Borders Bookstore announced on Sunday, January 30 that it would delay January payments to some landlords and vendors (including major publishers) for the second month in a row, causing speculation that the company may have to file for bankruptcy. According to a company statement, the payment delay “is intended to help the company maintain liquidity while it seeks to complete a refinancing or restructuring” of existing credit and obligations. Borders “understands the impact of its decision on the affected parties” and is considering restructuring in court.
Borders had announced on Thursday, January 27 that it had secured a $550 million line of credit from GE Capital, on conditions that publishers agree to turn missed payments into a loan; that other lenders are found; and that finances are renegotiated with vendors, landlords, and others on terms “satisfactory to GE Capital.” Underperforming stores will also be closed.
Publishers are wary: according to Publishers Weekly: “Before Sunday’s announcement, some publishers were willing to let Borders file for Chapter 11 and Sunday’s move will likely reinforce that conviction” but some publishers may not support a debtor in possession filing, which would require Borders to file Chapter 7 and liquidate the company. A publishing executive who did not want to be identified told Reuters, “I don’t know there is a lot of optimism on the publishers’ part that Borders and GE Capital can agree to terms that will give a renewed confidence in their ability to move forward and be a viable retailer and a financially stable one that pays their bills promptly.”
Borders share prices fell 14% to 73 cents per share on the Monday after the announcement.
See The Detroit News for more information.