Borders' share price continued to drop as the troubled retailer announced that two senior executives, chief information officer D. Scott Laverty and general counsel Thomas D. Carney, resigned from the company. Borders did not offer reasons for their departure.
Borders executives, including CEO Mike Edwards, are meeting with publishers in New York this week in hopes getting publishers to sign off on a plan to refinance its debt. Borders’ announcement over the holiday weekend that it planned to suspend payments to publishers has prompted at least one major house and the distributor, the National Book Network, to suspend book shipments to Borders at a time when the retailer is looking for new financing for its debt.
Although Borders is presenting publishers a new plan to refinance its debt, Borders’ spokesperson Mary Davis declined to comment on the suspension of book shipments and emphasized that the retailer remains solvent and that its stores are fully stocked. As PW reported yesterday, the retail chain has located a new bank willing to finance its debt if publishers and Borders management will accept several demands.
According to a source, the bank is demanding that Bennett LeBow, Borders’ largest shareholder, make a larger financial commitment to the company’s debt payments and the bank also wants publishers to accept a note/bond for the missed payments. But some observers have raised questions about the latter demand. If publishers are, in effect, giving Borders more attractive terms—i.e. a much longer time before having to make a payment—is this an unfair advantage over other retail chains as well as independent bookstores who are also struggling in the current economic climate? If Borders is given a longer payment term, will other retailers demand the same treatment from publishers?
Right now, in the face of Borders’ suspending payments, publishers don’t have much choice but to accept the bank’s terms. Although the American Booksellers Association declined to respond, it appears that some retailers are concerned about these questions. After initially declining to comment, Barnes & Noble returned with a statement of concern about Borders receiving "special terms."
"We think the playing field should be even," the B&N statement says. "We expect publishers to offer same terms to all other booksellers, including Barnes & Noble and independent booksellers. We fully expect publisher’s will require Borders to pay their bills on the same basis upon which all other booksellers pay theirs. Any changes in publishers terms should be made available to all."
