Borders, which gamely filed for bankruptcy earlier this year and then committed heavily to a reorganization effort to save itself, is out of options and will now begin the process of liquidation.
Thus ends the tenure of one of America’s most popular retail brands.
“Following the best efforts of all parties, we are saddened by this development,” Borders group president Mike Edwards said yesterday. “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution, and turbulent economy, have brought us to where we are now.”
In January, Borders filed for bankruptcy and listed assets of $1.27 billion and $1.29 billion in total debts.
Earlier this month, Borders had finalized a preliminary agreement to be bought at auction by a company called Direct Brands for roughly $215 million in cash plus the assumption of another $220 million in debt. The bid by Direct Brands, a component of the Phoenix-based investment banking firm Najafi, was a ‘stalking horse bid’—defined as an initial bid on a bankrupt company’s assets by an interested buyer chosen by the bankrupt company itself with a predetermined floor for minimum acceptable bids.
Last week, the creditor committee that was tasked with overseeing the Borders bankruptcy plan rejected the bid from Direct Brands on the grounds that it was too low.
That cleared the way for the U.S. Bankruptcy Court for the Southern District of New York yesterday to approve the sale of the company’s assets to two liquidation firms—Hilco Merchant Resources and Gordon Brothers Group—instead.
The remaining 200 or so Borders stores still in operation will be shuttered by Hilco and Gordon starting immediately through the end of September. The two liquidation firms also assume immediate ownership of all of Border’s intellectual property rights as well as Borders.com but it remains unknown when the company’s e-commerce operations will officially end.
Quite a few major book publishing houses are still holding IOUs from Borders, most notably Penguin Putnam (for $41.1 million), Simon & Schuster ($33.7 million) and Random House ($33.4 million).
“For decades, Borders stores have been destinations within our communities, places where people have sought knowledge, entertainment and enlightenment, and connected with others who share their passion,” said Edwards. “Everyone at Borders has helped millions of people discover new books, music, and movies, and we all take pride in the role Borders has played in our customers’ lives.”
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