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Restructuring your business in the wake of COVID-19: Communication is key

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Written by
Senior Director, Financial Communications

Larry Markowitz

Senior Director

Written by
Andrea Mandel-Campbell

Andrea Mandel-Campbell

The COVID-19 pandemic is not only ravaging the healthcare system, but the global economy as well. Governments around the world are taking exceptional measures, from paying employee wages to easing credit conditions, in an attempt to stave off a deep economic recession or even depression.

Unfortunately, despite governments’ best efforts, most businesses will need to take measures to preserve cash, such as laying off employees on a temporary or permanent basis, deferring rent payments or seeking to negotiate extended payment terms with creditors. Some may take the more formal step of filing for protection from creditors under Canada’s Companies' Creditors Arrangement Act (CCAA), Chapter 11 of the United States Bankruptcy Code, or equivalent legislation in their home jurisdiction.

In all cases, how a business communicates through these complex and highly sensitive processes will be key to the success of its survival plan. Not only are there delicate legal, regulatory and financial considerations to navigate, but competing stakeholder interests, from creditors to shareholders and employees, that may not be aligned.

Managing that delicate balance is crucial, and carefully crafted strategic communications can make the difference in how insolvency proceedings play out.

A successful restructuring requires the support of numerous stakeholders, including:

Secured lenders

Secured lenders often have the power to shut down the borrower’s business. Therefore, the first step in any restructuring plan is to gain the confidence of secured creditors and ask for their forbearance while the debtor implements its plan. Clear and proactive communication of that plan and its progression is key to maintaining this confidence.

Unsecured lenders

Unsecured lenders are often involved in the company as shareholders or in other capacities that bring them in close contact with its daily operations. An unpaid supplier that extends credit as part of its supply agreement also falls into this category.

Ensuring that unsecured creditors know what is happening and don’t begin to panic is essential. Panic can be contagious, and can spread to employees, suppliers and customers, not to mention bankers.


Workers need to know they’ll still have a job post-restructuring. If employees quit en masse due to uncertainty about the status of their employment (see “panic” above), business continuity could be threatened. A policy of full transparency in communications with the workforce is key to employee retention, not to mention employee morale.


Suppliers, including landlords, need to be confident they will be paid going forward. If they are not kept apprised of developments in the debtor’s restructuring, they may refuse to continue providing essential goods and services.

Customers / clients

Customers want to know that they can rely on the company to continue producing the same high-quality products, and that it will honour its warranties. A lack of customer confidence can be the death knell of any business continuity plan, which is why it is crucial that customers remain informed.

Distributors / retailers

Distributors and retailers want to know the company will continue to manufacture the same products they’ve been carrying, or what lines will be available. Without proper distribution channels, the financially distressed manufacturer will not be able to get its products to market.


Some restructuring plans involve payment of creditors in shares, leading to significant dilution of existing shareholders. In order to gain the positive vote of shareholders at a special meeting called for that purpose, the company undergoing restructuring needs to convince shareholders that dilution of their holdings is ultimately in the best interests of the company. A properly crafted investor relations plan is a key component of a communications strategy in such circumstance.


Often government plays a role in a corporate restructuring—principally as regulator, but often also as lender or even shareholder. Government relations are therefore an essential component of a well-structured communications plan.

An enterprise undergoing restructuring has a careful line to walk with its legal, regulatory and financial considerations, all while maintaining the confidence of its key stakeholders and preserving its reputation. It’s not easy, and it requires planning and coordination with legal and financial counsel.

——— Andrea Mandel-Campbell is a former Senior Vice-President and Practice Lead, Capital Markets at NATIONAL Public Relations