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  • CCAA proceedings now at your fingertips

    Trustees, creditors, academics, policy makers and government officials have a new source of insolvency information available to them thanks to recent changes to the Companies’ Creditors Arrangement Act (CCAA). One result of the changes, which came into effect September 18, 2009, is that the Office of the Superintendent of Bankruptcy (OSB) became responsible for maintaining both a Registry of Public Records and a Repository of CCAA Files.

    Registry of Public Records
    Once a court grants protection to a debtor company under the CCAA, the monitor (trustee) must send basic information to the OSB within one business day. This information includes the court’s file number and coordinates—including the website address of both the debtor and the monitor.

     
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  • How can a supplier protect their interest in inventory shipped to a customer from banks and other creditors?
    Enjoy this complimentary Webinar
     
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  • Creditors, Suppliers and Security Breaches

    Once upon a time, all the suppliers had to worry about what was the credit of their customers and the legal effectiveness of the security liens that they took on inventories. Now, debtors and creditors alike, for that matter, live under the constant threat of security breaches which can have consequences of a material order of magnitude. As a lawyer advising payments companies, I thought it would be interesting to discuss security breaches ...

     
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  • Predictive Indicators - Learn how to read the signs and improve your bottom line

    Managing your company’s exposure to risk has become a challenging task. There is more pressure to speed up the credit review process and more responsibility resting on your shoulders to be accountable for your decisions and improve company profitability.

     
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  • Court Declines to Approve Sale of Assets as Part of Proposal Proceedings

    In the decision of Justice Cumming In the Matter of the Proposal of Hypnotic Clubs Inc. (“Hypnotic” or the “Debtor”) the court dismissed a motion by the Debtor for a sale of its assets pursuant to s.65.13 of the Bankruptcy and Insolvency Act (“BIA”).

     
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  • Supreme Court Rules Crown Doesn’t Have Rights To GST And QST

    In a unanimous decision on October 30, 2009 relating to the Goods and Services Tax (“GST”) and the Quebec Sales Tax (“QST”), the Supreme Court of Canada rejected the most recent attempt of the Crown to secure its position by recovering the tax portion of accounts receivable outstanding at the time of bankruptcy where the bankrupt had not made the required remittances.

     
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  • Factoring Agreement: Security or Sale of Assets?

    Lenders and other members of the factoring community should be aware of the potential impact of a recent ruling on a priority fight over the accounts receivable of a bankrupt company.  One of the issues that the court had to consider was the application of a factoring agreement.

     
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  • PPSA & Legislative Q's
     
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  • Role of the Credit and Collections Department in Business

    Companies expect their credit department to be sales oriented. Put simply, this means the credit department should be looking for reasons to justify establishing open account terms and/or releasing orders pending, rather than looking for excuses to hold orders or to reject applicants for open account terms. Having this simple idea in mind can make

     
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  • Role of the Office of the Superintendent of Bankruptcy (OSB)

    The Office of the Superintendent of Bankruptcy (OSB) is part of Industry Canada. Their role is to ensure public confidence in the market place by protecting the integrity of the bankruptcy and insolvency system.

     
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  • BIA compared to the CCAA

    The Companies' Creditors Arrangement Act (CCAA) is a federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs. Under the CCAA, corporations ask the Court for protection while they prepare ...

     
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  • PIPEDA and Collections

    Often, collection activity requires interacting with personal information about a consumer, in order to research, contact or collect from that consumer. Whether you are in an internal receivables department, third party collection agency, or you are a legal agent...

     
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  • The 4C's of Credit for Business

    Credit people look carefully at trade accounts, especially in tough financial times, before they ship goods. What credit managers look for can be...

     
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  • Differences in Risk based on Type of Business

    In Canada there are three general forms of business ownership: a sole proprietorship, a partnership, and a corporation.

     
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  • What is a Proposal?

    Under the Bankruptcy and Insolvency Act, a Trustee or an Administrator of Proposals files a Proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both.

     
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  • What to do when a customer files for Bankruptcy

    Find out exactly what the situation is. Most people when they think of bankruptcy only think of the final stage, where the customer is no longer in business. In reality there are a few different types and various levels of severity.

