BORDERS GROUP BANKRUPTCY NEWS reports that Borders Group Inc. and
its affiliates filed for Chapter 11 protection (Bankr. S.D.N.Y.
Case No. Lead Case No. 11-10614) in Manhattan on Feb. 16, 2011.
"It has become increasingly clear that in light of the environment
of curtailed customer spending, our ongoing discussions with
publishers and other vendor related parties, and the company's
lack of liquidity, Borders Group does not have the capital
resources it needs to be a viable competitor and which are
essential for it to move forward with its business strategy to
reposition itself successfully for the long term," Mike Edwards,
Borders Group President, said in a press release announcing the
Chapter 11 filing.
Borders said that it has received commitments for $505 million in
debtor-in-possession financing led by GE Capital, Restructuring
Finance.
Borders said that it is serving customers in the normal course,
including honoring its Borders Rewards program, gift cards and
other customer programs.
Borders, however, said it has identified certain underperforming
stores -- equivalent to approximately 30% of the company's
national store network -- that are expected to close in the next
several weeks. A list of the 200 closing stores is available at
no charge at http://bankrupt.com/misc/Borders_ClosingStores.pdf
Borders emphasized that the closings were a reflection of economic
conditions, cost structures and viability of locations, among
other factors, and not on the dedication and productivity of the
workforce in these stores.
Financials
For the fiscal year ended Jan. 29, 2011, Borders recorded net
sales of approximately $2.3 billion. As of Dec. 25, 2010, the
Debtors had incurred net year-to-date losses of approximately
$168.2 million.
Borders had total assets of $1.28 billion and total debts of
$1.29 billion as of Dec. 25, 2010.
A total of $196.05 million is outstanding under a prepetition
revolver from lenders, led by Bank of America, N.A., as
administrative agent. and $48.6 million under a prepetition term
loan from lenders led by G.A. Capital, as admin. agent. The
prepetition revolver and term loan are secured by substantially
all of Borders' assets, excluding real estate holdings.
Borders Group submitted a consolidated list of 30 largest
unsecured creditors. The list is available for no charge at:
http://bankrupt.com/misc/Borders_ListofCreditors.pdf
Pershing Square Capital Management, L.P., LeBow Gamma Limited
Partnership, UBS AG, and Bennett S. LeBow each owns or controls
with the power to vote 5% or more of the voting securities of the
Debtor. As of Feb. 8, a total of 72,042,189 shares were
outstanding with 2,413 holders of these shares.
Store Closing Sales
Borders Group has submitted to the Bankruptcy Court an emergency
motion for approval to sell merchandise and owned furniture,
fixtures and equipment located at approximately 200 of their
stores and, at Borders' option, up to 75 of 136 potential other
stores, through store closing sales.
According to Holly Felder Etlin, managing director of AP Services
LLC, the 200 underperforming stores identified by Borders are
operating at a significant loss and represent a drain on Borders'
liquidity. Each week the 200 stores remain open causes Borders to
suffer approximately $2 million of losses. Border has ceased
supplying the closing stores.
Before filing for bankruptcy, Borders Group, on Feb. 3, 2011,
through their then advisors at FTI Consulting, Inc., began
contacting the nation's largest liquidation firms to gauge
interest in a process to solicit bids for store closing sales.
Two groups -- (1) Great American Group LLC and Gordon Brothers
Retail Partners LLC and (2) Hilco Merchant Resources, LLC, Tiger
Capital, and SB Capital Group -- participated in bidding for a
stalking horse position. Following a 3-day bidding, on Feb. 13,
the Hilco Group emerged as the party with the higher and better
bid. Compared to the GB Group's bid, the Hilco Group's bid
provides a guaranty percentage that is 2% higher, which equates to
almost $4 million more in proceeds for the Debtors.
The Hilco Group's bid would pay the Debtors (i) a guaranteed
amount of 73% of the cost value of all merchandise located at the
Closing Stores and which Borders estimate will bring at least $131
million and as much as $148 million into the estates, plus (ii) a
50% share of any proceeds received during the SCSs after a 5% fee
and recovery of expenses.
