Is bankruptcy looming for Borders?

Company restructuring could close many 'under-performing' stores; fate of downtown Palo Alto store unknown

Retail bookseller Borders Group, Inc., has announced that it plans to undergo a major restructuring that will close many stores and ask vendors and some landlords to work with the company on its debts.

Company executives said in a Jan. 27 statement that it has received a $550 million financing commitment from GE Capital, Restructuring Finance. The funding had several conditions, including closing under-performing stores.

But a Feb. 1 story in financial-news outlet Bloomberg News noted that three sources close to the company said Borders could file for bankruptcy as soon as next week. A source in the Bloomberg story said as many as 150 of Borders' 650 stores could close.

Borders has operated a bookstore in downtown Palo Alto at the historic Varsity Theater building at 456 University Ave. since 1996. The fate of that store amid the restructuring plans has not been decided, company spokeswoman Mary Davis said Wednesday.

She confirmed the company is finalizing a closure program by identifying under-performing stores.

"The stores will be closed as soon as practicable," she said.

The company has not announced how many stores will close or their locations and has not provided a timeline.

"When we are ready to announce something, we will," she said.

Landlord Charles "Chop" Keenan said Borders is current on its rent. The Palo Alto store is a good business, according to Keenan. If the closures involve the bottom one third or even 75 percent, Keenan doesn't think the Palo Alto store would be among those on the chopping block, he said.

"I think the pregnant question is, does the model work?" Keenan said of Borders' future.

Borders is the nation's second largest bookstore chain with approximately 19,500 employees throughout the United States, primarily through its Borders and Waldenbooks stores, according to the company.

The company is in discussions with some vendors and landlords on restructuring its financial agreement, executives stated in the January news release. Borders had disclosed earlier this year that it was delaying payments to some vendors.

The company "is doing everything possible to maintain its long-term and valued relationships with our vendors and publishers, which are in the best interests of serving our combined customers. We view the refinancing route as the most practical, efficient and beneficial to all parties, and we are working with our vendors in this regard," Borders President Michael Edwards said in the statement.

He did not rule out a bankruptcy filing.

"At the same time, given the current environment surrounding Borders, and in order to assure that the company can pursue its efforts to position itself to properly implement its business plan, it is prudent as well for Borders to explore alternative avenues, including the possibility of an in-court restructuring.

"We are confident that whatever path Borders pursues to implement its strategy, we will be able to count upon the support of our vendors, who understand the critical role a strong Borders provides to the reading public," he said.

Davis would not confirm or deny the Bloomberg report regarding bankruptcy.

"Our goal is to have a strong Borders for the long term. As such, Borders is involved in discussions with multiple parties -- including lenders, vendors, landlords and other business partners -- to determine the route that will provide it with the best opportunity to move forward with its business strategy.

"Borders understands the media interest in its situation but will not comment on theoretical, suggested or rumored outcomes to this process. Once the terms of any arrangements are finalized, Borders will make an appropriate announcement," she said.

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Posted by bad management
a resident of College Terrace
on Feb 2, 2011 at 4:40 pm

Borders just suffers from poor management. Their main competitor, Barnes & Nobles, is doing fine. B&N has moved into the 21st century with their profitable e-readers and e-books and internet services in addition to traditional stores. Borders needs to keep up or die off.

Like this comment
Posted by E-Readers-For-All
a resident of Another Palo Alto neighborhood
on Feb 2, 2011 at 4:52 pm

The likely Chapter 11 of Borders has been discussed in the trade press for several months now. Borders has announced a couple of times that it would not likely make payments to vendors this month. Seems that the "grim reaper" is catching up with this Gutenberg-era book seller.

