Updated: Borders on the brink in the US
The bookseller Borders has today (Wed) filed for bankruptcy protection in the US. The 40-year-old company plans to close about 200 of its 642 stores over the next few weeks, all of them so-called superstores. The company also operates smaller Waldenbooks and Borders Express stores.
The Drum reported on Monday:
A year after its British counterpart closed its doors, the giant American bookstore chain is expected to file for bankruptcy protection today (Mon) or tomorrow.
The company is in the last stages of preparing a bankruptcy filing, it was reported at the weekend.
Borders helped change the way Americans buy books "but failed to keep pace with the digital transformation rocking every corner of the media landscape," said the Wall Street Journal.
The filing for Chapter 11 bankruptcy protection is expected to lead to hundreds of store closings and thousands of job losses.
Borders is said to be seeking financing agreements that would keep it operating during the Chapter 11 restructuring process.
It shares fell 33% to 25 cents each in New York Stock Exchange trading on Friday after The WSJ reported its plans.
In a statement, the company said "Borders is not prepared at this time to report on the course of action it will pursue."
As interest declined in bricks-and-mortar booksellers, the bookseller suffered "a series of management gaffes, piled up unsustainable debts and failed to cultivate a meaningful presence on the Internet or in increasingly popular digital e-readers," said the Journal.
Customers became used to getting books mailed to them or downloaded to handheld electronic devices - and a notable Borders misstep was its decision 10 years ago to to transfer its Internet operations to Amazon.
Borders is expected to close about a third of its 674 Borders and Waldenbooks stores. Many of its 19,500 staff will lose their jobs as it attempts to reinvent itself to compete with Amazon and its popular Kindle reader, and Inc., the America's largest bookstore chain, Barnes and Noble, maker of the Nook e-reader.
Many believe Borders it may not be able to avoid liquidation, said the Journal. It is expected to report more than $1 billion in liabilities in its bankruptcy petition.Shoppers have been abandoning Borders and Barnes & Nobles bookstores just as they did music stores a decade ago.
Mike Shatzkin, chief executive of Idea Logical Co., a New York consulting firm, said "I think that there will be a 50% reduction in bricks-and-mortar shelf space for books within five years, and 90% within 10 years. Book stores are going away."
Borders is nearing a deal for so-called debtor-in-possession financing, which would keep the company operating in bankruptcy, insiders said.
Shareholders face big losses. Financiers Bennett LeBow and William Ackman, held more than 30% of Borders stock late last year, . Mr. LeBow, who became CEO of Borders Group last year, invested $25 million last May. Mr. Ackman's Pershing Square Capital Management LP is expected to lose at least $125 million on its investment.
Big publishers will also face losses on books shipped and sold through the Christmas season.
Amazon gained customers when Borders folded in the U.K. about a year ago. "We expect something similar will happen in the U.S.," the head of one major publisher said.