Citing a lack of capital and a desire to "reposition itself successfully for the long term," Borders Group has filed for reorganization under Chapter 11 bankruptcy code in federal court in New York.
The company plans a significant number of store closings, "equivalent to approximately 30% of the company's national store network"--about 200 of its 639 stores, which include about 500 superstores and 139 smaller stores. The store closings will take place "in the next several weeks" and are, Borders said, "a reflection of economic conditions, cost structures and viability of locations, among other factors, and not on the dedication and productivity of the workforce in these stores."
Borders listed total debt of $1.293 billion and assets of $1.275 billion. The top five unsecured creditors and their debt are Penguin, $41.1 million; Hachette, $36.9 million; Simon & Schuster, $33.8 million; Random House, $33.5 million; and HarperCollins, $25.8 million. Among distributors and wholesalers, Perseus is owed $7.8 million; Source Interlink, $6.9 million; Diamond Comic Distributors, $3.9 million; and National Book Network, $2 million.
For financing, Borders is relying on $505 million in debtor-in-possession financing from GE Capital, which, the company said, "should enable Borders to meet its obligations going forward so that our stores continue to be competitive for customers in terms of goods, services and the shopping experience."
Borders emphasized that its remaining 465 or so stores and borders.com continue to remain open for business and that Borders Rewards, gift cards and other customer programs are still being honored. Although many thousands of its 19,500 employees will be let go, the company said that it "expects to make employee payroll and continue its benefits programs for its employees."
Borders stock ceased trading on the New York Stock Exchange at the end of the day yesterday. Borders's shares closed at 23 cents a share, near their all-time low.
Borders has created bordersreorganization.com, which will include filings and other information. In a letter to vendors on the site, the company said that it will pay in full and under normal terms all bills and invoices for products and services provided after the filing. As for pre-bankrutpcy debts, "We cannot make the related payment without specific authorization from the Bankruptcy Court."
Since the company stopped paying many publishers' bills as of last December, Borders had continued to buy and stock new books but was following procedures familiar to retailers on credit hold, people with knowledge of the matter have told Shelf Awareness. The struggling retailer has been using wholesalers, buying books shortly before publication, and paying the usual 30-day wholesaler terms. Many national accounts managers have been working with Borders through wholesalers on book buys.
Borders Group president Mike Edwards emphasized that in reorganizing, the company aims to implement "the appropriate business strategy designed to reposition Borders to be a potentially vibrant, national retailer of books and other products.... We are confident that, with the protection afforded under Chapter 11 and with the support of employees, publishers, suppliers and creditors, and the reading public, a successful reorganization can be achieved enabling Borders to emerge from the process as a stronger and more vibrant book seller."--John Mutter