Method of payment according to ordinary business affairs/terms, whether ordinary among industry (i.e. trade usage) OR ordinary among specific parties (i.e. course of dealing) D always pays C w/ cash, even though all others in industry pay w/ check YES ordinary course of business D usually pays C on time, BUT payment in question happens to be late… AND, late payments generally OK among industry YES ordinary course of business Nature of debt must be very unusual to NOT satisfy 1st prong LBO, restructuring, and refinancing debts have all been deemed to be incurred in ordinary course of business (b/c ordinary businesspeople engage in such transactions, whether or NOT D has) Majority of litigation re: deals w/ 2nd prong MAY § 547(c)(2) be helpful to hire industry expert (NO guarantee that bankruptcy judge will believe non-expert) § 547(c)(3) enabling loan exception Special protections for C that loans $$ to D to enable D to acquire assets (NOT ordinary business loans)… D purchases $1M asset from C-vendor, puts $100K down, executes $900K to C-vendor secured by on asset C-vendor takes note SI 2-party (“2-party PMSI”) SI D purchases $1M from vendor, puts $100K down… C-lender executes $900K to D (who gives $$ to vendor) secured by on D’s asset note SI takes (“3-party PMSI”) 3-party purchase-money SI $$ loaned (“new must be… Given in conjunction w/ describing collateral security agreement –AND– Given by secured party (vendor w/ OR lender w/ 2-party PMSI 3-party PMSI) –AND– To enable D to acquire collateral (for that exact purpose) –AND– Used by D to acquire collateral (NO commingling of funds) –AND– In lender should make sure that $$ is used by D for 3-party PMSI, exact purpose by putting $$ in special bank account… OR, by making check jointly payable to D AND vendor … perfected within 30 days after D receives possession of collateral Lien D MAY have acquired rights in collateral (i.e. when shipped, as per before possession of collateral… UCC § 2501)
Method of payment according to ordinary business affairs/terms, whether ordinary among industry (i.e. trade usage) OR ordinary among specific parties (i.e. course of dealing) D always pays C w/ cash, even though all others in industry pay w/ check YES ordinary course of business D usually pays C on time, BUT payment in question happens to be late… AND, late payments generally OK among industry YES ordinary course of business Nature of debt must be very unusual to NOT satisfy 1st prong LBO, restructuring, and refinancing debts have all been deemed to be incurred in ordinary course of business (b/c ordinary businesspeople engage in such transactions, whether or NOT D has) Majority of litigation re: § 547(c)(2) deals w/ 2nd prong MAY be helpful to hire industry expert (NO guarantee that bankruptcy judge will believe non-expert) § 547(c)(3) enabling loan exception Special protections for C that loans $$ to D to enable D to acquire assets (NOT ordinary business loans)… D purchases $1M asset from C-vendor, puts $100K down, executes $900K note to C-vendor secured by SI on asset C-vendor takes 2-party SI (“2-party PMSI”) D purchases $1M from vendor, puts $100K down… C-lender executes $900K note to D (who gives $$ to vendor) secured by SI on D’s asset takes 3-party purchase-money SI (“3-party PMSI”) $$ loaned (“new must be… Given in conjunction w/ security agreement describing collateral –AND– Given by secured party (vendor w/ 2-party PMSI OR lender w/ 3-party PMSI) –AND– To enable D to acquire collateral (for that exact purpose) –AND– Used by D to acquire collateral (NO commingling of funds) –AND– In 3-party PMSI, lender should make sure that $$ is used by D for exact purpose by putting $$ in special bank account… … OR, by making check jointly payable to D AND vendor Lien perfected within 30 days after D receives possession of collateral D MAY have acquired rights in collateral (i.e. when shipped, as per UCC § 2501) before possession of collateral…