Phil Denning
Phil Denning

Every bankruptcy is unique, with the specifics varying case-by-case. However, what’s consistent across all situations is that a bankruptcy filing and the speculation surrounding it will cause a significant amount of disruption and potential confusion.

As with any crisis situation, stakeholders can forgive corporate mistakes or transgressions, provided the company responds appropriately, but they also possess long memories for botched or nonexistent responses. Decision-makers and executive teams facing a crisis must not only think and act quickly, but also think and act strategically.

The primary goals of crisis management are to limit the damage, allow all hands to return to focusing on the business, preserve your company’s relationships and reputation and establish a foundation for recovery. These goals all apply to managing communications around a bankruptcy filing.

Companies in crisis are most effective at regaining the public’s trust when they explicitly communicate the precise steps they’re taking to address the issue and actively demonstrate that these steps will lead to resolution. Fortunately, an in-court bankruptcy process typically has a structured process with milestones that can be leveraged to communicate with key stakeholders.

This article is featured in O'Dwyer's Jan. '21 Crisis Communications & PR Buyer's Guide Magazine
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The rumors start early

A publicly-traded, reporting company will likely see rumors speculating about a potential bankruptcy filing well before a filing is made. The speculation can be sparked by a filing including a “going concern” warning, the announcement of a process to review of strategic alternatives or even the disclosure of a potential bankruptcy among the options being considered.

The media frequently writes stories about companies hiring financial, legal or consulting advisors that may have bankruptcy experience. Unfortunately, these stories are typically very brief and do not provide a platform for providing context. These rumors or stories will trigger a series of questions from internal and external stakeholders, but the company may not be able to directly answer all the questions immediately. This may force difficult conversations earlier than planned, leaving the company to address the rumors and speculation with anxious vendors, employees, shareholders and other stakeholders.

Recommended strategy: Once a filing or disclosure is made—or once a reporter calls—it’s unlikely that you’ll be able to stop a story from being written. It’s also unlikely that there will be an opportunity to insert any balance nor the ability to provide context, so the communications strategy must focus on preparing for direct communications with the impacted stakeholders once the story runs or the disclosure is made, rather than simply trying to manage a story.

Targeted stakeholder communications

Preparing the communications around a bankruptcy requires developing a game plan for each stakeholder group: employees, customers, vendors, suppliers, landlords, creditors and shareholders, among others. Each company may have distinct stakeholder groups specific to their business, so it’s important to take the time to map out the various groups, understand what their likely questions or concerns will be and align on what messaging will be delivered.

The messages should be consistent across all communications. However, the areas of focus or emphasis will vary by stakeholder group.

Recommended strategy: as you prepare for a potential bankruptcy filing, first create a stakeholder map that enumerates the various stakeholder groups, how they will be impacted, the role they will play in the process, any particular issues or challenges specific to that stakeholder that should be considered, the frequency of communication during the process, who will communicate with the stakeholder group and what the overall communications goal or objective is when engaging with that stakeholder group.

Messaging on filing day

While it’s difficult to manage the potential rumors or speculation of a potential filing, a silver lining to those difficult days is that when you need to announce a filing, most stakeholders won’t be surprised by the announcement.

The structure of the filing—a “prepackaged” or “pre-negotiated” reorganization plan, a 363 Sale with a Stalking Horse bidder—each have communications challenges and messages to focus on. Once the filing is made, the company should focus each stakeholder group on how the process will benefit the company and the key stakeholders once complete.

Some stakeholders may presume that a bankruptcy filing means the company is going away, so the messaging on the filing day should clearly articulate how the business will operate going forward and how the restructuring will enable the company to continue to serve each stakeholder group.

Recommended strategy: When you don’t have all the answers people want, it’s helpful to communicate the process you will undertake. Focusing the discussion on the process and key milestones will help to guide the communications. Preparing a detailed rollout plan with tailored communications materials that can be immediately cascaded throughout all communications, internal and external is key to managing announcement day. Having the materials prepared and shared with the appropriate members so that they can provide as much information and insight into the process as possible will provide comfort that the company is on the right path.

Leveraging milestones in the process

There will be certain court-driven milestones during the bankruptcy process that will provide the opportunity to proactively communicate with certain stakeholders. Whether it’s the court approving First Day Motions, the approval of DIP financing, the requirement to issue notice to employees of potential job losses under the WARN Act, or sharing the timeline of a 363 Sale bid procedures are all opportunities to engage with your stakeholders, educate them on the process and reinforce the messaging on how this process will result in a company better positioned for the future.

Recommended strategy: The company, in collaboration with its legal and communications teams, should prepare a timeline of events that will unfold over the course of the bankruptcy process. The structure of the filing will drive the types and timing of the events. The court’s approval of the First Day Motions is the first opportunity to communicate some good news. The communications team should develop a plan to proactively communicate what these motions mean to the impacted stakeholders. Leveraging milestones in the process is a key first step in resetting the narrative.

Resetting the narrative

A bankruptcy filing is similar to other crisis situations in which the company will need to reset the narrative around itself following the event. While filing bankruptcy can be very painful and disruptive, it can allow a company to de-lever the balance sheet, find a new owner, close stores, renegotiate leases or obtain financing against assets that are difficult to finance outside of bankruptcy.

Properly positioning the go-forward, restructured business that will emerge from the bankruptcy filing is an important phase in resetting the perception of the business. Whatever path the company takes to emerge from bankruptcy, it should look for opportunities to communicate to the key stakeholders how the company will be stronger and better positioned for the future after completing the process.

Recommended strategy: The reputational overhang from a bankruptcy may take time to fade, and rebuilding credibility and goodwill will not happen overnight. The resetting process will take time and will require implementing a proactive communications program, showing progress over time.


Phil Denning is a Partner at ICR and head of the firm’s special situations group, advising clients on a range of crisis issues.