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Borders files for bankruptcy; Valencia store among those to be closed

Retail: National book-seller will continue to honor its rewards program, employee benefits

Posted: February 17, 2011 1:55 a.m.
Updated: February 17, 2011 1:55 a.m.

This Borders Books & Music store in Valencia is one of nearly 200 locations around the country scheduled to close after the national chain of book-sellers filed for Chapter 11 bankruptcy protection on Wednesday.

 

Borders bookstore chain announced Wednesday it is filing for bankruptcy protection and will close about a third of its bookstores, including its Westfield Valencia Town Center store.

The mega bookstore was one of the chain stores that drove mom-and-pop book-sellers out of business, but has been struggling with changing reading and buying habits of consumers, the recession, and a burdensome debt load listed at more than $1 billion, according to the bankruptcy filing.

Borders announced it will close approximately 200 stores nationwide, and identified superstores targeted for closure.

Common stock ceased trading on the New York Stock Exchange as of the close of the market Tuesday.

The Borders Group stated it in a press release that it does not have the capital resources needed to be a viable competitor.

The company said it is serving customers in the normal course of doing business, including honoring its customer rewards program and gift cards. The company expects to make employee payroll and continue its benefits programs for its employees, too.

However, a source told The Signal that any returns need to be made at the local Borders bookstore before Friday, and that coupons will be only be honored through Friday. Gift cards can still be redeemed. The source spoke on condition of anonymity.

Inventory sales at the stores slated for closure are expected to begin Friday. Liquidators will take over closing the stores. It is expected that the stores will close by the end of April, according to the source.

Locally, employees have not heard whether there will be any severance pay or when they will be let go.  About 25 employees at the Valencia bookstore are expected to lose their jobs.

The company emphasized that the closings were a reflection of economic conditions, cost structures and viability of locations, among other factors, and not on the dedication and productivity of the work force in these stores.

Stores to close
Borders published a list of store closures this morning on a website it set up specifically to address bankruptcy and store closure questions. Thirty-five stores in California will close, more than any other state in the country.

The list includes bookstores slated for closure at several regional shopping malls and in high rent locations such as the Glendale Galleria and the Sherman Oaks store on Ventura Boulevard.

“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,” said Mike Edwards, Borders Group president.

Borders has struggled to maintain a competitive presence in the marketplace as consumers shopping habits altered course dramatically in the past decade. Originally teamed with Amazon.com for online sale of its books, Borders launched its own online site in mid-2008. But not having its own online presence prevented customers from using their rewards points and coupons for online purchases.

Competition
The first Borders opened in 1971 in Ann Arbor, Mich., where the company remains headquartered today. K-Mart acquired Borders in 1992, and created the partnership with Amazon in 2001.

The book retailer made Wi-Fi service available in its stores in 2003. It opened Seattle’s Best Coffee shops in 2004.

Long after other book retailers launched e-readers, Borders came late to the game by offering the Kobo e-reader only last summer, along with its e-bookstore on the company’s website.

The e-reader came preloaded with 100 books but was cited by users to be poorer performing than its counterparts, such as the Amazon Kindle. An improved version was released this past fall.

Cash infusions
On Wednesday, the company announced it will receive $505 million in debtor-in-possession financing from GE Capital and others to help it reorganize.

Borders received a cash infusion of $25 million last May through the private purchase of 1.1 million shares in the company’s common stock, and additional financing the company had previously arranged.

In June, the company appointed Mike Edwards as a new president and CEO. Edwards had served as the interim CEO and had a background in the retail industry.

“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.

The list of store closures can be found at www.bordersreorganization.com.

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