Borders Files For Bankruptcy Protection, Will Close Up To 200 Stores

The signs have been there for weeks, and today, the beginning of the end of  Borders:

Borders Group, the beleaguered bookseller, filed for bankruptcy protection on Wednesday after failing to secure agreements with publishers and other vendors about reorganizing its debt.

The bookseller listed $1.29 billion in debt and $1.27 billion in assets in a filing in federal bankruptcy court in Manhattan.

“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,” Mike Edwards, Borders’ president, said in a statement.

Publishers saw the filing as an inevitable move after years of declining profits and management turnover for Borders. In a desperate effort to preserve cash, Borders abruptly stopped paying publishers at the end of December. In late January, the company said it would miss another scheduled payment to publishers and landlords, sending the company into a deeper tailspin.

(…)

Borders said that it plans to close about 30 percent of its stores — about 193 locations — over the next several weeks. The Chapter 11 court process affords debtors like Borders greater freedom to close down store locations and reject certain contracts with vendors.

Its five largest unsecured creditors were all major publishers, according to the filing, starting with Penguin Putnam, which is owed $41.1 million. Other publishers whom Borders owes payments are Hachette, Simon & Schuster, Random House, Harper Collins and Macmillan.

Whatever company emerges from bankruptcy is likely to be much different, and much smaller, than the Borders that we’ve come to know. In the long run, in fact, I don’t see how the company can survive without eventually merging with Barnes & Noble and making one last, albeit doomed, stand against the likes of Amazon and the rise of the e-book.

FILED UNDER: Economics and Business, Quick Takes
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. jwest says:

    I guess the employees of Borders didn’t figure going out of business into their plan of hiding conservative books.

    “On the right, of course, people are a lot unhappier. And they’re unhappier still since word got out that Borders employees were actually bragging about hiding copies of the anti-Kerry book, Unfit for Command. (You can see a cached Google page here. Example: “Just ‘carelessly’ hide the boxes, ‘accidentally’ drop them off pallets, ‘forget’ to stock the ones you have, and then suggest a nice Al Franken or Michael Moore book as a substitute. Borders wants those recommends, remember? . . .I don’t care if these Neanderthals in fancy suits get mad at me, they aren’t regular customers anyway. Other than ‘Left Behind’ books, they don’t read.”) “
    http://scienceblogs.com/deltoid/2004/09/freemarkets.php

  2. I seriously doubt that had very much to do with it, jwest.

  3. Dave Schuler says:

    IMO the situation is quite similar to that in the newspaper biz. First, the big conglomerates come in and wipe out the small dailies. Then the big conglomerates lose business to online, advertising revenue decreases, credit tightens up, and their business model stops working. Shazam!

    However, just as with the newspaper biz, there’s still a viable niche for small, mom and pop, bricks and mortar operations. The problems isn’t that it’s impossible to compete with with online; it’s that it’s impossible to compete with online for commodity sales.

  4. Loviatar says:

    This post and jwest comment are a major part of the reason why we coming to the end of our empire; bad stewardship by our business leaders and empty headed platitudes by the people who should be holding them accountable.

    At the least the Romans got a 1,000 years, the British got a few hundred, hell the Spanish even got about 50 years, the US we got maybe 20 years (1980 – 2000).

  5. jwest says:

    You’re probably right, Doug. The tiny percentage of conservatives who actually read couldn’t affect a book selling business.

    I remember how welcome I felt in Borders when I purchased Ann Coulter’s “Slander”. A helpful young associate found one of the few copies they had and the girl at the checkout counter rang up the sale without spitting on me.

    All in all, a pretty good shopping experience.

  6. anjin-san says:

    > I remember how welcome I felt in Borders when I purchased Ann Coulter’s “Slander”. A helpful young associate found one of the few copies they had and the girl at the checkout counter rang up the sale without spitting on me.

    Or laughing at you, as most literate folks would be inclined to do. Spitting is more of a redneck thing.

  7. Michael Reynolds says:

    The only surpise is that it took so long.

    There is no politics here. It’s a combination of rapid technological change and good old fashioned competition. Wal Mart, Target and Costco came into the market and pushed prices down on the bestsellers. At the same time Amazon arrived on the scene followed swiftly by the shift to digital.

    Dave is right that some of the Indies will prosper, but it will be tough as hell. We have probably seen our last new Barnes and.Noble superstore. the business is going digital and 5 years from now Costco and the big box stores will be out of the book biz and two thirds of sales will be online at a very low price point, maybe 3 or 4 bucks.

    While I’m prognosticating, the big six publishers will be more like the big 4 as some companies just bail out on books and others are conglomerated. It’s a revolution, baby.

  8. Trumwill says:

    In the long run, in fact, I don’t see how the company can survive without eventually merging with Barnes & Noble and making one last, albeit doomed, stand against the likes of Amazon and the rise of the e-book.

    I’ve been thinking about it since the last post on the subject, and I think that there could be room here for a sort of merger with Hastings. A cross between the two, with a large number of books but a wider selection of non-books, could be a pretty decent market-niche.

    I think the threat posed by eBooks is overstated. I believe there to be room for at least one, maybe two, chains of huge bookstores where one can get frou-frou coffee, browse a large selection, and take a physical book home with them immediately. There may not be nearly as many locations as now exist, but I think they’ll be there.

  9. Carey Harris says:

    online books are horrible for actual readers, but im glad borders is going down! support local stores!!! if you are in Santa Cruz Ca buy your books at Santa Cruz Bookstore: super-friendly and a much better selection, plus better prices!!!!!!!! i do however feel bad for all the people who will now be out of work because of stupid ceo’s bad decisions

  10. Jay Tea says:

    You’re probably right, Doug. The tiny percentage of conservatives who actually read couldn’t affect a book selling business.

    apparently jwest hasn’t seen the best-seller lists in… oh, about three decades. Otherwise, he’d might recognize such names as Beck, Coulter, Savage, Palin, Malkin, Ingraham, Hannity, O’Rourke, Sowell, O’Reilly, Limbaugh, and a few other notable conservatives whose books have essentially dominated that genre for years and years.

    (For the record, I bought Palin’s first book as a Christmas present, and my friend loved it. That and pretty much every single P. J. O’Rourke are the only ones from the above authors I’ve bought.)

    On the other hand, I hear Al Franken just sold his hundredth book. Apparently it was just the right size to level off this guy’s coffee table.

    J.
    J.

  11. jwest says:

    Jay Tea,

    There needs to be a special “snark” font invented for people to use in comments on blogs. I was being sarcastic.

  12. mantis says:

    Otherwise, he’d might recognize such names as Beck, Coulter, Savage, Palin, Malkin, Ingraham, Hannity, O’Rourke, Sowell, O’Reilly, Limbaugh, and a few other notable conservatives whose books have essentially dominated that genre for years and years.

    What genre? Jeremiads?

    On the other hand, I hear Al Franken just sold his hundredth book. Apparently it was just the right size to level off this guy’s coffee table.

    Rush Limbaugh Is a Big Fat Idiot and Other Observations – #1 on the NYT Best Seller List
    Lies and the Lying Liars Who Tell Them – #1 on the NYT Best Seller List

    You were saying?

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