Restructuring firm reviews Borders UK's store portfolio

Borders UK has appointed a restructuring company to advise it on how to close some of its underperforming stores, raising questions about the future of the bookseller.

The Independent has learned that Borders UK, which was bought by the private equity company Risk Capital Partners in 2007, has been working with RSM Bentley Jennison to review a range of potential restructuring options.

One option that has been floated would see Borders UK continue trading, but with fewer stores. There is no suggestion Borders UK itself is in trouble, though it is understood to be keen to reshape its store estate in order to eliminate less profitable outlets in locations such as out-of-town retail parks.

Risk Capital's Luke Johnson, who is also chairman of Channel 4, refused to discuss his plans for Borders UK. Tony Stockdale, the national managing partner of RSM Bentley Jennison, also declined to comment yesterday.

Among the company's total portfolio of Borders and Books etc stores, a number of stores in popular locations are thought to be trading robustly, but others are finding trading challenging, according to market sources.

Risk Capital Partners acquired a majority stake in Borders UK in September 2007. The deal was structured so that Risk Capital Partners paid an initial £10m, with a further deferred payment of £10m to follow. The acquisition included all 41 Borders superstores in the UK, the Borders superstore in Ireland and all 28 Books etc stores in the UK. However, since the acquisition, Borders UK has offloaded some of its Books etc stores.

According to its website, Borders UK currently has 41 of its core Borders stores, eight Books etc outlets and two Borders Express shops. Speculation has been swirling around Borders UK for sometime, partly over concerns about credit insurers reducing cover to publishers to supply it with books.

However, last December, Mr Johnson denied that Borders UK was considering a pre-pack administration specifically to reduce liabilities on its Books etc stores, when contacted by The Independent.

At that time, he said in an email response: "We have been steadily rationalising our Books etc store base and have exited a number of Books etc sites, but there are no further disposals currently planned. We are absolutely not planning any form of pre-pack administration of Books etc."

Like many retailers, Borders UK has suffered from some of its suppliers' credit insurance cover being scaled back by Euler Hermes, one of the UK's biggest insurers.

Last December, The Bookseller, the trade magazine, said that Euler Hermes was withdrawing its cover for suppliers to Borders UK and the retailer The Book People from 31 December. At least one distributor responded by advising its clients to reconsider their trading limits, reported The Bookseller.

According to an email that The Bookseller claimed to have seen, Euler Hermes UK said that "the information we currently hold does not justify maintaining the historic levels of cover being provided on this company" in light of the "challenging" economic conditions in the UK.

Amazon, the supermarkets and the death of Harry Potter

It was not only the author JK Rowling's army of fans who shed a tear upon learning that her final Harry Potter book would be published in 2007. The UK's booksellers have also mourned the loss of a blockbuster stream of revenues.

But there are many other reasons why specialist booksellers are finding life tough in a market where overall sales are declining. The most notable contributors to an unhappy storyline for UK booksellers are the big grocers, such as Tesco and Asda, offering glossy best-sellers and the inexorable shift to consumers buying their books online at Amazon.com.

Jonathan de Mello, the director of the retail consultancy at Experian, said: "The main reason is that the [bricks and mortar book] market has been massively eroded by the internet. On the internet you don't have to pay for fixed costs, such as for stores and staff." One of the sector's stronger players, Waterstone's said that like-for-like sales declined by 4.5 per cent for the 16 weeks ended 25 April, reflecting an overall book market down by about 4 per cent.