Borders Files For Bankruptcy, Owes Diamond Nearly $4 Million
The axe has finally swung. From PW:
After a drawn out process that began at the end of last year when it missed payments to top publishers, Borders Group has given in to the inevitable and filed for Chapter 11 bankruptcy protection in Bankruptcy Court for the Southern District of New York. The company has received $505 million in debtor-in possession financing led by GE Capital, Restructuring Finance. And as part of its turnaround plan, Borders said it will close approximately 30% of its current store base, about 200 locations, within the next several weeks.
According to Borders, the financing should enable the company to operate the stores that will remain open in a “normal course” including honoring its Borders Rewards program, gift cards, and other customer programs. Additionally, the company said it expects to make payroll and continue its benefits programs for its employees.
The announcement made this morning was foreshadowed last night when Borders implemented an ordering freeze and Ingram, its lifeline to the publishers, stopped shipping books. Publishers are now on the hook for hundreds of millions of dollars, led by Penguin Group (USA) which is owed $41.1 million, followed by Hachette at $36.9 million, Simon & Schuster at $33.8 million, Random House at $33.5 million, and HarperCollins at $25.8 million. Neither major book distributor, Ingram or Baker & Taylor, were among the leading creditors, and only one book distributor, National Book Network, is owed money with $2 million outstanding. The top 30 unsecured creditors are owed $314 million. The filing listed $1.27 billion in assets and $1.29 billion in liabilities. Borders said it expects to be able to pay vendors for merchandise shipped to it after today’s filing; those owed money prior to the filing will only be paid with the approval of the bankruptcy court.
As of Tuesday, the company had instituted an ordering freeze and book distributor Ingram, the company’s major lifeline to publishers, had stopped supplying the retailer. Diamond had already stopped orders to Borders weeks ago, and according to Heidi at ComicsBeat, court filings reveal Borders owes Diamond Comic Distributors $3,906,549.94.
To say this portends major disaster is an understatement. Diamond is already in precarious financial straits, and they can no longer hide the fact that they have an account that’s millions behind which they may never collect. And their losses will ripple through to publishers, many of whom have no slack to survive the sudden hit to the bottom line.
Stay tuned. This is not going to be pretty.