Monday, 2.14: Posted on Publisher's Lunch today, the discussion is no longer will Border's file for bankruptcy, but instead, when will they?
According to the Wall Street Journal, that may happen sooner than later - and in my honest opinion, this is a sad day...not that it wasn't to be expected, with the surge in sales of e-books.
As we move forward towards all things techy and e-centric, will bookstores go by way of the newspaper and become obsolete? Most likely, yes.
What are your thoughts?
See below excerpt for more information.
When Will Borders File For Bankruptcy? As Early As Today, Or Later This Week, Reports Say
The WSJ reported Friday afternoon that Borders "could file for Chapter 11 bankruptcy protection as soon as Monday or Tuesday," but also cautioned "the filing may be delayed a few days." Whenever the bankruptcy filing takes place, it will trigger the imminent liquidation and closure of a significant portion of their store base--now predicted to cover 200 of the company's stores (with an option to close 50 more), among other restructuring efforts. That would leave a base of roughly 400 to 450 stores remaining. If it comes before the end of this month, vendors who received checks at the end of November may have to fight to keep those funds by arguing that they were "incurred in the ordinary course of business." And anyone who was paid in December will likely have to return those funds, since Bankruptcy Code indicates that "the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition."
As publishers made it clear they weren't buying what Borders was selling with respect to its meeting the conditions of the potential new line of credit with GE Capital, the retailer put its efforts more fully into obtaining debtor-in-possession bankruptcy financing. The WSJ said Borders "is hearing pitches from Bank of America Corp. and General Electric Co.'s finance arm for $450 million in financing" and is also "in talks with GA Capital LLC about converting roughly $50 million in Borders' current junior debt to bankruptcy financing and providing about $10 million in new capital. The company is also negotiating with other potential investors about a separate alternative piece of junior debt financing that would repay Borders' existing junior debt." Turnaround firm AlixPartners was also brought in to advise on the Borders' restructuring.
A follow-up report from the paper today predicts that a Borders bankruptcy "will mean fewer places for consumers to buy books, which in turn is expected to speed the pace of online and e-book sales", but it will also benefit Barnes & Noble - which has indicated multiple times it expects to pick up business from bookseller consolidation - and some independent bookstores.
Bookselling chain Red Group Retail, which owns 27 Borders stores in Australia and New Zealand and licenses the Borders name, has had to underscore "they have no links to the business overseas at all" to avoid any customer confusion, and they are set to open a new store in Sydney.
Even statements from Borders spokeswoman Mary Davis have taken on an air of resignation: "There have been constant inquiries by reporters, and stories written, regarding whether Borders is considering a Chapter 11 filing. Borders is not prepared at this time to report on the course of action it will pursue."
Unsurprisingly, the news of an imminent bankruptcy filing caused Borders' stock to plunge yet again on Friday, closing down 32% at 25 cents, and continuing to decline in today's trading. Barnes & Noble shares popped at the same time, nearing $19 a share, higher than their peak reached during last year's proxy fight with investor Ron Burkle. The WSJ's story appeared mere hours after a Bloomberg BusinessWeek profile of Pershing Square's Bill Ackman, who holds 37% of company shares, confirmed the hedge fund had lost more than $125 million of its investment in Borders. -- S.W.
WSJ