What is Chapter 11 and How Can Strategic Communications Save Your Business? 

Chapter 11 filings are on the rise, and after years of low interest rates, some iconic chains are now under significant pressure in today’s high-interest, inflationary environment – with significant ramifications for both their finances and their customers.  

But there is a lot of confusion about what Chapter 11 means—and what it doesn’t mean. If you are about go through Chapter 11, it’s extremely important that all stakeholders understand the reality, and a smart communications and crisis PR plan will make a successful restructuring much more likely. 

Retailers in particular are vulnerable to media influence and social conversation, where unmanaged stories can become self-fulfilling prophecies – consumers hear or read about a bankruptcy, and shop elsewhere due to fears of unusable gift cards, inability to return items or lost warranties (particularly for big ticket items.) Rumors of a filing alone often trigger that cycle, beginning with doomsday headlines predicting business closures and mass layoffs.  

But when done right, a Chapter 11 filing can be a fresh start, enabling businesses to right-size operations, clean up balance sheets, and position themselves for future success. Bankruptcy court provides the breathing room, but public perception can be just as important, and mismanaged communications risk derailing a business restructuring or weakening employee loyalty and customer support. In fact, effective communications are as vital as securing debtor-in-possession (DIP) financing or selecting experienced legal and financial advisors. 

MikeWorldWide has led communications in some of the most significant restructurings over the past three decades. Here are five critical elements to consider when building a restructuring communications strategy: 

1. Tell Your Own Story
   Rumors often arise once advisors are retained, leading to speculation about a company’s prospects. Once the filing is public, it’s crucial to control your narrative. Your silence lets others define your story, often to your detriment. Early in the reorganization, stakeholders will be keenly interested in your messages. Use this opportunity to establish your path forward, set benchmarks, and define stakeholders’ roles in your success. By proactively communicating, stakeholders will be more confident in your roadmap. 
2. Balance Legal and Public Opinion
   Court documents become public and will serve as a primary source of information for media and stakeholders. Collaborate with your legal team to review these documents from a public relations perspective. Slight adjustments in language can help ensure you’re represented accurately and fairly, and can influence public opinion while preserving legal integrity. 
3. Elevate Your Leadership Team
   Turnarounds take time and often involve trial and error. You will need sustained stakeholder support, and communications are critical to keeping them engaged. Highlighting your leadership’s credentials as industry experts and turnaround veterans will build confidence in your plan and team. Trust in your company’s prospects begins with trust in its leadership. 
4. Leverage Third-Party Experts
   Industry experts, analysts, academics, and even retired executives can shape the narrative about your company’s reorganization prospects. These influencers, who the media knows and relies on, can provide valuable context and build confidence in your strategy and team. Proactively engage these third parties to ensure they are well-briefed and willing to support your narrative. 
5. Prioritize Internal Communications
   Amid media coverage and legal proceedings, don’t overlook your most crucial constituency: your employees. Employees interact directly with customers, suppliers, and partners, influencing stakeholders’ perceptions. Make sure they get the facts directly from the company and know how to handle inquiries. 
6. Demonstrate “Business Better Than Usual”
   Experts often recommend a “business as usual” approach during restructuring, but we advocate for “business better than usual.” Chapter 11 allows companies to address operational challenges, improve vendor relationships, and increase cash flow. With all eyes on you, show that your shelves are fully stocked, your service is prompt, and your customers are satisfied.  

No one wants to go through Chapter 11, but well-executed communications will help manage public perception, build stakeholder confidence, and pave the way for a successful reorganization. For communications professionals, having a Chapter 11 on the resume is a rite of passage, and for anyone going through a restructuring it helps to have on your side the expertise and precision that only decades of experience can provide. Seek guidance from experienced counselors who’ve been through it, who know how to partner with your legal and financial advisors, and who have successfully helped other companies through the uncertainty. 

Leave us a message to get in touch with Carreen about how we can help navigate your restructuring journey: