Debts and Poor Sales Help E-Books Win?
A key player in the offline bookselling industry, Borders Group Inc. (NYSE:BGP), has made today what others may call turning point for printed or at least offline book industry – filed for a repositioning relief, blaming poor sales and debts as the major culprit for its failure to save the once active company in the UK from 1998 to 2009.
In a Chapter 11 filing today at the court of New York, the same place where automotive giant General Motors (NYSE: GM) also filed for insolvency when it went through reorganization in June 2009, Borders said at least 200 underperforming stores, including two from Long Island and four from Michigan are sure to shut down in the next few weeks as it seeks restructuring relief under the bankruptcy code.
The figure is roughly 30 percent of the total number of Borders stores currently operating. However, the company added that another 75 stores are likely to add up to the list in the coming weeks.
Borders, based in Ann Arbor, Michigan was founded in 1971 by Tom and Louis Border. For five years, beginning 2004, the bookseller has been grappling with poor sales as online books have mushroomed the internet lately.
In 2010, Amazon e-book sales tripled in the first half, 207 percent higher than in 2009 according to AAP.
Borders has also been walking a tight rope with debts reaching $1.29 billion while assets remain at $1.27 billion, according to its Chapter 11 filing.
Borders owes $41.1 million to Penguin Putnam, its top creditor among 50 which are mostly publishers.
The Chapter 11 filing came three weeks after Borders received $505 million in debtor in possession financing offered by GE Capital and 2 weeks after stock market reacted on it with dramatic decrease form $.85 to $.39 per share during January 29, 20011 – February 2, 2011.
According to the company, the Chapter 11 filing will give it time to properly infuse the capital to reorganize itself to achieve long-term viability.
In a statement, Borders Group president Mike Edwards said it is “ confident that with the protection afforded under Chapter 11 and with the support of employees, publishers, suppliers and creditors and the reading public, a successful reorganization can be achieved” that will enable it to recover from the setback.
Ken Hiltz, managing partner of Southfield-based turnaround firm AlixPartners, has been appointed as Borders Group senior vice president – restructuring of the company.