Experts are ready to tackle coming bankruptcies

Though economic woes in the US have led such well-known companies as Bennigan's, Mrs. Fields, and Mervyns to file for bankruptcy, financial PR experts say that they are not currently dealing with more bankruptcy-related clients than usual.

Though economic woes in the US have led such well-known companies as Bennigan's, Mrs. Fields, and Mervyns to file for bankruptcy, financial PR experts say that they are not currently dealing with more bankruptcy-related clients than usual.

Brunswick Group director Jennifer Lowney says that, in her agency's recent discussions with financial consultants, the number of bankruptcies appears to be lower than expected. This is partially due to the difficulty of filing for Chapter 11, which temporarily freezes an organization's debt obligations while a court supervises a restructuring.

“Bankruptcy is never an attractive option for a company, no matter what they may say,” Lowney says. “It's difficult, it's expensive, and it's disruptive to operations.”

But general resistance to bankruptcies will not prevent a big wave of them from coming. Communications advisers working in certain sectors – such as retail and banking – could become quite busy over the next 12 to 18 months, says Hulus Alpay, SVP and head of the investor relations practice at Makovsky & Company.

As a result, companies would do well to reach out to the media, investors, and other audiences prior to any trouble. This allows a firm to more effectively reassure those audiences of the company's future. Even healthy organizations must plan early to counter rumors that, if they persist, can become self-fulfilling, Alpay adds.

“These key constituencies are heavily influenced by what they read,” he says. “Whether… it's on the front page of The New York Times or a blog, they assume it's real.”

The large number of information outlets makes communications more complex, notes Jason Schechter, MD for Burson-Marsteller's corporate practice. As news is more easily spread on the Internet, the audience for financial information, including bankruptcies, grows.

That wider audience means that what's happening within an organization must be expressed in more layman's terms, Lowney adds.

“Given the retail nature of a lot of the businesses… it's important to explain what a filing is,” Lowney says. “There's not a lot of consumer-level understanding of [that].”

Bankruptcies require careful, considerate employee communications as well, especially in the digital era. This ensures, among other things, that employees don't believe Internet rumors or panic unnecessarily.

But communications professionals advising companies in Chapter 11 understand that they must be careful to provide prompt, widely disseminated information on the state of a company's restructuring without constantly reminding customers of the company's financial problems, which can do lasting damage to the brand.

To this end, microsites are “a way to keep people updated without affecting your core brand,” Schechter says, because they provide a central source for financial information on a company without posting it on the main Web site.

Key points:

Communications pros expect more bankruptcies to occur and more work handling them

Advance outreach makes audiences more likely to listen when trouble strikes or rumors spread

For organizations that have filed Chapter 11, microsites provide timely information without damaging companies' brands

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