Many are shocked to discover that the second-largest bookstore chain in the country, Borders Group, has filed for bankruptcy and some stores across the country are already closing. This includes the favorite location in downtown Chicago on Michigan Avenue.
Junior to the biggest bookstore chain Barnes and Noble, it has been difficult to keep up with this larger rival as well as the growth of digital media and electronic books. Book-lovers are saddened at this news and their contributing factors, but to some it comes at no surprise. The company was facing financial trouble as of December 2010. According to the US Bankrupcty Court in Manhattan, Borders faced liabilities of $1.25 billion as well as assets of $1.28 billion just this past Christmas.
“[Borders] 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,” Borders Group President Mike Edwards has said in a statement.
Their plan is to file for a Chapter 11 protection bankruptcy after a sales decline and the debt they were facing. This took effect around December of 2010 with all the book shipments from publishing houses and Borders, unable to pay for them at the time, instead issued “I.O.Us” in which the publishers hesitantly accepted. Now, of course, the company is paying for it the hard way. According to court reports, Borders owed quite a bit to its major publishers: $41.2 million to Pearson PLC’s Penguin, $36.9 million to Hachette Book Group USA, and $33.8 million to CBS’s Simon & Schuster.
As far as the stores go, it is in this plan to close about 275 stores, which is around 30%. The company has about 650 including the smaller group Waldenbooks. Borders will still continue to have most stores open and generate business as normal as possible, including rewards program and giftcards.
According to the New York Times, both Borders and publishing houses are hopeful that the bankruptcy filing would give the company a chance to get back up on its feet.