Borders Group, currently run by cigarette tycoon and corporate raider Bennett S. LeBow, has filed for Chapter 11 bankruptcy. Bloomberg has the story:
Borders Group Inc., the number-two U.S. bookstore chain, filed for bankruptcy in New York today after management changes, job cuts and debt restructuring failed to make up for sagging book sales in the face of competition from Amazon.com Inc. and Wal-Mart Stores Inc.
Borders will shut about 30 percent of “underperforming” stores “in the next several weeks” and restructure with $505 million in so-called debtor-in-possession financing from lenders led by GE Capital, according to a statement. The 40-year-old chain listed debt of $1.29 billion and assets of $1.28 billion as of Christmas 2010 in its Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan. The company plans to restructure and continue to operate.
Borders, whose market value shrunk by more than $3 billion since 1998, racked up losses by failing to adapt to shifts in how consumers shop. Its first e-commerce site debuted in 2008, more than a decade after Amazon.com revolutionized publishing with online sales. The world’s largest online retailer beat it again by moving into digital books with the Kindle e-reader in 2007, a market Borders entered in July.
Hedge fund owner Bill Ackman, who previously offered to help Barnes & Noble buy out Borders, owns the majority of Borders shares. Borders plans liquidation sales on President’s Day, according to Bloomberg.
With electronic technology taking over, how much longer can any book superstore last?
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