Borders Group Inc. says it may have to close dozens of its best-performing stores due to a requirement of its bankruptcy financing if their landlords don't agree to extend a lease-negotiation period.
Borders, which filed for bankruptcy court protection in February, has extension agreements for 365 stores. But it said in a court filing Thursday that it is still negotiating extensions for 51, many of which are among its top-selling stores, including one near Penn Station in New York. The affected stores are in 23 states and include 10 at airports across the country.
The company's special bankruptcy financing requires it to start closing the stores where it has not obtained extensions by June 22. But Borders said it has asked its lenders to waive that requirement until a hearing about the sale of the company on July 21. The lenders are considering the request, Borders said.
Borders is in discussion with several buyers who have indicated they would be interested in buying some of the stores the company might have to close. Liquidating the stores "may not maximize their value for the benefit of creditors and will result in a significant loss of jobs," Borders said in the filing.
It's a "Hobson's Choice," a seemingly free choice in which there actually is only one option, Borders said.
The book seller said in the filing _ actually a motion for the court to let it close the stores _ that it must now either hold closing sales at stores where it doesn't have extensions or risk being placed into default by its lenders. Basically, Borders says it is being forced to close stores even though it doesn't want to and doesn't think it is the best move for the company, because its hands are tied by the financing agreement.
"Indeed, if this motion is granted, (Borders) will not be able to sell the stores ... to a going-concern buyer because they likely will have liquidated," Borders said in the filing.
Spokeswoman Mary Davis says the company, based in Ann Arbor, Mich., wants to keep most of the 51 stores in question open and continues to negotiate with landlords.
"We expect a far smaller number to actually close," she said.
Borders had 642 stores before it entered bankruptcy court protection and has closed 228, leaving just more than 400 in operation.
The company had said it planned to emerge from bankruptcy protection by August or September.
But last week it said instead that it is negotiating to sell some or all of its stores and could file a plan for that process within a few weeks.
Borders, which started with a single store in 1971, helped pioneer the book superstore concept along with Barnes & Noble Inc. but was brought down by heightened competition by discounters and online book sellers.