ANN ARBOR, MI-Borders Group Inc. has asked for permission to immediately sell off assets at up to 275 of its bookstores in preparation for closing, as part of its Chapter 11 bankruptcy filing in US Bankruptcy Court in the Southern District of New York today. The Store Reduction Program of “underperforming stores,” is equivalent to about 30% of the company’s retail chain locations, according to the company.
Mike Edwards, president, said in a statement that due to decreased consumer spending on books and the company’s lack of liquidity, the company had to file for protection because the firm does not have the capital resources it needs to be a viable competitor. “This decisive action will give Borders the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganize in order to reposition itself to be a successful business for the long term,” Edwards said.
In a bankruptcy petition, the company listed its assets as $1.28 billion, and debts as $1.29 billion. GE Capital has provided the firm with $505 million in Debtor-in-Possession financing to keep remaining stores open, Edward said. Employees will still get paid and the Borders Rewards program and gift cards will still function as usual, he said.
Borders has determined that closing 200 of the stores is critical to any reorganization process, as these stores lose the firm about $2 million per week. The firm also said it may close up to 75 more stores if it cannot negotiate favorable lease concessions from landlords.
It’s expected selling the closing store assets will earn the company up to $148 million. Sales of assets have already commenced.
California, Florida and Illinois have the most amount of closed stores, with other states having a handful of closures each. The closures include New York City locations at 100 Broadway and 461 Park Ave. The stores are “expected to close in the next several weeks,” but will all be closed by the end of April. The list of the store closures can be found here.
While Edwards said the company has a national brick-and-mortar presence and online capabilities, he did not explain the plan to compete with customers’ changing preference for digital readers, tablets and increased access to multimedia entertainment.
The company said it has 639 stores throughout the United States, under the Borders, Waldenbooks, Borders Express and Borders Outlet names. There are three more stores in Puerto Rico.
Investors own about 72 million shares of common stock, which were trading at about 23 cents per share as of 2 p.m. Kmart purchased the family-started firm in 1992, but spun off the company with its Waldenbooks chain in 1995 for $14.50 per share. The company’s stock price got close to $40 per share in July 1998 before it started its long slide.
The largest holder, Pershing Square Capital Management LP, owns 31.3% of the publicly traded equity interests of Borders Group Inc. Creditors are primarily book publishers.
By Robert Carr, Globe St.
