Borders' efforts to secure bankruptcy financing are 'moving slowly'
The Borders headquarters on Phoenix Drive in Ann Arbor, where about 550 people are employed.
AnnArbor.com files
Ann Arbor-based Borders Group Inc.'s efforts to line up bankruptcy financing are "moving slowly," Reuters reported late this afternoon, citing anonymous sources.
The report indicates that Borders plans to file for bankruptcy "by the end of the month." Previous reports by the Wall Street Journal and New York Times indicated that the bankruptcy filing could occur early this week.
Borders is trying to secure $450 million in debtor-in-possession financing from GE Capital to help it keep operating while navigating the Chapter 11 bankruptcy process, Reuters reported.
University of Michigan bankruptcy law professor John Pottow told AnnArbor.com that Borders' failure to immediately line up bankruptcy financing was not cause for immediate concern. He said some companies file for Chapter 11 bankruptcy without DIP financing immediately lined up but secure it soon thereafter.
But in those cases, companies need to secure the financing within weeks to avoid a serious chance of liquidation, Pottow said.
"I would be nervous if they go into bankruptcy and a month from now they’re like, 'We’re still trying to find DIP,'" Pottow said.
"It’s par for the course for Borders," he said. "Nothing’s going exactly like they it want to go."
Pottow also cautioned that DIP financing doesn't guarantee a successful emergence from bankruptcy court. DIP lenders don't agree to provide financing unless they have secured collateral ensuring they're able to claw back much of their loan commitments. The lenders can decide that the bankrupt firm's restructuring prospects are low and decide to halt financing.
In that case, the Chapter 11 restructuring filing would probably be converted into a Chapter 7 liquidation, which would involve a sale of Borders' assets and the death of the company.
Borders is facing a cash crunch after losing its main source of lending in late 2010. The company has been delaying payments to publishers and landlords in an attempt to conserve cash.
A company spokeswoman has repeatedly declined to discuss the situation.
Borders stock (NYSE: BGP) was trading at $0.23 at the close of the market today. The company employs about 550 workers at its Ann Arbor headquarters, another 100 at three Ann Arbor area stores and 19,000 overall at more than 500 superstores and 170 small-format stores.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
Nathan Bomey
Wed, Feb 16, 2011 : 1:16 p.m.
Yes, Borders filed for Chapter 11 bankruptcy this morning. More here: <a href="http://www.annarbor.com/business-review/borders-bankruptcy-ann-arbor-books/index.php">http://www.annarbor.com/business-review/borders-bankruptcy-ann-arbor-books/index.php</a> <a href="http://annarbor.com/business-review/timeline-of-borders-groups-decline/">http://annarbor.com/business-review/timeline-of-borders-groups-decline/</a> <a href="http://annarbor.com/business-review/what-was-borders-biggest-mistake/">http://annarbor.com/business-review/what-was-borders-biggest-mistake/</a>
Cash
Wed, Feb 16, 2011 : 12:58 p.m.
Detroit News said they filed 2/16/11.
Dr. Rockso
Wed, Feb 16, 2011 : 12:25 p.m.
Management failure to recognize e-commerce - late to the table. Management failure to recognize e-books.
Vittala
Wed, Feb 16, 2011 : 4:09 a.m.
It's been all down hill since K-mart got involved... I agree with the comment about forgetting what they were good at. It seems like they were more concerned with selling calendars and trinkets then books these past couple years. Hiring a grocery store CEO didn't help matters either... honestly I think it goes back to K-mart changing the culture when they took things over.
Stephen Landes
Wed, Feb 16, 2011 : 3:49 a.m.
In my opinion Borders forgot why they were excellent and decided to chase other things that seemed to be more "up to date". At one time the people who worked at Borders were really knowledgable about their area of the store. I don't sense that any longer -- they may be good, but they are too spread out over the whole operation to be specialists. Having a specialist in an area is important for people who want to talk to someone about the literature -- find a new author, learn about what is new and really good. These are things that some online sites try to simulate with the "others who selected this book also purchased" kind of messages. The people who worked the floor in Borders were a great reason to go there to buy a book. That no longer seems to be the case. As Tom Joad wrote one might just as well go to Amazon as go to Borders.
imsteved
Wed, Feb 16, 2011 : 2:31 a.m.
They'll need more than $450 million if they're going to buy Barnes and Noble, right?
Tom Joad
Wed, Feb 16, 2011 : 1:25 a.m.
Remember back in the good old days of Borders on State St? With a nascent internet and boom in computer programming Borders had a superlative collection of books, comprehensive in all the popular languages of the time. It continued to stock an impressive array of programming books up until a few years back. The State St store is a joke. If you want anything of substance you must order it, so why not get it at Amazon for a discount? The only remaining Borders store with an excellent collection of computer books is Palo Alto, CA. You'd think in a university town like Ann Arbor it would be top notch, but it isn't . Hell, even the AA public library's programming book collection is a joke, a sad one. Good riddance, Borders. You went after the easy profit and failed big time.
Roadman
Wed, Feb 16, 2011 : 12:02 a.m.
Sadly, I predict Borders will liquidate if they are unable to get financing.