The Ann Arbor-based bookseller Borders Group, Inc. filed for Chapter 11 bankruptcy yesterday morning.
The company, which owns Borders and Waldenbooks, filed for protection in U.S. Bankruptcy Court early yesterday. According to the bankruptcy filing, the company said it will close about 30 percent of its stores nationwide within the next few weeks — including its location at the Arborland Mall on Washtenaw Avenue.
“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,” Borders Group President and CEO Michael Edwards wrote in a Borders Group press release issued yesterday.
Employees at the Borders flagship location on State Street declined to comment on the state of the company yesterday.
According to the company’s bankruptcy petition, as of Dec. 25, 2010 the company holds assets of about $1.28 billion and liabilities of about $1.29 billion. The company also operates 642 stores nationwide and employs about 19,500 employees.
Borders secured a $505 million loan from GE Capital to finance its day-to-day operations while it’s in bankruptcy, according to the press release. However, the loan is pending court approval.
“This financing should enable Borders to meet its obligations going forward so that our stores continue to be competitive for customers in terms of goods, services and the shopping experience,” Edwards wrote in the statement.
Borders will continue to allow customers to use gift cards and its Borders Rewards program, according to the press release.
John Pottow, a professor at the University’s Law School, said Chapter 11 bankruptcy involves a reorganization of the debts of a company.
“You get a protection from all your creditors so they can’t sue you for not paying your debts,” Pottow said. “You get to hide for about a year or so.”
Edwards will be able to continue to run the company, Pottow said, but on behalf of Borders Group’s creditors rather than its shareholders.
The money the company has borrowed from GE Capital should help Borders with financing while executives accomplish their reorganization plan, Pottow said. He added that the reorganization plan is like a “haircut on debt,” in which Borders agrees to pay its creditors a fraction of what they owe.
“Bankruptcy is not good,” Pottow said. “Some people are going to lose their jobs.”
Keith Taylor, coordinator for the University’s Undergraduate Creative Writing Program, was an employee at Borders from 1981 to 1989. He worked at the first store brothers Tom and Louis Borders opened on State Street in 1971.
Taylor said the initial Borders store was a unique concept and was very popular.
“The whole idea of a book superstore was brand new,” Taylor said. “In the early ages, Borders was one of the first ones.”
Taylor said he left Borders because he felt uncomfortable with the company’s corporate atmosphere. He said he thinks that starting in 1985, the bookstore began to make poor business choices which ultimately led to the company’s downfall.
“They ruined themselves,” Taylor said. “They made all the wrong decisions.”
Taylor said he feels no sympathy for the store because of its financial troubles.
“It’s a junk store now,” Taylor said. “It doesn’t deserve to live.”
He added that he’s concerned about the financial security of the book industry in general.
“The book business has changed entirely,” Taylor said. “The music business disappeared almost overnight; it’s taking the book business a lot longer.”
LSA senior Aneka Kaul said she is upset that Borders and other bookstores are having fiscal issues since more people are buying books online. Kaul, who grew up in Ann Arbor, added that the Arborland Borders store has sentimental value to her.
“I’ve been going there since I was little,” she said.