Bankruptcy Emergence Communication
May 8, 2010
Senior Managing Director, Strategic Communications
As market conditions have improved over the past 18 months, an increasing number of companies are successfully navigating their way through Chapter 11 and emerging as a restructured company. In 2010, more than 300 companies emerged as reorganized entities, up from 211 companies in 2009 and 151 in 2008.
Certainly, companies entering into a bankruptcy or out-of-court restructuring face complex challenges, with a myriad of communications implications, irrespective of whether reorganization or an ownership change is the ultimate objective. Moreover, for those companies attempting to implement a reorganization, the challenges remain huge – and the communications issues complex – even after emergence from Chapter 11.
Many companies re-jigger reporting structures after a bankruptcy because a different structure makes sense for the leaner organization ...
During a bankruptcy, of course, each of a company’s stakeholders – investors, employees, business partners and, in some cases, even customers – are faced with uncertainty and challenges while the company restructures. Some stakeholders – equity investors, for instance – usually take the biggest hit of all. Not surprisingly, then, upon emergence, these stakeholders often scrutinize each new development to determine whether management and the board have truly embarked on the right path now that the company’s balance sheet and corporate strategy are in better order.
In the weeks and months following successful emergence, stakeholders look for greater guidance and reassurance about a company’s performance and direction as they will only have a few of the familiar signposts to guide them. Comparative financials are difficult and not necessarily helpful depending on the structure of the new entity, management teams may have changed during the restructuring and the employee base may have been reconstituted. Maintaining the support of all stakeholder groups following emergence can therefore be a tricky and complex task that calls for a specific communications strategy. The following offers several considerations to help guide companies and their advisors in using communications to manage the expectations of debt holders, equity holders, customers, employees and other stakeholders, and to create a “runway” for success post-emergence.