WASHINGTON — US bookstore chain Borders announced Wednesday that it has filed for bankruptcy protection from its creditors so that it can reorganize and re-emerge as "a stronger and more vibrant book seller."
"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," Borders president Mike Edwards said in a statement.
"To position Borders to remedy this condition, Borders Group, with the authorization of its board of directors, has filed a petition for reorganization relief under Chapter 11 of the Bankruptcy Code," he said, citing the US statute that allows him to fend off creditors seeking repayment while the company regroups.
In recent years, Borders has lost millions of dollars, in an industry in major transition from print to digital products.
In July, Borders launched an online electronic book store to challenge Amazon, Apple and Barnes & Noble in the fast-growing market for digital books -- companies that the Ann Arbor, Michigan based chain is seen as having badly trailed in the rapidly changing book market.
Edwards said Borders 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," Edwards said.
"This decisive action will give Borders the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganize in order to reposition itself to be a successful business for the long term," Edwards said.
Recent news report predicted the reorganization filing, after Borders Group delayed payments to vendors for two months and in recent weeks aggressively pursued deals with creditors and vendors despite withholding payments to conserve cash.
"We are confident that, with the protection afforded under Chapter 11 and with the support of employees, publishers, suppliers and creditors, and the reading public, a successful reorganization can be achieved enabling Borders to emerge from the process as a stronger and more vibrant book seller," Edwards said.