Debtholder Communications Strategies

Phil Denning (L) and Lee Pacchia co-authored this article.

After years of cheap money and forgiving lenders, the balance of power between corporate borrowers and lenders appears to be shifting toward creditors, creating an entirely new category of crisis threat that communications professionals need to plan and prepare for. Refinancing channels have narrowed, capital has become increasingly selective and lenders are demonstrating a newfound willingness to use their position aggressively when performance falters.

The recent rise of corporate distress, illustrated most prominently in the bankruptcies of TriColor and First Brands—coupled with mounting refinancing pressures across leveraged sectors—has exposed a critical gap in traditional crisis planning: the absence of robust debtholder communications strategies. As the credit cycle turns, there have been numerous situations highlighting how creditors can move quickly at the first sign of distress to preserve value, pursue litigation or re‑set terms. This often leaves boards with limited room to maneuver once a tipping point is reached. With normalizing interest rates and heightened economic uncertainty, debt stress has taken on a structural nature, and corporate stability now hinges as much on how an organization manages its lender relationships and capital structure as on its operating results.

Tale of two approaches

The contrasting experiences of Revlon and Avia Solutions Group illustrate the critical importance of proactive debtholder communications strategies.

Revlon faced mounting financial pressures for several years leading up to its 2022 bankruptcy filing. The cosmetics giant struggled with declining sales, increased competition and a heavy debt load of approximately $3.7 billion. Despite clear warning signs—including bond prices trading at distressed levels and credit rating downgrades—Revlon failed to establish proactive communication channels with its bondholders or develop a comprehensive crisis communications strategy.

When liquidity issues intensified in 2022, Revlon’s debt traded at deeply distressed levels, signaling severe financial distress to the market. However, the company’s communications remained largely reactive and insufficient. This communication vacuum allowed creditors to position themselves strategically without meaningful dialogue or negotiation with management.

The lack of proactive debtholder engagement left Revlon vulnerable when it ultimately filed for Chapter 11 bankruptcy in June 2022. Creditors, led by some of the most sophisticated distressed debt investors, had already positioned themselves to take control of the company’s valuable brand portfolio. The absence of early, transparent communication meant Revlon management lost the opportunity to shape the restructuring narrative or maintain stakeholder confidence during the critical pre-bankruptcy period.

In stark contrast, Avia Solutions Group’s response to recent market pressures demonstrates the value of prepared crisis communications. When the aviation services conglomerate’s 9.75% $300 million bond saw its price slide from the mid-90s to the mid-80s cents on the dollar following scrutiny of its SmartLynx Airlines Latvia transaction, the company moved quickly to regain control of the narrative.

Avia immediately characterized the negative coverage as a “smear campaign” built on “unsubstantiated and speculative accusations” and proactively scheduled a call with bondholders to address concerns directly. While controversy persisted around the €238 million in liabilities associated with the failed SmartLynx unit, Avia’s swift communications response bought valuable time and space to address business challenges from a position of greater control. This case demonstrates how prepared communications strategies can help companies weather debt market volatility and maintain stakeholder confidence during periods of heightened scrutiny.

Recognizing the warning signs

Communications teams should monitor several key indicators that could be leading indicators of increased debt-related risks:

Trading signals: Debt trading below 85 cents on the dollar, widening credit spreads compared to peers or unusual trading volumes.

Rating agency actions: Negative outlooks, downgrades or placement on credit watch by rating agencies.

Covenant metrics: Approaching or breaching financial maintenance covenants, particularly leverage or coverage ratios.

Market chatter: Increased media speculation of liquidity issues, analyst questions about liquidity, refinancing timelines or capital structure during earnings calls.

Peer contagion: Distress events at comparable companies that could trigger sector-wide scrutiny; and

Operational indicators: Delayed supplier payments, executive departures or asset sale rumors.

The key is establishing monitoring systems that detect these signals early, before they cascade into broader market concerns. Companies that wait for obvious distress signals have already lost control of the narrative.

How communicators experienced in distressed situations are fighting back

Given these evolving risks, communications professionals must expand their crisis planning to encompass debt-related scenarios. To prepare for these emerging risks, management teams should:

Develop early warning systems: Real-time monitoring of financial/operational flashpoints and activist signals. In our view, the most effective early warning system would extend visibility into the often-opaque debt markets, identifying when opportunistic or distressed investors begin building positions in a company’s debt, or when the debt trades at levels that indicate that their may be some financial stress or distress at the company.

Create debtholder-specific messaging frameworks: Traditional stakeholder communications often overlook the unique concerns and motivations of debt investors. Develop messaging that addresses liquidity, covenant compliance, collateral protection and recovery scenarios in language that resonates with sophisticated credit investors.

Establish direct creditor communication channels: Build relationships with key lenders and bondholders before a crisis strikes. Regular communication during stable periods creates trust and credibility that proves invaluable during periods of stress.

Integrate debt scenarios into crisis planning: Expand scenario planning to include debt-related triggers such as covenant breaches, rating downgrades, refinancing challenges and peer company failures. Each scenario should include pre-drafted messaging, stakeholder mapping and communication timelines.

Assemble cross-functional crisis teams: Ensure legal, finance, operations and communications teams operate as unified units with clear protocols for debt-related crises. Break down silos that can slow response times when markets are moving quickly.

Prepare for rapid response: Debt markets can move faster than traditional media cycles. Develop capabilities for same-day response to trading volatility, rating actions or negative coverage that could impact debt valuations.

The strategic imperative

For communications professionals, this represents both a challenge and an opportunity to demonstrate strategic value by protecting enterprise value through effective stakeholder communications and engagement.

Companies with debt on their balance sheets must prepare for a new reality where debt market dynamics can determine corporate fate as quickly as any operational crisis.

Developing debtholder communications strategies that can be rapidly deployed when unusual trading activity emerges in publicly traded debt, rating agencies issue downgrades or even a peer company experiences debt issues.

The winners in this environment will be those who build integrated threat detection systems, invest in early-warning capabilities and align their communications strategies with real-time risk intelligence. Companies that continue to treat debt communications as a technical funding detail rather than a core crisis risk will find themselves reacting to headlines instead of shaping them.

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Phil Denning is Partner at ICR. Lee Pacchia is Managing Director at ICR.