The Two Prime Considerations for Bankruptcy PR
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By Bob Gold, Principal, Bob Gold & Associates
Due to the COVID-19 pandemic, many organizations continue to suffer across all industries and have turned to the US Federal government Coronavirus Aid, Relief and Economic Security Act (CARES Act) for financial assistance. In a Paycheck Protection Program (PPP) loan data report, the U.S. Small Business Administration documented that 4.9 million PPP loans were made to businesses and nonprofits.
Before the pandemic, businesses focused on managing healthy enterprises. Now, they face an unfamiliar and complex process, along with a parade of specialized advisors needed to get through it. If they are considering Chapter 11, they must respond to two prime considerations about how they communicate their bankruptcy situation to interested and concerned parties.
First, there are the specialized intricacies and nuances of communicating in the throes of a complex legal and financial bankruptcy process.
Even the largest of businesses facing bankruptcy turn to outside communication advisors. That’s because in-house PR teams lack specialized knowledge and risk being overwhelmed by a raft of bankruptcy demands at the expense of their normal responsibilities.
Bankruptcy communications demands detailed and lengthy interactions with legal and accounting teams and a precise understanding of what can and cannot be said publicly, how it should be said, who says it and when. Furthermore, there’s a different corps of media that specializes in bankruptcy coverage and is often more aggressive and financially astute than the average trade, local or business reporter.
In-house PR teams accustomed to cultivating good working relationships with beat reporters will find themselves in awkward positions of saying no to media they depend on regularly for coverage. When the response is “no comment” (though savvy communicators know not to use this trite phrase) it’s better for the good cop in–house team to refer reporters to the bad cop bankruptcy spokesman—and preserve relationships with beat reporters.
Second, there is the need to combat the reputation damage caused by the stigma of shame, ruin, scandal and recklessness linked to bankruptcy in the public mind. Bankruptcy courts know a company’s reputation has value, which is why they often approve the hiring of outside communications counsel to advise the business and bankruptcy team on ways to protect or rebuilt that good name.
In-house PR and outside advisors can work together on the reputation issue by informing stakeholders on the bankruptcy case progress and steps taken to ensure the company emerges as a viable enterprise.
These two key issues are more acute for small and medium sized businesses with no, limited or inexperienced internal communications teams. They face steeper odds of emerging because, as smaller businesses, the only time the public ever hears about them is when they file for Chapter 11 protection. A successful emergence will depend even more on expert advisors for the bankruptcy process and communications around it.
Large companies facing a Chapter 11 communications test usually hire select, experienced New York firms that come with stratospheric rates beyond the reach of smaller businesses. The challenge for smaller enterprises is finding advisors at realistic prices but with the experience to provide the same specialized bankruptcy counsel of the big firms.