What's on the Other Side? Restructuring Communications During a Global Health Crisis

There’s no question that these are difficult and uncertain times.

Corporate leaders around the world are confronted with numerous challenges caused by COVID-19 – how best to operate, protect their employees, maintain supplier and customer relationships, and ensure the long-term viability of their companies, to name a few.

The dramatic economic downturn now has many companies considering a financial restructuring, whether through a court-supervised process or another means. “Bankruptcy” or “restructuring” can be dreaded words for employees, customers, shareholders and other stakeholders even in normal times. These words take on added weight and can be misinterpreted as “going out of business” during a global pandemic when there is no shortage of distressing news.

But for many companies, a restructuring is the best path forward, effectively unshackling the company from meaningful debt so it will emerge stronger and nimbler, while enabling it to continue to operate through the process. Communications can and should play a critical role in delivering that message, particularly in the current environment, thereby motivating employees to continue doing their jobs, ensuring customers are confident that there still will be products and services to buy, and giving suppliers clarity as to how they’ll be paid.

But, how best to explain the long-term viability of a company in the midst of a health crisis that has clouded the future of so many aspects of our economy and society?

The reality is a number of companies today are currently operating in a zero, or near zero, revenue environment, and revenue may not be returning for some time given the uncertainty about the timing and extent of our economy’s reopening and impact the virus will have on consumers’ spending habits. The outlook in the oil and gas market is so bleak that last month futures prices for a barrel of West Texas Intermediate crude oil entered negative territory for the first time in history.

In this setting, communications for distressed companies can be daunting. Here are the principles that should guide communications for a company pursuing a financial restructuring:

  • Spell it out. Explain the underlying strength of your strategic plan and how your company’s opportunity set will change by way of this process. For example, with lower interest payments, the company will have more opportunity to invest in R&D or geographic expansion. With a right-sized organization, the company can work more efficiently. Or, with a stronger balance sheet, the company will have greater access to capital to take advantage of bolt-on opportunities. Each company’s story will be different, so outline how you expect your business to perform after completing the restructuring and under a variety of recovery scenarios. And, as you move forward, update your stakeholders about progress you are making against your strategic plan.
  • Think long-term. Often companies focus on communicating what they are doing to fix the immediate and medium-term issues, such as the upcoming interest payment or the next borrowing base redetermination. But employees and other stakeholders want to know what goal the company is working towards. Communications should address the immediate issues but pivot to focus on the long-term opportunity as well. In other words, explain what lies ahead and how the restructuring will enable you to get there.
  • Change the narrative. Companies in the retail and energy sectors in particular can fall victim to a narrative that industry change is leaving certain companies behind or challenging an entire sector. When that happens, the “foregone conclusion” painted by the prevailing narrative can become a self-fulfilling prophecy. Companies in those sectors must work hard to define their own unique stories, highlight their strengths and avoid being grouped in with others.
  • Add a personal touch. Communications during financial uncertainty may require an unusual level or type of communications that is outside the company’s traditional cadence or practice. Many stakeholders, including employees whose jobs may be impacted by a restructuring, will appreciate extra hand-holding as they contemplate the question “Am I going to be ok?”. Increase the volume of outreach to customers and vendors and reinforce relationships. Look for opportunities to tout a new product launch or a customer win or an expansion to demonstrate that despite the temporary financial uncertainty, the business is still moving forward.
  • Sweat the details. When it’s time for the restructuring announcement, carefully planning the logistics can be critical to ensuring your message reaches its intended audiences. Think creatively to ensure key stakeholders hear from the company first, which might mean hosting meetings at multiple times to reach employees across time zones or shift schedules, and using a range of tactics including webcasts, calls, text messages and video to contact hard-to-reach stakeholders.

Crisis reveals leadership, and leaders communicate to engage and motivate action among their stakeholders and to affect the outcomes they desire. Companies in distress shouldn’t shy away from communications. Rather, they should be forthright about their situations and how restructuring will help them overcome their challenges and emerge on the other side better positioned to grow and succeed.

Communications, done well, can be a highly effective tool in enabling success, especially in light of an otherwise cloudy future.

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