Eleven Tips on Crafting a Chapter 11 Press Release

Thom Weidlich 10.15.20


With so many companies — especially retailers — filing for bankruptcy in these troubled times, we are republishing this post we did on our subscription CrisisResponsePro service way back in 2015 (!) on writing a press release for a U.S. Chapter 11 bankruptcy (the examples are from 2015, too). For a tutorial on bankruptcy procedure and communications, click here.

Filing for bankruptcy protection is on few companies’ bucket list but if circumstances force such a move it is especially fraught because the process isn’t one a company will be familiar with (unless it’s filing a so-called Chapter 22 — declaring bankruptcy for a second time).

It’s especially important to get the press release right. Not only because you want to frame your restructuring story but because the release should be used as the basis for communicating with other important stakeholders such customers and employees. Bankruptcy can be scary for a lot of constituencies, and the communications must be handled right.

Here are 11 tips on writing the Chapter 11 press release:

1. The Headline

While not a universal approach, consider deemphasizing the actual court filing in the headline. Focus instead on the company recapitalizing, taking the latest step in its transformation plan, or selling all or parts of the business. For example:

“A&P Executes Asset Purchase Agreements to Sell Approximately 120 Stores for Approximately $600 Million”

That was the headline on the July 20 release announcing the Chapter 11 filing by supermarket company The Great Atlantic & Pacific Tea Co. (A&P’s filing was a “Chapter 22”; it previously emerged from court protection in 2012.)

2. The First Paragraph

Similarly, consider not mentioning the actual filing until the second paragraph. The lead (and perhaps the headline) should emphasize that the goal is future growth.

For example, while the Sept. 16 release by Tulsa-based oil-and-gas company Samson Resources Corp. did mention the bankruptcy filing in its first paragraph, it focused on the restructuring, noting that the company “has taken the next step in implementing its previously announced financial restructuring by beginning a voluntary, pre-arranged process under Chapter 11 of the United States Bankruptcy Code.”

3. Prearranged

As in the Samson Resources release, if the filing is a “prearranged” or “prepackaged” bankruptcy, where much or all of the negotiations with and approvals of creditors have been taken care of before going to the courthouse, that should be mentioned, including the percentage of creditors that have signed on. That will inspire confidence that the reorganization process will be swift. Here is the headline from apparel company Quiksilver Inc.’s Sept. 9 release:

“Quiksilver U.S. Launches Pre-Arranged Chapter 11 Restructuring With Support of 73% of U.S. Secured Noteholders”

Here is Samson Resources’ headline:

“Samson Resources Files Pre-Arranged Plan of Reorganization to Complete Financial Restructuring”

4. Geography, Subsidiaries

It’s important to note what regions and units are affected by the bankruptcy. For example, if only your U.S. operations are filing (not affecting your extensive European operations), that should be pointed out so as not to strike fear into your European audiences.

5. DIP Loan

There are several things you can do to ease the worries of various constituencies, in a sense hinting at how the process will go. An important one is mentioning how much so-called debtor-in-possession (DIP) financing has been set up so the company can continue operating and who the lender is (reassure about its solvency). Provide details of the DIP loan.

6. First-Day Motions

Similarly, mention that, along with the Chapter 11 filing, the company has made so-called first-day motions to allow it to continue operating by, for example, paying employee wages, honoring existing employee benefits, establishing a cash-management system, using cash collateral, and paying pre-filing bills of “critical vendors.” Some of these motions, which must be approved by the judge, will be tailored to your industry.

7. Express Optimism

The release should note that:

  • The action (filing for bankruptcy protection) was not taken likely.
  • The company hopes to exit court protection as quickly as possible.
  • The action allows for a fresh start.
  • The filing will not affect the company’s day-to-day operations.
  • The company regrets any negative consequences for customers, suppliers, employees, creditors, shareholders, and others (those other important audiences).

8. Financial v. Operational

The release should note whether the Chapter 11 filing was due to financial or operational reasons or both. If financial, the company should note that it has too much debt to continue operations under those circumstances and the burden must be restructured. If operational, future operational changes should be detailed. For example, you might mention asset sales or the number of employee layoffs or store closings envisioned.

9. Outside Influences

The reasons and context for the filing should be mentioned. For example, in its Aug. 3 release, Bristol, Virginia, coal company Alpha Natural Resources Inc. emphasized the distress the U.S. coal industry is in right now.

10. Company Quote

The release should include a quote from a company leader, preferably the CEO, on why the filing was necessary, perhaps mentioning that other actions were considered but it became clear that the in-court restructuring was the best solution.

For example, Hollywood studio Relativity Media quoted CEO Ryan Kavanaugh in its July 30 release: “Our board and management team explored a variety of options to refinance Relativity’s debt, and we ultimately determined that the protection afforded by a court-supervised reorganization process will provide additional time and structure to achieve our financial and strategic objectives.”

Here’s Samson Resources CEO Randy Limbacher: “The steps we are taking will allow our Company to maximize future opportunities and compete more effectively with significantly less debt on our balance sheet.”

11. Advisers

Finally, bankruptcy releases often mention the firms acting as the debtor’s financial and legal advisers.

We hope your company never has to file for bankruptcy protection. But if it does, keeping these tips in mind will help create a successful press release announcing the company’s tough decision.

Image Credit: Minerva Studio/Shutterstock

This is an abridged version of an article that appeared today on the CrisisResponsePro paid subscription portal. (CrisisResponsePro subscribers can access the full version by clicking here. ID and password are required.) To take advantage of all of the content, data, and collaborative resources CrisisResponsePro has to offer, contact us at info@crisisresponsepro.com.

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