Borders Group is seeking the Bankruptcy Court's approval to
conduct an auction to select a liquidator where the Hilco Group is
the stalking horse bidder. Hilco Group will receive a $1,000,000
break-up fee if it is outbid at the bankruptcy auction.
Professionals Involved in Case
The professionals tapped by the Debtors for the restructuring are:
Debtors'
Legal Counsel: David M. Friedman, Esq.
David S. Rosner. Esq
Andrew K. Glenn, Esq.
Jeffrey R. Gleit, Esq.
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
1633 Broadway
New York, New York 10019
Telephone: (212) 506-1700
Facsimile: (212) 506-1800
E-mail: DFriedman@kasowitz.com
DRosner@kasowitz.com
AGlenn@kasowitz.com
JGleit@kasowitz.com
Debtors'
Financial
Advisors: JEFFERIES & COMPANY'S INC.
Debtors'
Lease and
Real Estate
Services
Provider: DJM PROPERTY MANAGEMENT
Debtors'
Interim
Management and
Restructuring
Services
Provider: AP SERVICES LLC
The Debtors'
Claims and
Notice Agent: THE GARDEN CITY GROUP, INC.
P.O. Box 9690
Dublin, Ohio 43017-4990
Professionals identified by Borders as notice parties are:
Counsel for
the DIP Agents: MORGAN, LEWIS & BOCKIUS LLP
Wendy Walker, Esq.
Sandra Vrejan, Esq.
Counsel for GA Capital,
Agent Under the
Prepetition term
Loan: RIEMER & BRAUNSTEIN LLP
Donald E. Rothman, Esq.
COUNSEL FOR GA CAPITAL LLC
Attorneys for
Group of
Major
Landlords: James S. Carr, Esq.
Robert L. LeHane, Esq.
Benjamin D. Feder, Esq.
KELLEY DRYE & WARREN LLP
101 Park Avenue
New York, New York 10178
Tel: (212) 808-7800
Fax: (212) 808-7897
Attorneys for
Publishers: Kenneth A. Rosen, Esq.
Bruce D. Buechler, Esq.
Bruce S. Nathan, Esq.
Paul Kizel, Esq.
LOWENSTEIN SANDLER PC
1251 Avenue of the Americas
New York, New York 10020
Tel: (212) 262-6700
Fax: (212) 262-7402
Financial
Advisor
to Publishers: ALVAREZ & MARSAL
Attorneys for
General Growth
Properties Inc.: Brad Eric Scheler, Esq.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP
Attorneys for
Bank of
America, N.A.,
Agent for
Prepetition
Revolving
Lenders: Julia Frost-Davies, Esq.
Andrew Gallo, Esq.
BINGHAM MCCUTCHEN LLP
About Borders Group
Borders Group is a leading operator of book, music and movie
superstores and mall-based bookstores. At Jan. 29, 2011, the
Debtors operated 642 stores, under the Borders, Waldenbooks,
Borders Express and Borders Outlet names, as well as Borders-
branded airport stores in the United States, of which 639 stores
are located in the United States and 3 in Puerto Rico. Two of
Borders' flagship stores (along with other less prominent stores)
are located in Manhattan. In addition, the Debtors operate a
proprietary e-commerce web site, http://www.Borders.com/, launched
in May 2008, which includes both in-store and online e-commerce
components.
As of Feb. 11, 2011, Borders employed a total of 6,100 full-time
employees, 11,400 part-time employees, and approximately 600
contingent employees (who are required to work one shift per
month, and usually do so at special events), all of whom are
located in the United States and Puerto Rico. Borders' employees
are not subject to any collective bargaining agreements.
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BORDERS GROUP BANKRUPTCY NEWS covers the bookstore chain's journey
into Chapter 11 as the Ann Arbor-based bookseller attempts to
restructure its operations.
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