Borders Seeks Approval to Liquidate, Close Stores

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There will be no storybook ending for Borders. The 40-year-old book seller could start shuttering its 399 remaining stores as early as Friday.

The Ann Arbor, Mich.-based chain, which helped pioneer the big-box bookseller concept, is seeking court approval to sell off its assets after it failed to receive any bids that would keep it in business. The move adds Borders to the list of retailers that have failed to adapt to changing consumers' shopping habits and survive the economic downturn, including Circuit City Stores Inc., Blockbuster and Linens 'N Things.

On Thursday, Borders is expected to ask the U.S. Bankruptcy Court of the Southern District of New York at a scheduled hearing to allow it to be sold to liquidators led by Hilco Merchant Resources and Gordon Brothers Group. If the judge approves the move, liquidation sales could start as soon as Friday; the company could go out of business by the end of September.

Borders' attempt to stay in business unraveled quickly last week, after a $215 million "white knight" bid by private-equity firm Najafi Cos. dissolved under objections from creditors and lenders. They argued the chain would be worth more if it liquidated immediately.

"We were all working hard toward a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution, and turbulent economy, have brought us to where we are now," said Borders Group President Mike Edwards in a statement.

Borders liquidation could have far-reaching effects, putting thousands of people out of work at a time of high unemployment, particularly in Michigan where Borders is based. The chain, which has been shrinking in recent years, currently has 10,700 employees.

"We'll want to look closely from the jobs perspective of people in the state," said Geralyn Lasher, spokeswoman for Gov. Rick Snyder, in a statement.

The loss of Borders stores will deal a blow to malls nationwide, according to real estate sources. Borders stores average about 25,000 square feet __ about half the size of a football field __ and a liquidation could leave large empty spaces across the country.

Borders' move to close 228 stores while it reorganized in bankruptcy protection already increased the collective vacancy rate of shopping centers that contained a Borders to 9.3 percent from 4.2 percent, estimated Chris Macke, senior real estate strategist at CoStar Group, the nation's largest provider of real estate data. Macke calculated the liquidation of the rest of the chain could increase the vacancy rate on that same basis to 18.8 percent.

Additionally, Simba Information senior trade analyst Michael Norris predicts the closing could cause sales of electronic books to fall. Borders, for one, entered the electronic book market with Canada's Kobo Inc. last year. Owners of the Kobo e-reader will still be able use Kobo software to buy and read books. And Kobo officials said users of Borders e-book accounts, which began transitioning to Kobo in June, will be able to access their e-books uninterrupted.

"This industry is going to slowly figure out that a lot of e-book readers still use bookstores all the time to discover what's new before heading home to buy it for their e-reading device," he said.

Perhaps a Borders liquidation would hurt the consumer most. Tanya Ellis, 42, of Southfield, Mich., said the closings are "horrible." She said she and a friend would stop at a nearby Starbucks, then visit the Borders store in Beverly Hills, Mich., and browse for about an hour.

"So where are we going to buy books from? I just got into reading books the last two or three years, and they just keep closing all these bookstores," she said, adding that electronic readers aren't an option for her. "It takes all the fun out of it."

Justin Grant, 31, from Brooklyn, however, was less phased. Although he had just picked up a parenting book to read on his commute home Monday, he said he buys most of the 25 to 30 books he reads a year on Amazon.

"It's much easier to get them through the mail and delivered to my desk at work," he said.

It has been a long fall for Borders since Tom and Louis Borders opened their first store in 1971, selling used books in Ann Arbor. At its start, the brothers were mostly interested in offering other bookstores a system they developed for managing inventory.

But in 1973, the store moved to a larger location and shifted its focus to selling new books and expanding, helping pioneer the big-box bookstore concept along with Barnes & Noble Inc. At the time, Waldenbooks and B. Dalton mall chains, with small stores and 20,000 to 50,000 titles, were growing rapidly. The new superstores, by contrast, offered between 100,000 and 200,000 titles, as well as enticements to linger like comfortable chairs and attractive lighting.

Kmart Corp. saw the potential and acquired Borders in 1992, forming a book unit with Waldenbooks. It then spun the bookstores off as a separate company in 1995, the same year Amazon started selling books online.

Borders was slow to adapt to the changing industry and lost book, music and video sales to the Internet and other competition. Sales began to fall, leading to a revolving door of CEOs. By the time Borders' current CEO, financier Bennett LeBow, came aboard in May 2010 after investing $25 million in the company, bankruptcy was already looking like a strong possibility.

Borders filed for bankruptcy protection in February after being hurt by tough competition from online booksellers and discounters. It hoped to successfully emerge from bankruptcy protection by the fall as a smaller and more profitable company, but pressure from creditors and lenders eventually led the chain to put itself up for sale and finally, seek approval to liquidate.

At its peak, in 2003, Borders operated 1,249 Borders and Waldenbooks, but by the time it filed for bankruptcy protection in February that had fallen to 642 stores and 19,500 employees. Since then, Borders has shuttered more stores and laid off thousands.

Borders says it expects to be able to pay vendors for all expenses incurred during the bankruptcy cases.

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26 Comments

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workinggirl

Let's put blame where it belongs--to the people who go into a store to browse, write down the name and UPC code
of product, then shop on line to save a few dollars. Instead of supporting the brick and mortar stores of their communities, they send their money to warehouses with few employees in other states. How many have looked at a book at Borders, probably bent and smugged some pages, and then ordered through Amazon? Soon you will have no place to browse except on line. The social experience of getting out of the house will be gone. We will pay a lot more through higher unemployment taxes than you saved by shopping on line.

July 19 2011 at 3:52 PM Report abuse rate up rate down Reply
davidl7082

The food stamp president strikes again.

