Borders Bankruptcy: Popular Bookstore Group to File
Borders Group is expected to file bankruptcy early this week following declining annual revenues, increasing rent obligations, and the surge in popularity of e-books.
Borders, which is based in Ann Arbor, Michigan, is the third largest bookseller in the country. According to the Wall Street Journal, Borders is turning to Chapter 11 bankruptcy protection after failing to get publishers to agree to a plan that would have restructured a debt that currently totals over $500 million.
The company released a statement on Jan. 27 saying it received a conditional refinancing commitment from GE Capital for $550 million, but the agreement required approval by Borders creditors.
Filing bankruptcy will result in a loss of nearly 20,000 jobs and the closing of approximately one third of the remaining 674 Borders and Waldenbooks stores. In 2009 the group closed 204 stores in an effort to reduce their debt.
Declining revenues is one of the main components to Borders pending bankruptcy. Third quarter sales in 2010 reached $470.9 million a 17.6 percent decrease from 2009. The companys operating losses reached $74.4 million, nearly twice as much as the previous year.
Borders was also slow to catch up in selling digital media. Amazon leads the way in selling e-books for the Kindle and Apple I-Pads. Discounted prices at the online store have made it hard for store retailers to keep up.