The emergence of the Internet, and in the last three years, the incredible technological advancements of e-ink, and LED displays, we have seen a number of very popular handheld reading devices. This week, Amazon has announced that its Kindle sales are exceeding its paper book sales--

Kindle eBooks outselling paper books on Amazon!
Web Link

Google has announced an on-line book sales outlet, as well as offering the reading public world wide access to millions of out-of-copyright books, in both .pdf and .epub format. The Internet Archive offers somewhat fewer books, but adds over 1,000 titles a day to its archive. This organization has partnered with some public libraries that declined Google's offer to digitize their books. So, the combination of both Google's books, and the Internet Archive's books, gives the ordinary person access to (probably) over 3M-4M books which can be downloaded for free.

Amazon last week announced something called "Singles", which are short "books", that cost as little as $.99. The success of this e-publishing format will take some time to establish; however, the fact that "publishing" houses like Amazon can experiment, and innovate, is clearly enabled by the technological success of the Kindle-style reading devices. Today, Rupert Murdoch has announced an iPad magazine, which will soon be competing with paper magazines, which have seen dwindling circulation in recent years.

Locally, it's hard not to see the effects of the Internet in any coffee shop. The iPads have become very visible in the past few months, with Kindles still very much in evidence. Virtually everyone in these places has a laptop, a Netbook, a Kindle, an iPad, or some sort of handheld device. The number of books to electronic devices is usually 1:10 to 1:15. This is a dramatic turnaround from just a few years ago. Even elderly people are sporting Kindles and iPads, these days.

And keep in mind that all of these devices contains a wireless interface. Be it 3G/4G or WiFi, people need not go to a bookstore, or a library, to browse, or gain access to reading material.

As far as reading, the future has come .. and there are consequences to those lingering in the past.

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Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 2, 2011 at 5:08 pm

I love to read and I can't see me giving up books for some time.

However, saying that, Borders and others have been competing with the likes of both Costco and Amazon for sometime. It is also competing against the great libraries most cities have. Moving with the times has not been something that is easy for a bookstore.

Our own downtown Borders has charm, a coffee shop, but it is not ideal. Parking is problematic in downtown if all you want to do is quickly go into a store and buy what you know you want on your way home from work.

Bookshops have to change. Having free wifi is one option. Having computers available (even for a small charge) would be another.

I would hate to see the demise of bookshops, particularly those with a great childrens' section. But unless they innovate, they will be lost.

Like this comment
Posted by John the Man
a resident of Another Palo Alto neighborhood
on Feb 2, 2011 at 5:41 pm

I like books.

Like this comment
Posted by julie britton
a resident of another community
on Feb 2, 2011 at 6:20 pm

i agree. Borders does suffer from bad management. they are not intouch with reality. too bad to see them go.

Like this comment
Posted by Digs
a resident of Old Palo Alto
on Feb 2, 2011 at 6:35 pm

I'm a very experienced book person who worked at Borders, and I can tell everyone the biggest problem with the company is that the farther you go up the corporate hierarchy, the more you find people who believe that bookselling is just another form of retail. It is not.
Last Spring, Borders issued a press release bragging that "from now on we want Borders to be known as THE bookstore for serious readers." In that same press release, they announced that their new Director of Marketing was the former chief executive of a leather handbag company. They not only didn't know what was wrong with their hiring decision, they didn't remotely understand what was embarrassing about making those two statements in the same press release. That leather handbag salesman is now President of Borders.
Working there, I found I could not make a certain co-worker understand the difference between not-finding-a-book-in-the-computer and finding-it-but-the-computer-says-we-have-zero-in-inventory. If you don't find the book in the computer, you're probably looking it up wrong. I repeatedly heard this person tell a customer "ooh, I'm so sorry, it looks like we don't have that book," when I knew the book, knew we had it, knew right where it was, but didn't say anything, because that co-worker was our General Manager, hired for her "retail experience" at Nordstrom's.
Borders is clueless about the book business. They deserve to fail.

Like this comment
Posted by neighbor
a resident of another community
on Feb 2, 2011 at 7:26 pm

Patronize Kepler's and Books Inc. --- where they know books are not just "product" and give real service to their customers.

