Jampole Communications

The Four Stages of Bankruptcy Communications

Stage 1: Getting Into Financial Difficulties
Key audiences typically learn about a company’s financial difficulties because of reports of a bad quarter, a bond downgrading, downsizing or the loss of a key customer. After a bond downgrading, or any time a company closes a facility or a retail outlet or makes a layoff at one location, rumors will spread about store and facility closures, financial difficulties and massive layoffs. The news media will often take the rumors seriously. A company must, at the very least, tell the news media that it does not comment on rumors, but should also consider denying or discussing certain rumors.

Once any of your key audiences knows that you face difficult financial times, it is important to change how your company communicates to them, even if there is little likelihood of a Chapter 11 filing.

Stage 2: Entering Chapter 11
Once a company knows it is going to enter Chapter 11, it must consider whether to surprise employees, vendors, customers and investors with the news or publicly discuss the possibility beforehand. When a company is going to have a “prepackaged” or “pre-negotiated” reorganization plan, that is, a plan that has been pre-approved by key investors, announcing the Chapter 11 filing in advance is always advantageous. Whenever the announcement comes, the company must immediately begin a campaign to tell key audiences how it will continue to benefit them. Every communication with every target market should focus on these benefits:

•	How the company currently benefits the audience
•	Why the company’s continued operation will benefit the audience
•	What the audience can do to help the company (e.g., continue customary vendor terms).

Stage 3: Submitting the Reorganization Plan
Once the reorganization plan is submitted, the company must begin to take a low profile when talking about the plan to investors or the news media. The company can continue to make positive messages to customers, vendors and employees, but these messages should focus on organizational strengths, not the new financial plan. The idea is to keep control of the process of negotiating and approving the Chapter 11 plan by keeping it out of the news media. The one exception is when there is a battle over the plan or some group proposes an alternative plan. In these cases, the company needs to weigh its public comments very carefully.

Stage 4: Re-establishing the Company's Reputation
Once a company has undergone a financial reorganization, it must rebuild its relationship with key audiences. And it must do so in a way that appears to be frugal and sensible:

•	Communicate why the company is stronger now
•	Share news that demonstrates the company is back, or on the way back
•	Tell the communities in which the company has operations how it helps them
•	Tell employees and shareholders that the worst is over, and they will soon enjoy the fruits of growth.

No company can repair its reputation overnight. Even an amiable pre-negotiated Chapter 11 may leave a bitter taste in the mouths of many investors, customers and employees. Rebuilding credibility will take a proactive communications program that may last years.

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