As someone who handles bankruptcy cases frequently, you know the ins and outs. You know the legal implications of different types of bankruptcies and restructuring. But what about your client? Does your client understand how it will be perceived and the nuances of explaining the Chapter 11 process to employees, customers, vendors, and investors?
For many people, the term “bankruptcy” conjures up negative images of boarded-up buildings, foreclosure signs, and Mr. Monopoly with his pockets turned out. That’s usually inaccurate. Nonetheless, you must deal with that misperception by reassuring, persuading, and informing your client’s audiences. Your communications must clearly and simply explain what Chapter 11 means, dispel common fears, and establish credibility.
Bankruptcy communications must be strategic. They must guide your client in who must be informed, what needs to be said, the forums in which to make announcements and disclosures, and when is the optimal timing.
Timing is critical.
Whenever a company closes a retail outlet or factory or lays off a few people, the rumor mill kicks in. So does speculation. Is what happened at one location a harbinger of major financial difficulties and massive layoffs down the road?
Most often, the first word comes when a company makes a filing in U.S. Bankruptcy Court and simultaneously announces it publicly. Sometimes, it’s beneficial to have the prospect aired publicly before filing (such as Sears). Pacific Gas & Electric, facing billions of dollars in potential liability as a result of Northern California wildfires, was required to give a 15-day notice of intent to employees under a new state law.
Regardless of when the communications occur, they must be carefully orchestrated, must set the tone, and must reassure.
Negative financial news can set off rumblings in the rumor mill. Your client’s employees, customers, vendors, and investors will wonder: “How does this affect me?” If they aren’t reassured quickly and clearly, it can create a crisis of confidence that undermines the business.
Crafting and tailoring these communications depends on who the target audience is. While each group has its own interests, the underlying message must be the same. Otherwise, you risk undermining trust and credibility.
Your communications need to address the individual’s interests. Employees will wonder if they’ll still have a job and will start sending out resumes. Customers will wonder if the company will shutter its doors à la Sears and will begin to shop elsewhere. Vendors will wonder if they’re going to be paid for their products and services.
Our brains are always scanning for how the information being given to us is relevant to us. You must soothe nerves by letting people know what to expect and anticipating questions that you know will be raised.
How much information should you share? Get to the bottom line, quickly. Don’t get lost in the weeds or get bogged down with excessive details. Otherwise, you run the risk of confusing and overwhelming the listener.
Your communications must focus on the future: Show how Chapter 11 will result in a stronger company. Explain how the process benefits each target audience.
In Chapter 11, your communications are external and internal.
The most obvious is a news release announcing the filing. This will reach the public and hence your customers. But it’s just the beginning.
A solid strategic communications plan also provides packets of information that must be shared with employees, vendors, and others who are critical to keeping your client’s business operating: Letters from management, Q&As, Chapter 11 terms and definitions, sequence of events, and talking points for hotlines.
The simpler and less scary you make the process seem, the more reassured your stakeholders will be.
Eden Gillott, president of Gillott Communications and a former business professor, resolves issues both in and outside the media’s glare — from celebrity scandals and corporate fraud to criminal and civil litigation. Educated at Harvard and NYU, she’s co-authored A Lawyer’s Guide to Crisis PR (Second Edition) and A Board Member’s Guide to Crisis PR. She’s been featured in and written for the Wall Street Journal, the Washington Post, Los Angeles Times, NPR, Financial Times, Bloomberg Law, Law360, California Lawyer, Verdict, Attorney at Law Magazine, and The Bankruptcy Strategist (an ALM publication).
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