On June 29, David Schier, credit manager for Jacobus Energy, a Milwaukee, Wis.-based fuel supplier, was enjoying a relaxing Sunday until he received a call from the company's sales rep for Indiana. It was bad news. The rep had heard that one of Jacobus' bigger customers – Alvan Freight, a Kalamazoo-Mich. trucking company – was about to file for bankruptcy protection. Jacobus' owner was promptly informed, and the Alvan account was immediately locked to prevent any fresh shipmentsgoing out. When Schier got into the office on Monday, the first thing he did was confirm the news – the rumor was true. "There had been no real warning signs apart from a very slight increase in the time they were taking to pay, but it was nothing that would make you think the company was in serious trouble," he says. "They'd been an exceptional company for years and it came right out of the blue."

Alvan's collapse won't be a material problem for Jacobus, which has about 7,000 customers in the U.S. and annual sales of about $1 billion – but it's the latest and most dramatic sign that the company's portfolio of receivables is heading into choppier waters. Schier says that most of Jacobus' customers are in either the construction or the trucking sector, and both sectors are under pressure. The portfolio remains in good shape, he says, but some customers are starting to drift in their payment habits and Jacobus' credit department is trying harder to anticipate problems and is giving customers less leeway. "The last time we had to take these sorts of measures was in the early 90s, but our prediction is that this is going to be worse. We're a big enough company to deal with it, but we're looking at everything we can do to maintain our profitability and financial strength," says Schier.

One option is to hedge the risk, and bankers have cooked up some exotic products since corporate defaults last spiked, like receivables puts, credit default swaps and securitization. Despite the credit crunch caused by the subprime crisis, all of these tools remain on the table, bankers insist. Unlike credit insurance, some of these trades can be put in place on even the riskiest customers – but the costs involved can be high.

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