduct. There is more information available about people online today so the resume must match or it is easily spotted by investing a few minutes online.
  

Employees (students):

• 
  We stress with students that they have to be honest in their resume. Anything factual can be verified and they assume it will be - dates of hire, positions held, degrees conferred, etc. Don't embellish or you cost yourself the job.


• It is often harder for the employer to verify specific accomplishments but the risk of overstating them is too high.


• Truth in advertising is an important concept. Setting realistic expectations is critical in the interview process and later in salary negotiation.


• Best advice - always tell the truth then you don't have to worry about keeping your story consistent or people finding outside evidence to the contrary.