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Posted by Nora Charles
a resident of Stanford
on Feb 2, 2011 at 9:04 pm

A world without bookstores is unimaginable. There are some of us who love to look at the rows of books, discover something new, and smell the fresh pages. To me kindles are soulless devices, and if they serve to hasten the demise of bookstores, I curse their creation.

Like this comment
Posted by Anon.
a resident of Crescent Park
on Feb 3, 2011 at 4:23 am

Egads, i sometimes go to Borders, but I have to be pretty desperate just in the off chance that I might need to visit what is probably the worst restroom facilities in the Bay Area or catch a wiff from the stench of one of the homeless people who lounge around in there like their going to buy a book.

Seriously, I had to take that poke at Borders. It is no wonder more people do not go to Borders, and I don't think it is the parking, I can park at the parking structure close by and get there in a minute or two. The problem is the prices. The people who work there are mostly nice and helpful, but you do not begin to ever get just overpriced stuff until you begin to play their game with the membership card and keep up with discounts ... which I hate.

I much prefer Kepler's, even though they are smaller.

I'd love to see the Varsity theater in that spot again ... then I could use the last remaining copper Varsity dollar that I still have from the 70's! That place was so cool, I still the half the reason I go to Borders is just to see what used to be the old theater. It's probably gone for good, but it was a very nice place at one time.

I'd hate to see the place get torn down, that would be a shame. Borders just does not distinguish itself in any way as a bookstore any more.

Like this comment
Posted by Anon.
a resident of Crescent Park
on Feb 3, 2011 at 4:24 am

Ooops ... they're ... I meant "they are"

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Posted by Steven Kunes
a resident of Old Palo Alto
on Feb 3, 2011 at 11:02 am

Perhaps consolidation with Barnes & Noble would be the way to go. Obviously Borders suffers from management problems and with the advent of the e-book there may not be enough readers for conventional books...sad to say. It kind of serves them right, however, since megastores such as Borders are what marked the demise of so many smaller family-owned bookstores.

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Posted by Albert
a resident of Charleston Meadows
on Feb 4, 2011 at 8:48 am

Downtown Palo Alto is not a good place for bookshops. That seems like an odd statement to make, since there are a lot of people on the street (the most in Palo Alto), and book shops depend on walk-in traffic.

But let's review recent history. In the last ten years, or so, Downtown has lost its bookstores. Bookbuyers, Chimera, Stacey's, Stanford Book Store, and Megabooks, all on University, have disappeared. A smaller bookstore on Hamilton was in a block of stores that burned, and was not reopened after the building was repaired. If memory serves, there was a small shop in Alma, too. Borders is the only large bookstore that remains. (Bells is in no danger at the moment, but it is a family business, and not likely to continue on forever.)

While e-books and the Internet are doubtless a primary force driving a shift in distribution, there is also a cost-of-business component driving up rents, which is harder to see, here in Palo Alto. It's a shame that the Weekly hasn't investigated this matter and shown the effect of rent increases on the ability of bookstores to stay on University Avenue. (We have to wonder: "how many books does a store have to sell to offset a $1,000/month increase in rent?)

The impact of the "Downtown Developers" lust for maximizing their profits is understandable, but there are consequences on the "quality of life" that results for the rest of us. Booking books on-line is one of those changes that we'll just have to get used to in the 21st Century.

Like this comment
Posted by Enough!
a resident of Charleston Meadows
on Feb 14, 2011 at 2:26 pm

Oh no! Just heard the news! Now what kind of dreck store is going to move in that beautiful space?

Bring back a movie theater.


Like this comment
Posted by Enough!
a resident of Charleston Meadows
on Feb 14, 2011 at 2:28 pm

What does Anon mean 'torn down?'

They won't tear down that gorgeous building, will they? Downtown has been messed up enough...leave our historic buildings alone already!

Sorry, but further commenting on this topic has been closed.

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