July 19 2011 at 3:33 PM Report abuse +2 rate up rate down Reply
2 replies to davidl7082's comment
LEE Resolution

another 5 or 6 percentage points and Obama will get close to FDR's unemployment records during the Great Depression.

Something for the president to shoot for.

July 19 2011 at 3:34 PM Report abuse +2 rate up rate down Reply
ddan8719

very good..he does.but its for your own good.. there new goverment for the people will amaze you.

July 19 2011 at 4:25 PM Report abuse rate up rate down Reply
LEE Resolution

you've obviously never spent much time abroad (especially in Europe), or you'd realize how silly your comments really are.

July 19 2011 at 3:32 PM Report abuse rate up rate down Reply
LEE Resolution

The economic crisis that began during Bush's final year in office (beginning with the debt ) has been quadrupled in the past 21/2 years. Unemployment has risen above 9,2 (17% in actual unemployment numbers, according to unemployment requests from state offices around the country). GDP has slowed to a trickle, and the nation endures crisis after crises under this wrecking ball president.

July 19 2011 at 3:29 PM Report abuse rate up rate down Reply
netexas121

I'll let the Tea Bagger have the last word because it has no meaning to debate.

July 19 2011 at 3:28 PM Report abuse -1 rate up rate down Reply
1 reply to netexas121's comment
LEE Resolution

and you obviously have no stomach for debate.

July 19 2011 at 3:30 PM Report abuse +1 rate up rate down Reply
1 reply to LEE Resolution's comment
LEE Resolution

of course, for an individual to have debating courage, he must be in possession of facts, not loony left talking points. BS might get you in the debating room but it won't keep you there.

July 19 2011 at 3:37 PM Report abuse +1 rate up rate down
LEE Resolution

netexas121

Gee Lee,

Why don't you take the place of one soon to be laid off Border employee and come back to discuss this issue.
*********
And herein rests the typical nonsensical and silly response from a lefty who typically cannot muster up a factual response to the most basic political/economic discourse.

July 19 2011 at 3:23 PM Report abuse rate up rate down Reply
LEE Resolution

it's sad when any business large or small, closes down (Montgomery Wars comes to mind). In this case and under the current Obama induced economic circumstances, it's frightening.

July 19 2011 at 3:14 PM Report abuse rate up rate down Reply
2 replies to LEE Resolution's comment
LEE Resolution

Montgomery Wards......as it were.

July 19 2011 at 3:14 PM Report abuse rate up rate down Reply
1 reply to LEE Resolution's comment
hattie54

Monty Wards going out of business killed America's malls.I didn't believe the article in the NY Times 25 years on how malls were closing.Go to Deadmalls.com and you'll be SHOCKED at how many have closed,esp.in Ohio,NY etc.As for the mess now,Republicans chose to have short memories and blame Obama for everything.

July 19 2011 at 3:39 PM Report abuse rate up rate down
netexas121

You are sincerly confused Lee. The ecomonic crisis we have now started under the Bush Administration.

July 19 2011 at 3:22 PM Report abuse -1 rate up rate down Reply
hattie54

The one in my town is doing well.Its in a nice center with KMart ( a nicer one ) and other stores,restaurants next to it.I hate to see it close.

July 19 2011 at 3:10 PM Report abuse rate up rate down Reply
netexas121

I feel sorry for those losing their jobs but that is the norm these days. I don't like Borders and never have.

For this company and all others I think that it is a shame you can't control your business to be successful enough to stay in business and have a healthy employee community. What this country is lacking is true solidarity. In a lot of Euro countries (at one time anyway) it was the responsibility of the company issuing the layoffs to find work for the ex-employee or continue to pay the ex-employee salary (actually % of). If we were to have this principle in the good ol' US of America then maybe businesses (CEO's and Boards) would not be so laxed in dumping several thousand people out into the street. I hope the CEO of Borders ends up under some causeway pan handling.

July 19 2011 at 3:02 PM Report abuse rate up rate down Reply
1 reply to netexas121's comment
LEE Resolution

I recently returned from Europe.

Why don't you move to Frankfurt or Metz and see if you can find work...

'This principle' as you call it, is the reason that Europe has been bogged down with no growth for decades....

July 19 2011 at 3:06 PM Report abuse +1 rate up rate down Reply
1 reply to LEE Resolution's comment
netexas121

Gee Lee,

Why don't you take the place of one soon to be laid off Border employee and come back to discuss this issue.

July 19 2011 at 3:19 PM Report abuse rate up rate down
LEE Resolution

here's what the Obama regime has to do with Borders and a lot of other businesses that are on the edge and in danger of laying off additional thousands.

For whatever reasons, Obama may not be the cause, be he sure is the tipping point. Who's to say that Borders didn't have a fighting chance of survival under even somewhat better economic conditions. Same goes for hundreds of small enterprises teetering on the edge of disaster.

Businesses cannot go month in month out (or year in, year out in this case), just hanging on. With no light at the end of the tunnel until 2012, a lot more businesses are going to become casualties.

July 19 2011 at 2:55 PM Report abuse rate up rate down Reply
1 reply to LEE Resolution's comment
netexas121

I believe your intentions are good but since the recession it has been survival of the fitest and smartest for the industry you are competing in. As the commenter below posted this all started in 2007-08-09. REALLY has nothing to do with Obama who wrong or right has only been attempting to clean up Bin Laden-Bush/Cheney mess.

July 19 2011 at 3:08 PM Report abuse -1 rate up rate down Reply
1 reply to netexas121's comment
LEE Resolution

and your 'intentions' don't make much sense. Moreover, 07 when Obama was a senator and voting against the very legislation he now proposes, thru 08 and 09, The loony and insane 110th congress had the check book, and managed it like a drunk blond on a mall shopping spree .

July 19 2011 at 3:19 PM Report abuse +1 rate up rate down