Borders Buyout Or Bankruptcy

With technology advancing and pushing electronic book sales for devices like Kindle and Nook, bookstores are facing tough times ahead keeping their doors open. In February of this year, the second largest bookstore in the United States, Borders, announced it was filing for bankruptcy and closing nearly one-third of its stores. The problems began in 2008 when profits began to steadily decline each year, resulting in the loss of its competitive edge against Barnes & Noble. Further problems were created with the large amount of turnover at the corporate level, leaving the company unsteady. Borders President Mike Edward said that a Chapter 11 bankruptcy was crucial to restructure the debts if the company was to have a chance to remain in business. Edward says, “ (It) does not have the capital resources it needs to be a viable competitor.”

In April, Borders presented a debt restructuring plan to its creditors that outlined ways in which the company could operate more cost effectively. With nearly $1.29 billion in liabilities, compared to $1.28 billion in assets, the company promised creditors to emerge from bankruptcy with increased online sales and overhauled stores.  By closing less profitable stores, the company hoped to boost income through more focused efforts to compete with electronic reader devices. Not everyone was as hopeful the restructuring plan would be effective, but now that might not matter.

Borders Buyout

Borders was given until October to finalize the Chapter 11 debt restructuring plan, but they may not need it if one of the offers to buy out the company go through. The interested parties are remaining silent and Borders is on the lookout for the best offer. Borders has continued to experience loss of profits since filing for bankruptcy and has creditors nipping at their heels for a restructuring plan. The main problem in a buyout is whether all of the stores will be purchased and whether the new operator can reverse the trend in profit loss. Many are estimating that anyone purchasing Borders will face a hefty responsibility in restructuring its finances and day to day operations.