Borders closes the book and files for Chapter 11
Thursday 17 February 2011
Borders, the US bookshop giant, filed for Chapter 11 bankruptcy yesterday, a little over a year after its namesake and former sister company collapsed in the UK.
The same forces that brought down the UK business – competition from online booksellers such as Amazon, and latterly from electronic books downloaded to e-readers such as the Kindle – also afflicted its former parent, which owes $1.29bn (£804m) to publishers and other creditors, according to bankruptcy court filings.
Unlike its UK namesake, however, Borders in the US will continue to operate under Chapter 11 protection and it promised yesterday to emerge as a slimmed-down and refinanced company, better able to compete. It will immediately shut 30 per cent of its 644 stores, with the loss of thousands of jobs. The company employs almost 20,000 workers. It is the biggest US bookstore chain after Barnes & Noble, with stores in 48 states and Puerto Rico.
GE Capital is providing $505m in so-called "debtor in possession" loans that allow the company to operate while reorganising its debts, as General Motors did recently.
Borders' financial woes have been mounting for several years. In 2008, it was forced to borrow from its largest shareholder, Pershing Square, the hedge fund run by Bill Ackman, which became the company's dominant force. Pershing and other equity holders now face the prospect of their shareholdings being wiped out.
Financial difficulties delayed Borders' entry into new digital markets and it launched a dedicated e-bookstore only last July.
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