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.