All our coverage of the Borders saga, from financial struggles to hope, to the final fall...
The stories are presented in reverse chronological order.
Borders: Everything Must Go
The last of the big pieces of Borders are about to go on the auction block. At Wednesday’s hearing at U.S. Bankruptcy Court, Judge Martin Glenn approved the auction of its leases on August 31 for small-format stores and on September 13 for superstores. That’s just one day ahead of the September 14 auction for the company’s trademarks, Web site, and other intellectual property.
In a filing with the SEC today, Borders announced several management changes, including the termination of company president Mike Edwards and executive v-p and CFO Scott Henry late last week.
Because of the company's shaky finances, most publishers began transitioning sales to other outlets long before Borders' bankruptcy filing. Even so, the crippled chain moved a lot of books; it was the nation's #3 bookseller, with 14% of the market last year, according to Bowker.
It might seem only reasonable for independents to gloat, at least a little, now that one of their biggest competitors, Borders Book Group, which had 1,249 stores in 2003, has begun closing its remaining 399 stores. But the response from indies to Borders's demise has been muted by the potential impact on the overall health of the bookselling business and the readers it serves.
In the end, Borders went the way of other large retailers like Circuit City and Linens ‘n Things. At Thursday’s hearing, Judge Martin Glenn said that he will enter the sales order for Borders’s liquidation and going-out-of-business sales starting Friday.
Borders is adding up the losses, and a few profits, for its last monthly operating report to be submitted before the liquidation of its bookstores begins.
Prior to tomorrow’s hearing at which Judge Martin Glenn will rule on Borders’s impending liquidation set to start on Friday, the chain is trying to lay to rest the nearly 90 objections that have been filed, including ones from Kobo.
As much as independent booksellers may have wished that Borders had gotten swallowed up back in the 1990s when it put so many stores out of business and was well on its way to becoming a 1,249-store behemoth, the response to its impending demise has, for the most part, been measured.
The strong show of support and appreciation continues for Borders, including this letter from Sourcebooks.
With Sunday’s deadline passed and no bids to keep Borders open as a going concern, according to reports in the Wall Street Journal, it is growing increasingly likely that the troubled retailer will begin going out of business sales as early as Friday.
Borders confirmed that it will submit the proposal from a consortium of liquidators led by Hilco and Gordon Brothers to bankruptcy court on Thursday. If approved, as expected, going-out-of-business sales will begin under a phased roll out at stores and facilities starting Friday.
With the fate of Borders Group to be decided early next week, below is a list, by store number of the current outlets, starting with the first store in Ann Arbor.
The outlook for Borders underwent a dramatic reversal late yesterday as the chain, responding to objections filed by both landlords and publishers, modified its bidding proposal to remove the offer made by Najafi Companies' BB Brands as the stalking horse bidder and replaced it with the bid by the liquidators.
Despite BB Brands dropping out as the stalking horse bidder for Borders as a going concern and a consortium of liquidators led by Hilco assuming that role, the show, or in this case the sale, must go on.
As landlords of more than a hundred Borders locations continued to pile on their objections to the compressed time frame of the retailer’s proposed sales process, Borders responded late yesterday afternoon saying the schedule is key to getting the best possible outcome.
The creditors committee has filed an objection asking the bankruptcy judge to deny Borders bid procedures motion as well as the breakup fee for BBB.
In separate filings, landlords for about 50 Borders locations raised objections to the compressed time frame for the Borders auction, scheduled to take place on July 19.
Ever since Borders Group filed for Chapter 11 in February, one of the overriding concerns of the major publishers has been that the bankruptcy process not be dragged out.
Borders’s 11th-hour amendment to its DIP facility to prevent the closing of 50 stores was approved after some hesitation at this morning’s bankruptcy hearing. Judge Martin Glenn called the million-dollar fee that Borders is paying for the extension a bitter pill. “I’ll approve it with reluctance,” he said. “I think you’re getting raped is the best way I can describe it. The other side of the coin is, it’s the only game in town. It’s very close to me saying no.”
As talks progress about the sale of most of its assets, Borders Group reported that its net loss in the May 1 to May 28 period was $35.4 million, down substantially from the $132.2 million the chain lost in April.
The future of Borders has become much clearer with a motion filed late Friday that asks the court to approve a new motion that will permit it to sell “substantially all of its assets” by July 29. If the motion is not approved, or an agreement to sell the company is not reached, Borders said it will liquidate the bookstore chain as quickly as possible.
