Although our blog mainly focuses on the benefits of Chapter 7 and Chapter 13 bankruptcy protection, today we are going to discuss Borders Group Inc. and the bookseller’s decision to file for Chapter 11 bankruptcy protection. After several attempts to save the business from filing bankruptcy, Borders announced their decision today to file Chapter 11 in the U.S. Bankruptcy Court in Manhattan.
The president of Borders Group said, “It has become increasingly clear that in light of the environment of curtailed customer spending…and the company’s lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor.” By filing Chapter 11, the bookseller will be able to focus on reorganizing operations and finding ways to access new capital. Part of the reorganization includes closing about 30 percent of the company’s stores nationwide. In total, 16 Borders stores are expected to be shut down in Florida in the next several weeks.
Borders is the second-largest bookseller in the U.S., but has had to compete against Internet-only retailers for years. Companies like Amazon.com Inc and digital readers have shifted the focus of consumers to e-books and purchasing used books online for a much cheaper price. The company began to accumulate debt as Borders struggled to compete with online retailers. In efforts to fight the growing debt, the bookseller sold its Paperchase line of stationary for $31.2 million. The company also attempted to work out a deal with GE Capital that would give the company a $550 million secured line of credit. However, Borders could not meet the required benchmarks in order to obtain the credit.
Borders began in 1971 as a local used book store in Ann Arbor, Michigan. Since then the company has expanded to 644 stores in the U.S. However, the company made some crucial mistakes along the way that affected their access to online consumers. As of Dec. 25, Borders assets were listed at $1.28 billion and liabilities were listed at $1.29 billion.
Individuals are not the only ones pursuing bankruptcy protection. More companies are finding it difficult to compete in today’s economy as debtcontinues to increase. Individuals and companies may fear bankruptcy and what it implies, but many are finding that bankruptcy offers certain benefits they never knew about. Florida bankruptcy attorneys discuss the concerns and questions clients have about bankruptcy so that each client can make a sound and informed decision about filing for bankruptcy protection or not.
The Florida Times-Union: “Borders files for bankruptcy protection, Jacksonville store to close,” Kevin Turner, 16 Feb. 2011
The Wall Street Journal: “Borders Files for Chapter 11 Bankruptcy Protection,” Joseph Checkler, Eric Morath and Jeffrey A. Trachtenberg, 16 Feb. 2011