Borders Group preparing possible bankruptcy filing
Ann Arbor-based book store chain Borders Group Inc. is preparing a possible bankruptcy filing, according to anonymous sources cited by Bloomberg late this afternoon.
Borders employs about 550 workers at its Ann Arbor headquarters.
A Chapter 11 bankruptcy filing would give Borders a shot at reducing its costly lease footprint. Bloomberg reports that the firm's bankruptcy proposal would involve the closure of about 150 of its 500 superstores.
But bankruptcy also would probably wipe out the equity of Borders shareholders, leave unsecured creditors with next to nothing and raise the possibility of liquidation.
Borders, which employs about 550 workers at its headquarters in Ann Arbor and operates three superstores in the county, has been delaying payments to landlords, publishers and other parties in an attempt to save cash.
The company said last week that it had gotten a possible $550 million line of credit from GE Capital, but the credit is contingent upon a number of additional factors, including Borders' ability to secure financing from other sources.
A Borders spokeswoman could not be reached for comment this afternoon.
In recent interviews, restructuring experts said a bankruptcy filing could lead to any number of outcomes for Borders:
--Borders could successfully make cuts to its leases and convince lenders to accept equity in exchange for eliminating debt, finally emerging with a profitable business model.
--The firm could sell off its assets to Barnes & Noble or another player like a private equity firm with a tolerance for a restructuring effort. Under this option, Borders could use the Section 363 provision in the bankruptcy code, a provision that allows valuable assets to be packaged together so that they can be sold to an outside firm or emerge as a new company. In that scenario, the old assets would stay in bankruptcy and be liquidated. This is what happened during General Motors’ 2009 bankruptcy filing, for example.
“Even if they decide they do want to merge with Barnes and Noble, they still may want to go through a prepackaged bankruptcy to scrub out some of these leases,” University of Michigan law professor and national bankruptcy expert John Pottow said recently.
New York hedge fund manager Bill Ackman, one of Borders' largest shareholders, said recently that he would help Borders finance an acquisition of competitor Barnes & Noble in a bid to create a streamlined, single national bookseller.
--The company could be forced to convert its Chapter 11 reorganization filing into a Chapter 7 liquidation, which would involve a sale of all of its assets and the death of the company.
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
runbum03
Wed, Feb 2, 2011 : 11:09 a.m.
With 2/3s of kids leaving school illiterates, what the 'ell did you expect would happen? The Michigan Printing Association said years ago the biggest threat to their industry is illiteracy. Ditto for newspapers. How many "folk" with a pot card have you ever seen at Borders? LOL. I'm just saying . . .
mmppcc
Wed, Feb 2, 2011 : 11:36 a.m.
runbum03: Making a statement when you're ignorant to the facts is dangerous. While it might be true for you, Borders is not facing bankruptcy because people can't read. The e-book business is booming. Borders made poor choices and didn't change with the times, so stop trying to blame teachers, or schools, or the Toothfairy, because some corporate executives, once again, hurt a lot of hard-working people.
Tru2Blu76
Wed, Feb 2, 2011 : 10:58 a.m.
Re: "These borders employees probably won't be getting "feelgood" buyouts or early retirements like the public sector demands." Perfect example of prejudicial comment: when everyone knows it's private corporations getting the biggest payouts for fraud and failure. What's behind this purposeful vilification of public employees? If it's true that public employees "price themselves out of the market" with demands for a few percent above-median income, then it must also be true of business executives who take in 400X median income have priced themselves out of the market. And this has NOTHING to do with Borders. Borders: bad business decisions brought that company to this sad end. Hundreds of employees will "pay the price." Ann Arbor's economy will suffer. Those who made the bad decisions get to move on to other high income jobs because: they're given too high regard. Rewarding for failure has got to stop. It's not public or private employees who are to blame.
snapshot
Thu, Feb 3, 2011 : 3:34 a.m.
Tru2Blu, You must not be reading or listening to the news regarding public employees salaries, pensions, and benefits. You don't argue about facts, you look them up. I didn't "blame" anybody in my statement. You, however, seem to be blaming the Borders employees for the company failure. Is that prejudicial, or does that term only apply to folks who use facts rather than fiction?
15crown00
Wed, Feb 2, 2011 : 6:23 a.m.
They can't pay their bills.they have to go. I'm so very glad i don't work for them.Jobs are hard to come by.
Booradley
Wed, Feb 2, 2011 : 2:50 a.m.
Its a shame since bookstores are getting fewer and fewer. Kindle is OK for books you don't want to keep but there still is nothing like the soft pages of a good book. Besides half the fun of going to a bookstore is browsing all the shelves and finding a new treasurer to read. Call me old fashion but I still like my Borders bookstore. I'd hate to see them go.
Tom Joad
Wed, Feb 2, 2011 : 12:26 a.m.
Borders Books is a dinosaur in the Kindle/Amazon age. It had its run and Bound books will be relegated to the library bookshelf. Borders can take solace in contributing to the explosion of reading but electronic readers are the future, and they missed the boat. Browsing the Brick and Mortar store will be a thing of the past.
snapshot
Wed, Feb 2, 2011 : 1:35 a.m.
u r rite
snapshot
Wed, Feb 2, 2011 : 12:18 a.m.
And the public employees are griping about small increases in healthcare costs and complaining they haven't gotten a raise. Go figure. The failure of Borders affects more employees than the city of Ann Arbor has. These borders employees probably won't be getting "feelgood" buyouts or early retirements like the public sector demands. This should serve as an eye opener for public employees. Go talk to a Borders employee about how tough you have it on the job.
Edward R Murrow's Ghost
Wed, Feb 2, 2011 : 2:18 a.m.
"And the public employees are griping about small increases in healthcare costs and complaining they haven't gotten a raise." Really? Who, exactly, has been "griping"? Good Night and Good Luck
blahblahblah
Tue, Feb 1, 2011 : 11:37 p.m.
Very unfortunate if true. Like Pfizer before them, Borders has the distinction of being Ann Arbor's largest "private" employer.
Olan Owen Barnes
Tue, Feb 1, 2011 : 10:27 p.m.
I wish them nothing but the best as I do all local employers.