It looks like all Borders Group stores that faced the possibility of being forced to hold closing sales next week will get more time. In a statement filed with the bankruptcy court Wednesday, the company said that it has reached an agreement in principle with its lenders and the creditors committee on an amendment that would alleviate the need to hold store closing sales at outlets where no agreement had been reached to extend lease negotiations.
As promised, Borders continues to whittle away at the number of stores it may need to close because of an inability to reach agreements to extend lease negotiations. From the original list of 51 outlets, the number of stores that face possible closure now stands at 40.
No one said Chapter 11 is cheap. The two principal advisors for the unsecured creditors committee in the Borders’ case submitted their first interim application for payment for service provided from late February through April 30. Financial advisor BDO USA is seeking $1,197,903.75 in fees plus $32,267.69 in travel and other costs. Lowenstein Sandler, general counsel to the committee, submitted a bill for $853,082.78.
Borders filed a motion Friday taking six of the 51 stores off the list of outlets that may be closed. Judge Glenn also approved the request to move up the hearing for a motion to give Borders approval to conduct store closing sales at stores where extensions have not been reached.
Events are coming to a head at Borders as the chain works to stay within the requirements of its DIP financing while juggling offers for some of its assets. On Thursday, faced with what it termed a “Hobson’s choice,” in which there is only one option, Borders filed to close up to 51 of its most profitable stores.
Borders has endured a rash of executive resignations since it filed for Chapter 11 in February and the latest to jump ship is Michele Cloutier executive v-p and chief merchandising officer.
Over the objections of the Creditors Committee, the most contentious issue since the start of the Borders bankruptcy on February 16 was resolved in Borders favor Thursday, with the retailer being given an additional 120 days beyond its original June 16 deadline to file and solicit acceptances for a Chapter 11 plan. In ruling against the committee, Judge Martin Glenn noted that he will file a decision with the order later today or tomorrow.
With a crucial hearing set for tomorrow in which judge Martin Glenn will rule on, among other things, Borders Group's motion for an extension for an exclusive period to develop its reorganization plan, the retailer's lawyers fired back at arguments made by the Creditors' Committee that Glenn should deny the request. In reply, Borders attorney Andrew Glenn said the company has pursued a dual-track process of exploring the possible sale of its assets as well as a standalone plan of reorganization as suggested by the committee. If Judge Glenn denies Borders' request for an extension, the future of the Chapter 11 process will be put in doubt.
One week after Borders Group filed a motion to extend the exclusivity period for filing and soliciting acceptances for a Chapter 11 plan, the Creditors Committee filed an objection. In it, they note that they are “gravely concerned” that an extension could be detrimental to general unsecured creditors. If granted, the extension would give the retailer an additional 120 days from the June 16 deadline to file a plan.
Borders lost more money in April than it did in March, according to statements filed with the bankruptcy court Friday.
Yesterday Borders asked Judge Martin Glenn and U.S. Bankruptcy Court for more time for its exclusive period to come up with a chapter 11 reorganization plan, without which it will be in default of its DIP Credit Agreement. The request for an additional 120 days would move the deadline from June 16 to October 14.
Borders has filed a motion to keep the details of its separation agreement from Seattle's Best Coffee under seal. According to the motion, public disclosure about the details of the deal could hurt both SBC and Borders. Borders confirmed that it will not use SBC in its going forward stores.
This morning's Creditors Committee conference call with Borders should end speculation as to the bidder for 225 bricks-and-mortar stores in the troubled chain.
Rumors of Borders selling a piece of its business are swirling this weekend just days after CEO Mike Edwards said in a letter to vendors that it had decided against selling the company, or parts of it, and was preparing to find a way to exit from Chapter 11 as a intact company.
The May 11 Borders’s hearing was a rather routine affair until lawyers for both sides approached the bench after Judge Martin Glenn asked for an update on where things stood. After returning from a brief meeting out of earshot from those listening on the phone, the judge adjourned the hearing. Speculation is that the attorneys were updating the judge on whether any bids for the company were made on Friday. Sources told PW that at least one bid was in fact made.
In less than a half hour, this morning's Borders hearing ended with the court's approval of a modified plan for both the Key Employee Incentive Plan, or KEIP, for five senior managers and 10 additional managers, and the Key Employee Retention Plan, or KERP, which covers 25 critical employees.
