NEW YORK—Bookstore chain Borders Group Inc. announced that it would file for Chapter 11 bankruptcy protection on Wednesday morning and plans to close almost a third of its store locations in the United States
The No. 2 bookstore behind Barnes & Noble Booksellers (B&N) in the U.S. market, Borders resorted to bankruptcy after capital restructuring and expense cutting failed to stem losses.
Borders faced a tough transition from print to digital books and was left in the dust facing stiff competition from both online retailer Amazon.com, whose Kindle e-reader has been wildly successful, as well as from its archrival B&N, which has experienced its own success with the Nook.
“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 and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term,” said Borders President Mike Edwards in a statement.
The company said Wednesday that it would look to close 30 percent of its stores and received $505 million in debtor-in-possession loans from a consortium of lenders including GE Capital.
“This financing should enable Borders to meet its obligations going forward so that our stores continue to be competitive for customers in terms of goods, services, and the shopping experience,” Edwards said.
In a Chapter 11 filing with the U.S. Bankruptcy Court in Manhattan on Wednesday, Borders listed assets of $1.28 billion and debt of $1.29 billion. The largest unsecured creditor listed by the company was book publisher Penguin Putnam, with $41 million in unpaid claims. The company’s biggest shareholder of record was Pershing Square Capital Management LP, a hedge fund.
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