     
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  • Standard Ratios

    Liquity Ratios

    • current Ratio
    • Acid Test

    Debit - Equity Ratios

    • Current Debt to Tangible Net Worth
    • Total Debt to Tangible Net Worth
    • Working Capital
    • Net Worth
     
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  • Credit Rules (Axioms)

    If short-term credit suppliers are paid by asset conversions, then the primary interest should be centered on the balance sheet and their focus of attention should be liquidity.

     
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  • PPSA Registrations - Is this the Weakness in Your Armour?

    As the saying goes, an ounce of prevention is worth a pound of cure. This expression is particularly apt when it comes to secured creditors and their registrations under the Ontario Personal Property Security Act (the "PPSA"). Although "getting it right the first time" has always been the mantra of secured creditors, the economic roller coaster ride of recent months has heightened the need to ensure a properly perfected secured claim.

     
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  • Credit and Collections as a Revenue Generator
    Next time you are spending quality time with a client, at a board meeting, or getting an update from the CFO you may want to inquire about practices of their company’s credit and collections department. The credit and collections department is constantly interacting with the company's customer base. This provides them with opportunities to augment sales, identify customer needs and problems, and / or be proactive in collecting those slow paying accounts. A properly operated credit and collections department can enhance profits and earnings per share.
     
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  • Can creditors recover goods under the 30-day rule in a bankruptcy?
    Enjoy this complimentary Video Break
     
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  • Risk Assessment

    Risk assessment is a step in a risk management procedure. Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat (also called hazard). Quantitative risk assessment requires calculations of two components of risk (R):, the magnitude of the potential loss (L), and the probability (p) that the loss will occur.

     
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  • Credit and Collections Department Should Be Generating Revenue

    Next time you are spending quality time with a client, at a board meeting, or getting an update from the CFO you may want to inquire about practices of their company's credit and collections department. The credit and collections department is constantly interacting with the company's customer base. This provides them with opportunities to augment sales, identify customer...

     
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  • PPSA

    The Personal Property Security Act ("PPSA") is the name given to each of the statutes passed by all common law provinces, as well as the territories, of Canada. They regulate the creation and registration of...

     
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  • Construction Credit

    Construction credit is a unique and specialized form of mercantile credit. Although the field follows many of the same principles, practices and procedures as mercantile credit, there are a number of factors that make the practice unique. In order to be successful, the credit professional must...

     
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  • Terms used by CPA's

    A CPA will competently assist an organization (whether it is a privately held business, a publicly owned corporation, or a nonprofit organization) with preparing reports on its financial performance. Such reports help owners and managers make operational decisions, enable creditors to evaluate loan applications, and provide individuals with information to make investment decisions.

     
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  • The Quickening of Innovation in Asset Based Financing

    Some would call it evolution: others, revolution. Semantic flourishes aside, financial technologies are increasingly in the foreground as drivers of product differentiation and proliferation in the asset-based financing industry.

     
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  • My Customer is Restructuring, in Receivership or Bankrupt – What Now?
    Presented by Jerry Henechowicz, CA-CAIRP, Trustee in Bankruptcy Jerry HenechowiczThis one hour webinar with one of Canada’s leading restructuring and insolvency firms to get updates on the best practices and latest trends in maximizing recoveries when a customer is restructuring, in receivership or bankrupt.
     
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  • Sharpen Your Financial Analysis Skills
    Presented by George Brown, MBA, CMA, CCP, CIA
     
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  • Lifting or Piercing The Corporate Veil
    If you always thought that incorporation generally protects shareholders and directors from personal liability when things go wrong, then this webinar is for you. Our webinar leader is Andrew Hladyshevsky, QC, LLB and a partner with the law firm, Fraser Milner Casgrain
     
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  • Target Take Two
    Back by popular demand, Russell Bennett will revisit the bankruptcy of Target and the fall out for its creditors. In May, when we first held this Live-Webinar, it generated a lot of interest from our members – follow up questions continue to come in to the National office.
     
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  • Betting The Company: BOMBARDIER Goes All-In on C Series Jets and Blows Up Its Balance Sheet
    A brief analysis of Bombardier's woes and what we can learn from a company undertaking a massive project, consuming working capital, and ultimately destroying its balance sheet.
     
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  • How Creditors Can Stay Informed

    Knowledge Is Power: As a creditor, you need to learn quickly and easily about public legal notices. NoticeConnect brings that information to your fingertips! They are a web platform for publishing and accessing legal notices and has been operating since 2014. The platform is trusted by lawyers, trustees, banks, and government.

