DETROIT — Borders Group Inc. filed for Chapter 11 bankruptcy protection Wednesday after five years of turnaround efforts failed to return the Ann Arbor, Mich.-based bookseller to health.
The nation’s second-largest bookseller said it would
close 30 percent of its stores, or about 200, in the coming weeks. In
addition, Borders said in its bankruptcy filing that it may close an additional 75 to 136 stores on top of the 194 announced Wednesday. The six in Colorado include stores in Littleton, Aurora, Boulder, Greeley, Dillon and Grand Junction.
It received $505 million in debtor-in-possession financing, led by GE Capital, Borders said in the filing in the U.S. Bankruptcy Court for the Southern District of New York. That was the same court that handled the fast-track bankruptcies for General Motors and Chrysler.
Borders listed $1.27 billion in assets and $1.29 billion
in liabilities in its Chapter 11 filing. It has fewer than 50
creditors, mostly publishers. The top creditor is Penguin Putnam, which
is owed $41.1 million.
It also said it appointed Ken Hiltz of Southfield, Mich.-based turnaround firm AlixPartners as senior vice president in charge of restructuring.
“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,” said Mike Edwards, Borders Group president, in a statement.
Borders ended its bankruptcy avoidance effort with round-the-clock efforts to work out survival deals with lenders and vendors.
The filing, rumored for weeks, comes just three weeks after a $550 million financing commitment with GE Capital was announced.
The restructuring could release the company from its
brick-and-mortar shackles as it closes underperforming stores and sheds
leases, said Ken Dalto, a Farmington Hills, Mich.-based turnaround expert.
“They could be merged or bought by Barnes & Noble out of bankruptcy to create one super bookseller in the United States,” he said.
But Dalto said Borders would need to move quickly through bankruptcy to avoid tarnishing the brand to the point that it isn’t viable.
“It won’t move as fast as GM. They had more
pre-planning and the government to move the pieces for them,” he said.
“They have to reduce a lot of costs quickly. They have to put all those
creditors on hold. It is a big undertaking.”
Christopher Wensley, 23, a Wayne State University student who shops weekly at the Borders store in Canton, Mich., said he’s worried the company would close his store even though it is newer. And that would leave a void for him.
“I think that with Borders
it provides an experience for the vast majority of us that we wouldn’t
otherwise have,” he said. “You may have this whole new generation who
can’t experience a bookstore.”
Wensley said that many of his friends have already ditched traditional books in favor of digital books on e-readers.
“There are still a lot of us when we think of
reading a book, we think of an actual book. When you pick up a book you
enter into a completely different world,” Wensley said. “It is
something that you can’t replicate with anything else. It is such an
intimate thing. It is you, the book, the story and the characters.”
Shoppers at the flagship Borders store in downtown Ann Arbor were surprised Wednesday and even tried to help out the troubled bookstore chain a little.
Leah Leblanc, 29, of Ann Arbor was sad to hear that the Borders Group filed for bankruptcy.
“I don’t ever buy books online,” said the nanny, who
was shopping for a “Ranger’s Apprentice” book at the flagship store. “I
like the atmosphere here of the bookstore, the ambiance of it.”
Sean Houchins, a 20-year-old University of Michigan sophomore from Salt Lake City who bought a teddy bear for his girlfriend’s birthday, wasn’t shocked by the news.
“I’m not completely surprised,” said the former Barnes & Noble
clerk. “It’s the natural outcome of what’s happening in the industry. A
lot has to do with e-books. … Amazon sells for cheaper.”
University of Michigan lecturer Montatip Krishnamra was
moved by the bankruptcy filing to do her part to help the ailing
bookseller. She took her Thai language class to Borders on Wednesday morning to buy coffee.
“Normally, we go to Starbucks,” said the 61-year-old Ann Arbor resident. “Today, we said, ‘Let’s go support Borders.’ … It’s a good store. I’m sorry to see them go. I hope this one doesn’t close.”
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