At Thursday’s hearing in U.S. Bankruptcy Court in N.Y., Borders’s motion for lease modifications was quickly approved by Judge Martin Glenn and has already been signed. However, the issue over bonuses remains unresolved.
In its second turnabout within a week, Borders will close its Northeast distribution center in Carlisle, Pa., but keep the warehouse in LaVergne, Tenn., open for the foreseeable future, according to the Nashville Business Journal.
Borders has decided to keep three of the 28 additional stores it said it was going to close last week open. Separately, a list of companies owed at least $100,000 has been released.
One month after Borders went into bankruptcy and got court approval to close 200 stores by the end of April, it is readying going-out-of-business sales for 28 more. They will close by the end of May. In its first-day filings, Borders reserved the option to close up to 75 more stores on top of the initial 200.
The bankruptcy court on Wednesday approved Borders's DIP motion, giving the chain at least $450 million to fund its ongoing operations. Papers filed with the court order also provided some indication of how Borders believes the downsizing of its operations will impact its spending and cost requirements through June. Also yesterday, the court approved early rejections of five more leases.
The official committee of unsecured creditors involved with Borders Group’s Chapter 11 filing was approved Thursday afternoon with representatives from Penguin, HarperCollins, Random House and Perseus Books Group appointed. Rounding out the committee are representatives from Sony Music, GGP Limited Partnership and the Simon Property Group. Next meeting for the committee is set for March 22.
At Thursday morning's hearing for Borders' bankruptcy, Chief Judge Arthur Gonzalez of U.S. District Court, Southern District of New York, gave the retailer the go ahead to liquidate 200 stores and begin going-out-of-business sales on Friday rather than hold off for the customary 21-day waiting period.
A bookseller going out of business, even a chain bookseller, is bad for the book business, according to a statement just released by the American Booksellers Association. Commenting officially on the Chapter 11 filing made by Borders today, the ABA said it is “saddened when any bookstore closes” and that the industry “does not benefit from the diminishment of places to browse, discover, and buy books.”
The list of stores Borders hopes to close compiled by Hilco, the company hired to liquidate stores targeted for closure has been released as part of the bankruptcy filing.
Downloadable PDFs of Borders bankruptcy filing and a list of store closures.
After a drawn out process that began at the end of last year when it missed payments to top publishers, Borders Group has given in to the inevitable and filed for Chapter 11 bankruptcy protection in Bankruptcy Court for the Southern District of New York.
As Borders runs out of options and prepares to file for Chapter 11 bankruptcy protection, GE Capital, which committed to providing $450 million debtor-in-financing credit, is trying to limit its exposure, according to one major publisher.
With nearly every major news organization reporting that Borders will file for bankruptcy this week, the question among publishers is becoming more and more can the chain avoid a Chapter 7 filing that would result in the liquidation of the company.
As another week comes to a close, the situation at Borders remains status quo--at least for the moment. Ingram continues to be the chain's lifeline to the publishers, continuing to ship books while few publishers are. There was no movement among publisher in accepting Borders proposal to exchange missed payments for notes, and publishers, like the rest of the industry, are waiting for the next shoe to drop.
With Bloomberg and the Wall Street Journal both reporting that Borders could file for bankruptcy next week, publishers have started speculating about why the process will take that long.
Borders announced Sunday evening that it was delaying January payments to vendors and landlords in a move to conserve cash. The action will almost certainly end any hope Borders has of winning approval from publishers of its proposal to exchange missed December payments for notes.
Borders announced Thursday evening that GE Capital has agreed to provide the company with $550 million in new financing, but the deal is subject to a number of conditions, including receiving $125 million in financing from publishers and other vendors.
Unless publishers undergo a change of heart, it appears likely that many will reject Borders’ proposal to exchange missed payments for notes. According to several sources, Borders wanted another meeting with publishers this week, but was turned down.
After a meeting between publishers and their financial advisor earlier this week, publishers were told that the Borders offer was at least worth considering.
The downsizing of Borders continued yesterday with the news that it laid off 45 employees--40 at corporate headquarters and five in its distribution centers. According to employee message boards, Borders CEO Michael Edwards is expected to make an announcement Wednesday, although a company spokesperson said nothing is scheduled.