     
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  • Direct payments and construction insolvency
    Main contractor Carillion’s entry into liquidation has resulted in many employers seeking to establish relationships with subcontractors, under which they will be paid directly in order to stay on site and finish the relevant project. On the face of it, this seems like an attractive solution, and may leave some employers wondering why they didn’t procure their projects by construction management in the first place. However, establishing direct relations is not without risks, and requires safeguards for employers and subcontractors alike. Those are set out in the last section of this article, but it is important to understand the pitfalls, particularly of direct payment, first.
     
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  • Remington Outdoor Company Plan of Reorganization Confirmed by the Court
    MADISON, N.C.--(BUSINESS WIRE)--Remington Outdoor Company (“Remington” or “the Company”), one of the world’s leading designers and manufacturers of firearms, ammunition, and related products, today announced the United States Bankruptcy Court for the District of Delaware confirmed the Company’s Plan of Reorganization (“the Plan”). Remington expects to emerge from bankruptcy before the end of May.
     
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  • These Best Credit Practices in Brazil Will Keep You from Falling Downhill
    I’m often asked by many overseas creditors about where to start when establishing a business relationship with a customer in Brazil. My answer is that it often depends on whether you are going to grant credit, and if so, how much.
     
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  • PetSmart taps advisers to trim $8 billion debt pile: sources
    (Reuters) - PetSmart Inc, the largest U.S. pet retailer, has hired restructuring advisers to explore ways to trim its debt pile of more than $8 billion as it continues to face falling profits, according to people familiar with the matter.
     
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Q and A (3)
  • What can creditors do to protect themselves when a customer remits a cheque, for less than the full amount owing, and marks it "Paid in Full" or words to that effect? Also, what can a creditor do to protect themselves in this situation when their company uses a "lock box" or "shared service" center and the A/R personnel may not even see the cheque prior to it being negotiated? Is the law that governs these scenarios Federal or Provincial?
    https://creditedu.org/knowledgecentre/index.php/site/qa/3

    Courts are very familiar with this tactic and will generally not give effect to it. A cheque marked “paid in full” may very well be evidence of an agreement to reduce the debt owing, but it is easily rebuttable by clear evidence that the creditor accepted the payment only as partial payment. This is based at least partially on the concept of consideration. Put simply, this concept involves the idea that you do not get something for nothing. What the debtor is attempting to do in this situation is to receive a discount on its debt without providing any real benefit to the creditor in return. The courts will not allow a debtor to unilaterally alter its agreement with its creditor - which is what it is attempting to do with the notation on the cheque.

    One possible method of dealing with such attempts would be regularly forwarding statements thanking the debtors for any payments received and indicating the account balance to date. If the debtor then challenges the statement arguing that payment had been made in full by way of the cheque in question, all the creditor would have to do would be to respond by saying it was received in partial payment. Unless the debtor is able to produce some sort of an agreement with the creditor showing the creditor’s agreement to accept the reduced amount in full satisfaction for the amount owing, it is extremely unlikely that the courts find in favour of the debtor.

    Of course, if the creditor notices the notation before it deposits the cheque, it can also send a specific letter to the debtor thanking it for the payment and saying that the payment has been applied against the amount owing, that the creditor did not agree to accept the payment in full satisfaction of the amount owing and that the balance remains owing by the debtor.

    The law governing these scenarios is the common law of contract, which is a matter within the jurisdiction of the provinces. As such, the law as interpreted in one province may not necessarily be applied in another. However, frequently the courts in one province will consider and often follow the decisions of courts in other provinces.

  • We see more and more public companies partially or completely reorganizing as Income Trusts. What are the advantages and disadvantages to the company and what could the ramifications be to trade creditors? Is there anything we should be questioning or looking for in this type of transaction?
    https://creditedu.org/knowledgecentre/index.php/site/qa/4

    An income trust (the "Trust") is essentially an investment vehicle which a corporation (the "Corporation") can establish in order to divert and distribute its revenues in a generally more tax efficient manner to the investors of the Trust.

    While the pros and cons of establishing an income trust are largely tax driven, extremely complex and beyond the scope of this forum, income trusts basically operate by taking the monies raised by the Trust from its investors and loaning them to the Corporation. Such loan can either be on a secured or an unsecured basis. Revenues from the Corporation's operations are then paid to the Trust in order to service the loan with those monies then being available for distribution to the Trust's investors.

