Tagged: BORDERS

With the impending bankruptcy of Borders Group Inc., we thought we'd give you a quick explanation of the two types of options facing the company.

Chapter 7 Bankruptcy

Also known as "liquidation" or "straight bankruptcy." It sparks an 'everything must go' sale of the company's assets. The company may cease operations after filing Chapter 7 bankruptcy.

The company that owes the money files for Chapter 7 bankruptcy in court. The company's assets are turned over to a bankruptcy trustee who then sells the assets and tries to pay back the company's creditors. In exchange, the company that owes the money is freed from having to pay all of its bills in full (unless some wrongdoing is found).

The details of Chapter 7 rules vary from state to state.

Chapter 11 Bankruptcy

Also known as "reorganization" bankruptcy used by many corporations (like K-Mart and General Motors).

After filing for Chapter 11 bankruptcy, the company that owes money typically keeps running its business and keeps its assets while going through a reorganization process overseen by the court.

A reorganization plan is put forth, and if the majority of creditors accept it, and the court accepts the plan - the company continues operating and repays its creditors under the reorganization plan.

Payment to creditors can come from the sale of assets, repayment from future profits, or from mergers or recapitalization.

The end of Borders

Borders Book Group Inc. can't pay its bills.

Several reports say the company is expected to file for bankruptcy sometime this week. From Reuters:

Bookseller Borders Group Inc is reviewing bids from liquidators to close hundreds of stores as it works out the final details of its impending bankruptcy filing, according to people close to the talks. The review is part of its plan to close about 200 of its 650 stores, which are a mix of Borders superstores and smaller Waldenbooks shops, these people said. The store closings will remove weak stores that have bled the retail chain's cash in recent years and provide immediate funds from the sale of inventory.

A Border's spokesman is quoted in the report saying, "Borders will not comment or speculate upon Borders' future course. If and when the company has something to disclose, it will do so."

President's Obama's Budget proposal and Michigan

President Obama released his budget proposal to Congress yesterday saying "Even as we cut out things that we can afford to do without, we have a responsibility to invest in those areas that will have the biggest impact in our future."

The Detroit Free Press says the President's budget is a "mixed bag" for Michigan. On the up side, the budget continues to invest in advanced vehicle technology research, it asks that a $7,500 rebate be put in place to encourage electric vehicle purchases (instead of a tax credit), and it would help the state avoid a big payment it owes the federal government for borrowing money to cover unemployment benefits.

And the down side? From the Freep: 

...it cuts in half a program to help poor people pay energy bills, cuts community block grants and Great Lakes restoration funding and ends plans to build an amphibious Marine Corps vehicle that could have created hundreds of Michigan jobs. 

A big day for Flint

The city of Flint will likely find out today whether it can go to the bond market to cover it's $17 million budget deficit.

The State Administrative Board is meeting today at 11 a.m. to decide the city's fate.

If the plan is not approved, the State of Michigan may eventually have to take over the city's finances.

City Administrator Greg Eason told WJRT: 

"This stabilization bond is critical to the survival of the city over the next three to five years."

Borders Books is expected to begin its next chapter this week. The Ann Arbor based bookseller is expected to file for bankruptcy protection Monday or Tuesday. 

On Friday, the Wall Street Journal reported Borders will likely file for bankruptcy protection this week. Borders stock fell by a third on the news.

It’s not like the news was unexpected. Borders has been struggling financially for years. Less than a year ago,  investors were paying more than $3 for a share of Borders stock. When the market closed Friday, you could have bought a share of Borders Books for 25 cents.

Borders is still the nation’s number 2 traditional bookstore with more than 600 stores. But as book buyers have spent more online, Borders’ share of the total book market has shrunk.

It’s been delaying payments to publishers and others since December, as the company has tried to hang on to some cash. Borders’ bankruptcy plan reportedly includes closing more than 200 stores. 

No word on what the plan is to convince book buyers to return to Borders.

The Rise and Fall (and Re-Rise?) of Borders Group.

The Wall Street Journal is reporting that Borders Group may file for bankruptcy protection on Monday or Tuesday next week. The Ann Arbor-based bookseller has struggled in recent years as book buyers have migrated from big box stores to the web.

This could be a pivotal week for the future of Borders Books with some sources saying the company could seek bankruptcy protection.    

The Ann Arbor-based bookseller delayed payments to publishers and others the past two months.   The company has been trying to negotiate with its vendors and come up with a plan to move forward.    Borders has a half billion dollar financing deal in place, if it can come to terms with its vendors. 

Jeff Manning is a managing director with BDO Capitol Advisors.   Manning’s company closely follows the retail market. 

"The challenge,  if you look at the statistics,  majority of companies that enter bankruptcy do not emerge.  If you look at recent statistics with retailers, an awful lot of retailers have gone straight into liquidation." 

Manning expects Borders’ vendors will decide it’s more in their interest to keep Borders viable. He says, if Borders does file for bankruptcy, the company will probably exit bankruptcy before Christmas.   But Manning says Borders execs must be careful, since the bookseller is in a precarious position:

"One foot in the grave and one foot on a banana peel," says Manning.

The Rise and Fall (and Re-Rise?) of Borders Group.

Ann Arbor-based Borders Books announced Sunday that it would be delaying January payments to its landlords, vendors and others. Borders also delayed payments in December.  

Borders says the move is intended to ‘protect liquidity’. Borders has been losing money for years, as book buyers have increasingly turned to the internet.

Michael Norris is the senior trade book analyst with Simba Information. He says there is one problem Borders executives must find a solution for. 

They need to answer the question 'Why should I shop at Borders? They should tattoo that question backward on their forehead so they can see every time they look into the mirror every morning.

Borders lined up a half billion dollars in financing last week to help the book seller stay afloat. But the company may still be headed toward bankruptcy protection

Ann Arbor-based Borders Books may be able to stave off bankruptcy, thanks to a new financing deal announced this week .     Professional writers are waiting to see what the company’s next chapter will bring. 

Borders Books has been struggling to survive. 

Yesterday, the Ann Arbor bookseller announced it had lined up $550 million dollars in financing to stay afloat.

The deal is contingent on Borders reaching a deal with book publishers. It's been reported that the company set a February 1st deadline for the publishers to agree to take up to a third of the booksellers debt. A Borders spokeswoman would only say the company has not stated a specific date. 

The deal with GE Capital announced Thursday could help. Or it may not. The Wall Street Journal is reporting that Borders is still looking for money to finance the company through a possible bankruptcy filing.