Borders’ seeks approval to liquidate, close stores

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NEW YORK (AP) — There will be no storybook ending for Borders. The

40-year-old book seller could start shuttering its 399 remaining

stores as early as Friday.

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The Ann Arbor, Mich.-based chain, which helped pioneer the big-box

bookseller concept, is seeking court approval to sell off its

assets after it failed to receive any bids that would keep it in

business. The move adds Borders to the list of retailers that have

failed to adapt to changing consumers’ shopping habits and survive

the economic downturn, including Circuit City Stores Inc.,

Blockbuster and Linens `N Things.

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On Thursday, Borders is expected to ask the U.S. Bankruptcy Court

of the Southern District of New York at a scheduled hearing to

allow it to be sold to liquidators led by Hilco Merchant Resources

and Gordon Brothers Group. If the judge approves the move,

liquidation sales could start as soon as Friday; the company could

go out of business by the end of September.

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Borders’ attempt to stay in business unraveled quickly last week,

after a $215 million “white knight” bid by private-equity firm

Najafi Cos. dissolved under objections from creditors and lenders.

They argued the chain would be worth more if it liquidated

immediately.

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“We were all working hard toward a different outcome, but the

headwinds we have been facing for quite some time, including the

rapidly changing book industry, e-reader revolution, and turbulent

economy, have brought us to where we are now,” said Borders Group

President Mike Edwards in a statement.

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Borders liquidation could have far-reaching effects, putting

thousands of people out of work at a time of high unemployment,

particularly in Michigan where Borders is based. The chain, which

has been shrinking in recent years, currently has 10,700

employees.

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“We’ll want to look closely from the jobs perspective of people in

the state,” said Geralyn Lasher, spokeswoman for Gov. Rick Snyder,

in a statement.

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The loss of Borders stores will deal a blow to malls nationwide,

according to real estate sources. Borders stores average about

25,000 square feet — about half the size of a football field —

and a liquidation could leave large empty spaces across the

country.

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Borders’ move to close 228 stores while it reorganized in

bankruptcy protection already increased the collective vacancy rate

of shopping centers that contained a Borders to 9.3 percent from

4.2 percent, estimated Chris Macke, senior real estate strategist

at CoStar Group, the nation’s largest provider of real estate data.

Macke calculated the liquidation of the rest of the chain could

increase the vacancy rate on that same basis to 18.8

percent.

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Additionally, Simba Information senior trade analyst Michael Norris

predicts the closing could cause sales of electronic books to fall.

Borders, for one, entered the electronic book market with Canada’s

Kobo Inc. last year. Owners of the Kobo e-reader will still be able

use Kobo software to buy and read books. And Kobo officials said

users of Borders e-book accounts, which began transitioning to Kobo

in June, will be able to access their e-books

uninterrupted.

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“This industry is going to slowly figure out that a lot of e-book

readers still use bookstores all the time to discover what’s new

before heading home to buy it for their e-reading device,” he

said.

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Perhaps a Borders liquidation would hurt the consumer most. Tanya

Ellis, 42, of Southfield, Mich., said the closings are “horrible.”

She said she and a friend would stop at a nearby Starbucks, then

visit the Borders store in Beverly Hills, Mich., and browse for

about an hour.

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“So where are we going to buy books from? I just got into reading

books the last two or three years, and they just keep closing all

these bookstores,” she said, adding that electronic readers aren’t

an option for her. “It takes all the fun out of it.”

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Justin Grant, 31, from Brooklyn, however, was less phased. Although

he had just picked up a parenting book to read on his commute home

Monday, he said he buys most of the 25 to 30 books he reads a year

on Amazon.

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“It’s much easier to get them through the mail and delivered to my

desk at work,” he said.

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It has been a long fall for Borders since Tom and Louis Borders

opened their first store in 1971, selling used books in Ann Arbor.

At its start, the brothers were mostly interested in offering other

bookstores a system they developed for managing

inventory.

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But in 1973, the store moved to a larger location and shifted its

focus to selling new books and expanding, helping pioneer the

big-box bookstore concept along with Barnes & Noble Inc. At the

time, Waldenbooks and B. Dalton mall chains, with small stores and

20,000 to 50,000 titles, were growing rapidly. The new superstores,

by contrast, offered between 100,000 and 200,000 titles, as well as

enticements to linger like comfortable chairs and attractive

lighting.

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Kmart Corp. saw the potential and acquired Borders in 1992, forming

a book unit with Waldenbooks. It then spun the bookstores off as a

separate company in 1995, the same year Amazon started selling

books online.

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Borders was slow to adapt to the changing industry and lost book,

music and video sales to the Internet and other competition. Sales

began to fall, leading to a revolving door of CEOs. By the time

Borders’ current CEO, financier Bennett LeBow, came aboard in May

2010 after investing $25 million in the company, bankruptcy was

already looking like a strong possibility.

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Borders filed for bankruptcy protection in February after being

hurt by tough competition from online booksellers and discounters.

It hoped to successfully emerge from bankruptcy protection by the

fall as a smaller and more profitable company, but pressure from

creditors and lenders eventually led the chain to put itself up for

sale and finally, seek approval to liquidate.

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At its peak, in 2003, Borders operated 1,249 Borders and

Waldenbooks, but by the time it filed for bankruptcy protection in

February that had fallen to 642 stores and 19,500 employees. Since

then, Borders has shuttered more stores and laid off

thousands.

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Borders says it expects to be able to pay vendors for all expenses

incurred during the bankruptcy cases.

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—

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AP Retail Writer Anne D’Innocenzio in New York and reporter Corey

Williams in Detroit contributed to this story.

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