    The typical structure sees virtually all of the Corporation's distributable income paid out without corporate tax because the income is being used to service the Corporation's debt (e.g., the loan from the Trust). If the investors of the Trust are tax-exempt entities such as RRSPs or pension funds, payments to them from the Trust will be received on a more favourable tax basis than if the monies were distributed as dividends.

    While the establishment of the Trust will not alter the manner in which the Corporation carries on its business (note that the Trust does not carry on business - it is simply an investment vehicle), the difference is that with the establishment of the Trust, the Corporation has a new and typically large creditor (being the Trust) whose debt must be serviced by the Corporation.

    From the perspective of companies doing business with the Corporation and extending credit to the Corporation, while the creation of the Trust in and of itself will not negatively impact upon the Corporation's ability to carry on its business, companies doing business with the Corporation may be at a greater risk should the Corporation subsequently run into financial difficulties. Aside from the Corporation having less flexibility to refinance since cash flow will be committed to debt service on the monies owing to the Trust (and other lenders), the Trust represents a new creditor which did not previously exist. If the Trust's loan to the Corporation is made on a secured basis, the Trust will be entitled to recover its monies prior to all of the Corporation's unsecured creditors, thereby diminishing the pool of funds available to the unsecured creditors. Similarly, secured creditors are at risk to the extent that the Trust's security has priority over their security. If the Trust's loan to the Corporation is made on an unsecured basis, the Trust will be another unsecured creditor sharing in the monies available to the unsecured creditors, meaning less monies will be available for the unsecured creditors had the Trust not been created.

  • How does theoretical economics affect credit decisions?
    https://creditedu.org/knowledgecentre/index.php/site/qa/12
    1. As we have seen in the recessions of 1991 and 2001, marginal companies in many sectors will be forced to file for protection because of liquidity problems caused by them failing to meet their financing covenants, or the bank not renewing their line of credit, or credit becoming more expensive.  A failure of a major buyer can cause a company to break its covenants and be outside of its margining limit.
    2. With publicly traded companies, the problems may occur, but at least there is disclosure required if public companies are not meeting forecasts or they are outside of their banking covenants or they are having difficulty renewing their lines of credit.  Furthermore, often the debt of these companies is rated and the company’s fortunes are followed by industry analysts.

    By the time a credit manager gets the information, the company may already have a large exposure to the buyer.  As the situation deteriorates it may be difficult to bring the exposure down.  It is a question of timing, the poor results may not be reported for several months and during that period the exposure has been continuing to run.  The time between the disclosure of the problem and the reorganization may be very short as the buyer and secured creditors want to protect the assets.

    1. With private companies the problem is exacerbated, as it is difficult to even obtain financial information, let alone be advised in advance of developing problems.  Suppliers don’t know if sales are down, margins are being squeezed or there are problems with the bank.  If a credit manager can obtain Financial Statements, they provide a historical picture at best.  The effect of the recession is happening in real time, out of sight.

    In summary, credit managers work with very imperfect information.  Time works against them in obtaining information and they have to often make credit decisions projecting 3 to 6 months ahead.  A recession in the U.S. affects many buyers, but in most cases, the credit manager can only guess at how much the buyer is impacted.

