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The bookseller plans to restructure its business and increase its focus on e-commerce.
The last 12 months have been a busy one with several big chain retailers and catalogers, including Blockbuster Inc., filing for bankruptcy. The latest chain to join the trend is multichannel books retailer Borders Group Inc., which plans to focus more on e-commerce as it closes nearly 200 stores.
This morning Borders, No. 194 in the Internet Retailer Top 500 Guide, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.
Borders, which in recent months has delayed payments to vendors, listed assets of $1.27 billion and total debts of $1.29 billion in its bankruptcy filing. Among its debts, Borders owes $41.1 million to Penguin Putnam Inc., $36.8 million to Hachette Book Group, $33.7 million to Simon & Schuster Inc., $33.4 million to Random House, and $25.8 million to Macmillian/MOS.
Borders generated annual web sales of $60.4 million in 2009 and year-to-date web sales of $43.3 million through the third quarter ended Oct. 30. The retailer lists Pershing Square Capital Management LP as owning 31.3% of the company’s publicly traded interest and LaBow Gamma Limited Partnership 15.4%. Borders didn’t break out specific figures in its bankruptcy filing.
Borders announced in the bankruptcy filing plans to begin closing stores—as many as 193, or about 30% of its bricks and mortar network. ”Borders plans to undertake a strategic store reduction program to facilitate reorganization and its repositioning,” the company says. “Borders has identified certain underperforming stores—equivalent to approximately 30% of the company's national store network— that are expected to close in the next several weeks.”
Borders has received commitments for $505 million in debtor-in-possession financing led by the Retail Finance and Restructuring Operations unit of GE Capital to restructure its business and focus the company more on e-commerce as it restructures.
“It has become increasingly clear that in light of the environment of curtailed customer spending, our ongoing discussions with publishers and other vendor related parties, and the company's lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term,” says group president Mike Edwards. “This financing 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. It also affords Borders the opportunity to move forward in implementing the appropriate business strategy.”
Borders has hired AP Services LLC, a New York retail liquidation services firm, to assist with the store closings. Borders also has entered into a stalking horse agreement with a group comprised of Hilco Merchant Resources, SB Capital Group, and Tiger Capital LLC for inventory liquidation. A stalking horse bid is an initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company.
Borders Chapter 11 caps a busy week of retail-related bankruptcy filings. On Monday Oriental Trading emerged from its Chapter 11 organization. In addition to Blockbuster, Appleseed’s Intermediate Holdings LLC, more commonly known as Orchard Brands, also is restructuring under bankruptcy protection.