Borders

Borders set to ask court for liquidation approval

Borders Group Inc has been under bankruptcy protection since it filed in February, but now it looks as though the bookstore pioneer will have to officially close its doors. News of the possible closure has been passed through the media this entire week, but the corporation will officially ask the bankruptcy court today, Thursday, July 21 for permission to liquidate.

If the liquidation agreement were to be approved, it would provide somewhere between $250 million and $284 million which would be used to pay off as much of the debt owed to creditors as possible. Although the company would be liquidated, Borders Group Inc would retain the rights to its brand name and several leases that they hold. Those assets would then be auctioned off at a later undetermined date.

Liquidation was not the original plan for the company, but after a bidding deadline for the sale of nearly 30 store locations passed and the only possible deal fell through, the company’s hand was forced. The bookstore giant originally hoped that a private-equity firm called Najafi Cos would purchase the business for $215 million in cash and another $220 million in assumed liabilities. After the offer was announced, there was enough negative response and objection from several of the creditors with large amounts of money owed to them that the deal failed to be made.

As one of the largest business bankruptcies of the decade filled with record high filings, consumers and creditors alike await the decision of U.S. Bankruptcy Judge Martin Glenn that could close the 40-year-old business for good.

Source: Reuters, “Borders to seek court’s OK on plan to shut doors,” Nick Brown, 21 July 2011

Equity firms to buy Borders out of bankruptcy?

As the times change, so does technology. Unfortunately, in order to stay profitable, many industries need to keep up with the changes or they could be left in the dust. Such is the case for Borders Group Inc., which filed for Chapter 11 bankruptcy protection in February of this year.

The bookstore giant’s economic hardships are partly due to the gaining popularity of electronic readers such as the Kindle, by Amazon and the Nook, by Barnes and Noble. After its own failed attempt to release an e-reader and consistent poor sales, Borders closed 237 of its 642 stores in 2011 before filing for bankruptcy protection.

Reportedly, the company had been trying to reorganize its debts under Chapter 11, but after continuous losses it is now being said that the bankruptcy court will hold an auction to sell the company in effort to keep more stores from closing and to keep the business in operation.

Bloomberg reported that there are two private equity firms that are planning to make the opening bids on Borders. One firm is called Najafi Cos., which is based in Phoenix and just purchased French CD and DVD clubs from Bertelsmann AG, the biggest media company in Europe.

The other potential bidder is Gores Group LLC, a private-equity firm out of Los Angeles which is supposedly seeking at least half of Borders’s stores, Bloomberg reported.

“You have to have some strategy for buying Borders. The younger generation doesn’t walk into a bookstore to buy a book,” a Wall Street bankruptcy attorney told Bloomberg.

Regardless of who buys Borders, this might be the best option for the company, which started off as one used book store in Michigan operated by two brothers as they went through college and grad school. Selling the company could appease its creditors so that more stores do not have to be closed.

As you can see, Chapter 11 bankruptcy is much more complex than Chapter 7 bankruptcy and can bring different results for companies with the goal of keeping the business in operation while figuring out a way to pay back creditors.

Source: Bloomberg, “Najafi Said to Be Considering Buying Borders Book Stores Out of Bankruptcy,” Tiffany Kary and Lauren Coleman-Lochner.

Borders says executive bonuses necessary for Chapter 11 success

As part of our blog, we’ve been following Borders Group Inc.’s bankruptcy case. Many of you might recall that Borders Group filed for Chapter 11 bankruptcy protection in February. Borders-one of the nation’s major book retailers-has recently experienced financial difficulties when faced with steep competition from electronic readers such as the Amazon Kindle and the Barnes and Noble Nook. Borders own unsuccessful attempt to market an e-reader combined with falling retail sales caused the company to fall into a cycle of debt.

However, in the midst of their fiscal strife, Borders’ executives made the news last week for appealing to a US bankruptcy judge for permission to continue issuing themselves large annual bonuses. Borders’ representatives argued that only by maintaining competitive salaries for their top executives could they ensure that the company’s leaders will choose to remain with Borders throughout this hard time.

The bankruptcy judge agreed that bonuses for executives were indeed in the “best interests” of almost everyone who has a stake in Border’s financial solvency.

The bonus plan is result-orientated, meaning that the ability of executives to receive their bonus will depend on if they can ensure that the company streamlines its costs and creates a functional payment plan with its creditors. One of Borders’ lawyers claimed that the bonuses could total around $6 million dollars.

Critics believe that the company is not far enough along into its bankruptcy process to begin issuing financial incentives to its top executives. The scale of the bonuses could also be viewed as insensitive to the many Borders workers who have been recently laid-off as the company closed-or is in the process of closing-225 stores nationwide since February.