Wiki (19)
  • Preference
    https://creditedu.org/knowledgecentre/index.php/site/wiki/54
    The payment of money or the granting of security by a debtor that benefits one or more creditors to the detriment of the other creditors.
  • Personal Bankruptcy - Summary Administration
    https://creditedu.org/knowledgecentre/index.php/site/wiki/52
    A Summary Administration applies to individuals whose realizable assets are estimated at less than $10,000. The Summary Administration of a bankruptcy estate is a simplified procedure in which, for example: - there is no publication of the notice of bankruptcy in a local newspaper; - a meeting of creditors is only called if requested by creditors and according to certain conditions; - no inspectors are appointed unless the creditors decide to appoint them; - joint assignments are permitted; - the trustee's fees are prescribed; - the trustee is discharged without a court appearance, except when a creditor or the Superintendent opposes the discharge.
  • Quorum
    https://creditedu.org/knowledgecentre/index.php/site/wiki/61
    The minimum number of creditors who must be present in person or by proxy to conduct business or to take a vote. At a meeting of creditors, one creditor present, in person or by proxy, who has filed a provable claim with the trustee prior to the meeting, constitutes a quorum.
  • Personal Bankruptcy - Ordinary Administration
    https://creditedu.org/knowledgecentre/index.php/site/wiki/51
    An Ordinary Administration applies to bankruptcy files of individuals whose realizable assets are estimated to be worth $10,000 or more. This type of bankruptcy procedure provides, for example: - the publication of a notice of bankruptcy in a local newspaper; - a meeting of creditors within the 21 day period following the day of bankruptcy; - the possibility for the creditors to appoint 5 inspectors; - the approval of the trustee's fees by the inspectors.
  • Priority
    https://creditedu.org/knowledgecentre/index.php/site/wiki/56
    The order in which creditors are ranked for payment of claims provable under the Act.
  • Inspector
    https://creditedu.org/knowledgecentre/index.php/site/wiki/35
    A person appointed by creditors to represent them before the trustee during the administration of a bankruptcy or proposal.
  • Assignment (in bankruptcy)
    https://creditedu.org/knowledgecentre/index.php/site/wiki/5
    Made by insolvent persons who assign all their property to a trustee for the benefit of their creditors.
  • Assets
    https://creditedu.org/knowledgecentre/index.php/site/wiki/4
    Items that are owned and have value; in the context of bankruptcy it means all the property of the debtor available for the general benefit of creditors.
  • Dividend
    https://creditedu.org/knowledgecentre/index.php/site/wiki/21
    The proportional share of a bankrupt's estate paid out by the trustee to creditors who have proven claims against that estate.
  • Preferred creditor
    https://creditedu.org/knowledgecentre/index.php/site/wiki/55
    A creditor who has been given a priority under the Act over other creditors in the distribution of dividends.
  • Statement of Affairs
    https://creditedu.org/knowledgecentre/index.php/site/wiki/69
    The bankrupt's financial statement or a balance sheet of assets and liabilities showing the estimated value of the debtor's property and the names and addresses of creditors and the amounts owed.
  • Official Receiver
    https://creditedu.org/knowledgecentre/index.php/site/wiki/45
    A person appointed by the Governor in Council deemed to be an Officer of the Court who performs statutory duties as specified by the Act, such as: accepting the documents for the filing of proposals and bankruptcies, examining bankrupts under oath and chairing meetings of creditors.
  • Exempt Assets
    https://creditedu.org/knowledgecentre/index.php/site/wiki/27
    Assets made exempt from execution or seizure by provincial legislation that are not available to the trustee for the benefit of creditors.
  • Proxy
    https://creditedu.org/knowledgecentre/index.php/site/wiki/60
    A document signed by a creditor granting another person the authority to represent them at creditors' meetings. The proxy holder can exercise the creditor's right to vote.
  • Surplus income
    https://creditedu.org/knowledgecentre/index.php/site/wiki/72
    Payment required, if any, to be made by a bankrupt to the estate for distribution to creditors. The amount of the payment is fixed by the trustee, having regard to the standards established by the Superintendent and to the personal and family situation of the bankrupt.
  • Division II Proposal (Consumer Proposal)
    https://creditedu.org/knowledgecentre/index.php/site/wiki/23
    A simplified proposal for repayment of debt to creditors, available under the Act to a consumer debtor whose aggregate debts, excluding a home mortgage, do not exceed the amount prescribed in the Act.
  • Ordinary resolution
    https://creditedu.org/knowledgecentre/index.php/site/wiki/48
    A resolution carried by the majority of votes (one vote for each dollar of debt) of claims of creditors; disallowed claims do not vote.
  • Division I Proposal
    https://creditedu.org/knowledgecentre/index.php/site/wiki/22
    An offer made by debtors to their creditors in order to modify their payments. The procedure for a Division I Proposal applies to companies and individuals who want to avail themselves of it. This procedure also allows for a restructure of business debts while the business continues to operate.
  • Insolvent person
    https://creditedu.org/knowledgecentre/index.php/site/wiki/34
    A person who is not bankrupt and who resides, carries on business, or has property in Canada, whose liabilities to creditors provable as claims under the Act amount to $1000.00 or more, and: - who is unable to meet obligations as they become due; - who has ceased paying current obligations in the ordinary course of business as they become due, or; - the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all obligations, due and accruing due.