STOP PRESS - Borders Files for Bankruptcy; Owes Top Publishers $230 Million, and Will Close About 200 Stores

From PublishersLunch:

Borders formally filed for Chapter 11 bankruptcy protection in a Manhattan Federal Court, listing total debt of $1.29 billion and supposed assets of $1.275 billion. Among the top 30 unsecured creditors listed in the filing, book publishers and distributors are owed roughly $230 million (see below for the full list).

The bookseller says in an announcement that it "has received commitments for $505 million in Debtor-in-Possession (DIP) financing led by GE Capital, Restructuring Finance. 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." For customers, they expect to honor the Borders Rewards program, gift cards and other customer programs and they expect "to make employee payroll and continue its benefits programs for its employees."

The company says they had 642 stores open as of January 29. In their press release, they say they expect to close "approximately 30 percent" of those stores, or roughly 200 locations, "in the next several weeks."

Ken Hiltz has been named senior vice president - restructuring of the company. Named advisory firms include Jefferies & Company for financial and restructuring services; DJM Property Management for lease and real estate advisory services; and consultants AP Services for interim management and restructuring services. The company intends to "finalize and implement a store closure, store liquidation and lease modification plan" as already discussed and approved by their board.

President Mike Edwards addresses the obvious in the release, "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." Elsewhere, the announcement perpetuates the company's illusion that they are but one more step away from a turnaround into "a stronger and more vibrant book seller."

The publisher creditor list comprises:

Penguin $41.1 million
Hachette Book Group $36.9 million
Simon & Schuster $33.75 million
Random House $33.5 million
HarperCollins $25.8 million
Macmillan $11.4 million
Wiley $11.2 million
Perseus $7.8 million
F+W Media $4.6 million
Houghton Mifflin Harcourt $4.4 million
Workman $4 million
McGraw-Hill $3.1 million
Pearson Education $2.8 million
NBN $2 million
Norton $2 million
Zondervan $1.9 million
Hay House $1.7 million
Elsevier Science $1.6 million
Publications Intl. $1.1 million

Readers will recall that we recently tried to frame the coming Borders bankruptcy in the context of the AMS bankruptcy from late 2006. In that filing, the 40 largest publisher creditors were owed $220 million, topped by Random House, which was owed $43.3 million.