Borders Heads Towards Liquidation

As the endgame for the Borders Group winds down, on Thursday, July 14, a judge said that the bookstore chain — which has been in Chapter 11 bankruptcy since February — could move toward liquidation.

The decision by Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan followed days of last-minute negotiations. On Wednesday, July 13, a committee of the company’s unsecured creditors had rejected a proposed takeover bid by the Najafi Companies, as reported by the Wall Street Journal. Borders had designated Najafi as the stalking horse, or opening bidder, in a bankruptcy court action. However, according to the WSJ, publishers and landlords owed money by Borders objected that the Najafi bid would allow the company to liquidate the chain after buying the business.

Having offered $215 million for Borders in the bid, which included the assumption of $220 million in liabilities, Najafi had said it would drop the liquidation option only if publishers agreed to begin shipping inventory to Borders under normal trade terms. However, not all publishers would agree to this condition, and, with Borders scheduled to appear before the bankruptcy judge on Thursday, the chain decided to select a group of liquidators as the designated bid, as reported by the Journal, which noted that the liquidators’ bid is valued at least $252 million.

On Thursday, Judge Glenn approved procedures for an auction of Borders, which will take place in a week if there is a challenge to the bid by the liquidators, which are led by Gordon Brothers Group and Hilco Merchant Resources, as reported by the Wall Street Journal.

There is still a chance that another bidder might emerge or that Najafi could still bid for the beleaguered 399-store chain, which has already closed 237 stores since filing for bankruptcy and which employs approximately 11,000 people.