Borders Bankruptcy Affects Boston Consumers
Down the street from the Boston Bankruptcy Court is the giant Borders Books bookstore at the historical intersection of Washington Street and School Street. This is two blocks from our Boston bankruptcy law office. Borders Group, filed for bankruptcy protection in New York, and will be liquidated shortly. However, there is a large effect for consumers here in Boston. A Boston bankruptcy lawyer‘s perspective:
The Borders Chapter 11 bankruptcy case was filed on February 16, 2011. At the time there were 17,500 employees. Borders started in 1971 as a used bookstore in Ann Arbor, Michigan, by two brothers, Tom and Louis Borders. It is still based there. In 1992, they sold their growing company to Kmart, which packaged it with Waldenbooks and sold it off in 1995.
According to the Bankruptcy Court filings, the Borders Group listed debts of $1.29 billion. Sales are lower and lower and, without textbook sales, the Borders numbers look bad. And textbooks are moving towards multiple online venders. Of the 642 stores nationwide, 200 have already been closed, with eight stores of 23 stores closed in Massachusetts; the stores in Braintree and Shrewsbury closed in May, 2011. Experts claim that Borders failed to keep up with technology changes in the industry and lost significant market share, resulting in the bankruptcy. Also a factor may be the 2001 sale to Amazon of their internet operations. It is hard to imagine, now, how any retail business such as a bookstore could survive on a large scale absent an internet presence.
Bids by Najafi for Borders were insufficient, and were rejected by the Borders creditors’ committee. Bidders have until July 18, 2011. There were signs that the Boston company Gordon Brothers will be making a bid for the assets of Borders, however, a local issue is what will happen to the 40,000 square foot store? The owner of the Washington Street building, Clarendon Group USA, Inc., will have to find another tenant. Clarendon bought the building in 2006, before the economic downturn, however, Borders had been there since 2000. The lease to Borders is up next January, however, the market for such showcase space is not clear.
At the outset of the Chapter 11 case, Borders secured with a $505 million loan from GE Capital. This was called a debtor in possession financing, and was approved by the bankruptcy court to allow the debtor, Borders, to remain in possession of their stores and inventory, in an attempt to reorganize.
The next scheduled hearing in Bankruptcy Court is July 21, 2011. The motions on that day, as presently listed by the Court Docket, are for terminating lease agreements, sales of mortgage notes, amending the agreement regarding payment to creditors, and the sale of various leases. Boston readers should consider a trip to the Washington Street Borders before the case is wrapped up, the assets sold, and the lease turned over to another entity. There may even be a few books on personal bankruptcy worth purchasing.
There is only one main bookstore chain left in Massachusetts, Barnes & Noble. Located in the Prudential Center, the megastore may or may not thrive as a result of the loss of their competitor.