Source: Business Week, “Borders Bankruptcy Judge Approves Bonus Plan for Executives.” Tiffany Kary, 22 April 2011

Borders bookstore uses Chapter 11 protections to regain stability

About a month ago, our blog conveyed a report from the Wall Street Journal stating that Borders Group, Inc. was petitioning for Chapter 11 bankruptcy protection. The popular bookstore company has fallen on hard-economic times after increased competition from electronic readers such as Amazon’s Kindle and the Barnes and Noble Nook drove consumers away from traditional booksellers. After Border’s own attempt to enter the electronic market fell short of expectations, the company decided to restructure its debt under Chapter 11.

Now, an optimistic new report from the Wall Street Journal indicates that Borders Group, Inc. is hoping to leave bankruptcy protection by the end of summer 2011. After filing under Chapter 11, Border’s was able to negotiate a new payment plan with creditors, streamline its operations and cut costs while still remaining in business. The report from the Wall Street Journal signifies that the company’s efforts are paying off.

Border’s executives have scheduled a meeting with a number of creditors and publishers for early April, in which they plan to present their new and improved business plan for the future of the company. The goal is to exit Chapter 11 in time for the sales increase which normally accompanies the fall and winter holiday seasons.

The company is currently in the process of closing approximately 200 stores, several of which are located in Colorado. The President of Borders stated that, depending on landlord negotiations, as many as 75 more locations may be closing in the near future. However, even after these closures, the company will still own over 400 operating locations across the nation.

In an economic climate which has not been kind to retailers, Borders Group, Inc. may become a successful example of how companies can use the advantages offered under bankruptcy protection to pull themselves out of financial ruin.

Source: Authorlink News, “Borders Hopes to Exit Bankruptcy By Summer.” 14 March 2011.

Borders bookstore seeks Chapter 11 protection to help manage debt

Yesterday, the Wall Street Journal reported that the bookstore company Borders Group Inc. has submitted a petition for Chapter 11 bankruptcy protection. This development comes a month after the company stated it may consider restructuring its debt.

Borders released its plans to close over 200 stores nationwide, about 30 percent of the company’s locations. The Wall Street Journal did not report which Border locations will be closing, but the chain’s prevalence throughout Colorado makes it likely that some local communities will be affected.

Borders and other bookstores such as Barnes and Noble have fought to maintain profit levels as eReaders such as the Kindle have gained rapid popularity. Borders attempted to enter the new electronic market by releasing its own eReader-the Kobo-but the sales never reached the levels of success attained by Amazon’s Kindle or Barnes and Noble’s Nook.

The company’s largest creditors include Penguin Putnam Inc., Hatchette Book Group, Simon & Schuster Inc., Random House and Harper Collins Publishers. Borders also recently attempted to establish a new line of credit with General Electric Company, but the conditions of the deal proved too stringent for the struggling company.

Over the months leading up to this announcement, Borders has attempted to regain control of its debt by selling Paperchase-the company’s line of stationery-closing unproductive stores, and attempting new marketing strategies. Filing for Chapter 11 bankruptcy protection will help the company continue these efforts by allowing the remaining Border’s locations to stay in business while the chain negotiates a plan of reorganization with its current unsecured creditors. If the negotiations go well, Borders could be back on the path to financial stability in just a few months.

Source: Wall Street Journal. “Borders Files for Chapter 11 Bankruptcy Protection.” Joseph Checkler and Eric Morath, 16 February 2011.

Not So Happy New Year for Borders Books or Its Publishers

December 31, 2010, the day where people across the nation make all kinds of promises to themselves and others and have all the best intentions of keeping them. But, as most can attest to, on average New Year’s resolutions barely last through the month of January. It looks as though Borders bookstore is breaking a promise early this year.

Borders is the second largest, nationwide bookstore chains in America second only to Barnes & Noble, but Borders Group Inc. announced on Thursday, December 30, that they would not be keeping all of the payment promises they made to their publishers. The company reported that they would delay making payments to several of their publishers. A spokesperson with the company said “there can be no assurance” that the refinancing plans the company has drawn up will prove to be successful. The announcement has made stockholders, business investors and their loyal consumers wonder if filing for bankruptcy protection is somewhere in the near future.

As an alternative to bankruptcy, the company plans to negotiate with their creditors, publishers who supply the company with books prior to receiving payment for them, for a creditor workout that would restructure payment arrangements.

Many of their publishers may be willing to work with the retailer because their success could depend on the future of Borders Group Inc. Borders bookstores helped exponentially grow the interest in and success of graphic novels. If Borders stores shut down, many of those smaller publishers could also find themselves in financial trouble.

Source: BleedingCool.com “Borders Delay Payments to Publishers – Is Bankruptcy Imminent?” Rich Johnston 12/31/10