Borders files for Bankruptcy

Last Wednesday one of the best known retail chains, Borders, filed for bankruptcy after 40 years of trading. News of this development in their trading future has left the struggling book industry wondering what will happen next, and who will be next to fall.

The New York Times has reported that 'the troubles of Borders are rooted in a series of strategic missteps, executive turnover and a failure to understand the digital revolution — problems in many ways of Borders’ own making. But as those in the volatile industry digested the news that most saw coming, they were acutely aware of the bigger picture: that in a fast-evolving bookselling environment there is slim margin for error.'

“The book retailing industry is very challenging right now,” said Michael Souers, an analyst for Standard & Poor’s. “We’ve had significant transformation. Bookstores have gradually been losing their prominence, and the U.S. market is oversaturated in terms of the number of retail stores. So that trend will likely continue as e-books gain more prevalence in the market.”

Borders have said that its stores will remain open during the bankruptcy process and that the rewards program it operates (particularly in the US) will continue to operate. In addition, the company has declared that it will continue to honour any gift cards or vouchers presented at any of its stores.

In its filing in United States Bankruptcy Court in Manhattan, Borders listed $1.29 billion in debt and $1.27 billion in assets. As of the filing, Borders owed $272 million to its 30 largest unsecured creditors — including $41.1 million to the Penguin Group USA.

Publishers, mourning the loss of valuable shelf space, said they hoped the bankruptcy filing would be a chance for the bookseller to reinvent itself. But they were also skeptical that the company’s deep-rooted problems could be overcome.

Borders has however told publishers that it was working on a long-term plan for its revival.

“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, the company president, said in a statement.

Certainly one area that needs significant strength is their online business, and no doubt this will be at the forefront of any revivial plans.

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