updated 11:45 am EST, Wed February 16, 2011
Borders files for Chapter 11 protection, more
Last week's unofficial report of the Borders Group's near bankruptcy status is now official, as the company detailed its plans. The company has filed a petition for reorganization relief under Chapter 11 after the authorization of its board of directors. The deal will secure commitment for $505 million in debtor-in-possession financing from GE Capital, Restructuring Finance.
Borders admitted the move was necessary due to the general overall lower customer spending, e-book sales and the greater success of competitor Barnes & Noble.
Customers and employees will not be negatively affected by the move, with Borders Rewards, gift cards and other customer programs continuing to operate as usual, and payroll and benefits programs unaffected. About 30 percent (about 200 of 674) of the company's underperforming stores across the nation will be close over the next few weeks, however. The closures are due to the state of economy, locations and other factors, Borders states.
Borders has fallen behind in the e-book game, as the Kobo eReader attached to the store hasn't caught on versus the Amazon Kindle or Barnes & Noble's Nook. Its dependency on physical stores has added costs not faced by companies that focus strictly on digital books, like Amazon or Apple.