Economy
11:33 am
Thu January 6, 2011

Is Borders Group Inc. headed for bankruptcy?

Sales at Borders Book stores have been slipping for several years as more buyers go to places like Amazon.com to find their titles, and as more people move into the digital reader market. Last month, the company reported that its third quarter sales were down 17.6% from the same period a year ago.

So the company is struggling to find a way to pay its bills. One way it's trying to preserve cash is to suspend its payments to publishers.

An anonymous source told Reuters that Borders "is floating the idea of treating the money it owes publishers as a loan, a way for the company to rework its finances."

Some publishers have stopped sending books to the company. Robert Gottlieb, chairman of Trident Media Group, is quoted as saying:

"Publishers are sitting by and waiting and they are not shipping any more books into Borders because they are waiting to see how it all falls out."

Barnes and Noble is watching too. In another Reuters article they say that if Borders gets to renegotiate payment arrangements with publishers, then they should get the same deal.

AnnArbor.com has a piece about the outlook for Borders. John Pottow, a national bankruptcy expert from the University of Michigan Law School, says either bankruptcy or a merger with Barnes and Noble is imminent:

“One of those things will happen within the next few months. The amount of losses they’re incurring is not something where they can avoid (restructuring).”

The company says it operates around 650 stores and employs more than 19,500 people worldwide.