Borders Files for Bankruptcy16 Feb, 2011 By: Erik Gruenwedel
As expected, financially challenged Borders Group Inc. Feb. 16 filed for bankruptcy protection, securing $505 million in debtor-in-possession financing commitments to continue operations.
Ann Arbor, Mich.-based Borders filed the Chapter 11 motion with the U.S. Bankruptcy Court in New York, citing $100 million to $500 million in liabilities. It said it would begin shuttering upwards of 30% of its underperforming stores in the coming weeks, among other cost reductions. Borders operates 639 stores in the United States and three in Puerto Rico.
The company employs about 6,100 full-time employees and more than 11,000 part-time staffers, according to the filing.
In addition to books and periodicals, Borders has been steady retailer of packaged media, including movies and music.
“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, which are essential for it to move forward with its business strategy to reposition itself successfully for the long term,” Borders president Mike Edwards said in a statement.
Through Jan. 29, Borders recorded $2.3 billion in sales and $168.2 million in losses through Dec. 25.
The home entertainment industry emerged relatively unscathed by Borders’ bankruptcy filing with only two studios ranked among the book retailer’s top 30 creditors, according to a court filing.
20th Century Fox Home Entertainment is owed more than $6.4 million in packaged media trade, followed by Sony Pictures Home Entertainment with about $2.9 million.
The majority of Borders creditors are book publishers, including Penguin Putnam, which is owed more than $41 million.
Borders said it would seek to shutter more than 200 stores (out of 642) as quickly as possible. Failure to reach amended lease terms with select landlords could result the immediate closure of an additional 75 stores, according to a filing.
The chain said it is losing $2 million a week at underperforming stores.