Borders to liquidate, does not receive formal going-concern proposal

By Caroline Salls

Pittsburgh, July 18 - Borders Group will ask the U.S. Bankruptcy Court for the Southern District of New York to approve a previously announced proposal from Hilco and Gordon Brothers to purchase the store assets of Borders' business and administer a liquidation process, according to a company news release.

Since it did not receive a formal proposal from a going-concern bidder, the company said it did not hold an auction for substantially all of its assets.

"Following the best efforts of all parties, we are saddened by this development," Borders Group president Mike Edwards said in the release.

"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, eReader revolution, and turbulent economy, have brought us to where we are now."

Borders said it currently operates 399 stores and employs roughly 10,700 employees.

Subject to court approval, the liquidation is expected to begin at some stores and facilities as soon as Friday, with a phased rollout of the program expected to conclude by the end of September.

As previously reported, an agency agreement with Hilco Merchant Resources, LLC, Gordon Brothers Retail Partners, LLC, SB Capital Group, LLC, Tiger Capital Group, LLC and Great American Group, LLC was originally signed on June 30 and then amended on July 13, according to a court filing.

Under the agency agreement, Borders will receive a guaranteed 72% of the $350 million to $395 million cost value of the merchandise sold in a liquidation.

The company said it plans to liquidate under Chapter 11, and, as a result, Borders expects to be able to pay vendors in the ordinary course for all expenses incurred during the bankruptcy cases.

The sale hearing is scheduled for Thursday.

Borders, an Ann Arbor, Mich.-based specialty retailer of books and other educational and entertainment items, filed for bankruptcy on Feb. 16. The Chapter 11 case number is 11-10614.

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