More Transparency of Post-Petition Debt

Retail giants like Toys "R" Us, Sears, and Forever 21 all share a common fate: administrative insolvency in Chapter 11 bankruptcy. This means new vendors who extended credit after the filing were left unpaid, while professional fees were mysteriously covered. This unacceptable pattern highlights the need for greater financial transparency within the Chapter 11 process.

The Problem: Unfulfilled Promises and Unpaid Bills

Chapter 11 aims to facilitate business turnaround and creditor repayment. Yet, some debtors exploit the system, securing post-petition credit with promises of adequate "DIP" financing, only to leave vendors stranded when funds dwindle. This practice not only harms vendors but also undermines the integrity of the process.

Broken Trust and Missing Accountability

Bankruptcy judges, while empathetic, lack the resources to conduct in-depth financial analysis. They rely on committees and interested parties to raise concerns. However, debtors and management, often pressured by secured creditors, prioritize securing additional credit at the expense of long-term sustainability and vendor fairness.

The Role of the Chief Restructuring Officer (CRO)

While CROs are supposed to be the voice of reason, their effectiveness hinges on transparency. They possess vital knowledge of the bankruptcy process and should act as a watchdog, ensuring responsible spending and alerting stakeholders when the "point of no return" approaches. Failing to do so, or being overruled by the board, should come with consequences.

Demanding Transparency: A Proposed Solution

To mitigate the risks for vendors and ensure responsible financial management, consider these reforms:

1. Publicly Available Monthly Reports:

   • Detailing open purchase orders, broken down by category (stock goods, custom goods, etc.) and payment status (able/unable to pay).

   • Listing unpaid post-petition liabilities and available liquidity.

   • Filed with the court, accessible on the debtor's noticing agent and website.

2. CRO and CFO Accountability:

   • Overseeing report preparation and certifying accuracy.

   • Facing consequences for failures in transparency or mismanagement.

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Conclusion:

By implementing measures that promote financial transparency and hold key players accountable, we can prevent Chapter 11 from becoming a graveyard for unsuspecting vendors. This will ultimately foster a healthier bankruptcy system and protect those who support companies in their critical time of need.

Improvements:

• Concise and focused: The rewritten text highlights the main issue and proposed solution while reducing jargon and unnecessary details.

• Stronger tone: The rewritten text uses a more assertive and persuasive tone, emphasizing the need for change.

• Clear call to action: The rewritten text concludes with a concrete call for action, urging for the adoption of the proposed reforms.

I hope this rewrite is helpful! Please let me know if you have any other questions.