A bankruptcy judge on Thursday approved Borders Group's plan to sell off its assets via a group of liquidators in what could be the final nail in the coffin for the 40-year-old chain.
Judge Martin Glenn of the U.S. Bankruptcy Court of the Southern District of New York approved Borders' plan to appoint liquidators led by Hilco Merchant Resources and Gordon Brothers Group to sell off its assets. Going-out-of-business sales are set to begin at some stores Friday.
The move had been expected since the Ann Arbor, Mich.-based bookseller's attempt to stay in business unraveled quickly last week, after a $215 million "white knight" bid by private-equity company Najafi Cos. collapsed under objections from creditors and lenders. They argued the chain would be worth more if it liquidated immediately.
There was a small reprieve: About 30 to 35 of Borders remaining 399 stores could be sold to rival chain Books-a-Million Inc. The two companies are still in talks, but if that deal happens, it could save about 1,500 of Borders remaining 10,700 jobs, said Borders lawyer Andrew Glenn.
Books-A-Million, based in Birmingham, Ala., will become the second-largest U.S. bookseller after Borders liquidates. It operates more than 200 stores in 23 states and the District of Columbia.
The deal makes sense for Books-A-Million because they will likely be able to get a good deal since it will be easier for landlords to lease out the vacant space to a similar type of retailer, and not spend thousands renovating it for another type of store or dividing up the space, said Morningstar analyst Peter Wahlstrom.
The small number of stores also seems "manageable" for Books-A-Million, which could enter markets it is not presently in or upgrade to a better location, he said.
Borders filed for bankruptcy protection in February after being hurt by tough competition from online booksellers and discounters. It hoped to successfully emerge from bankruptcy protection by the fall as a smaller and more profitable company, but pressure from creditors and lenders eventually led the chain to eventually seek approval to liquidate.
At its peak, in 2003, Borders operated 1,249 Borders and Waldenbooks, but by the time it filed for bankruptcy protection in February that had fallen to 642 stores and 19,500 employees. Since then, Borders has shuttered more stores and laid off thousands.
Borders says it expects to be able to pay vendors for all expenses incurred during the bankruptcy cases.