Final Chapter. Liquidation brings sad end to Borders

By Kurt Anthony Krug Legal News An end of an era approaches as liquidation sales continue across the nation at Borders Books and Music stores. The 40-year-old Ann Arbor-based bookseller hasn't turned a profit since 2006, having lost $605 million in the last four fiscal years. In February of this year, Borders Group, Inc. - which oversees all Borders stores - filed for Chapter 11 bankruptcy protection. Borders has $1.275 billion in assets and $1.293 billion in debts. As a result of Chapter 11, Borders closed down more than 200 stores. During its five months in Chapter 11, only 399 stores remained (259 Borders super-stores, 114 Borders Express and Waldenbooks, and 26 Borders airport outlet stores) and 10,700 people were employed. Also in that period, Borders attempted to reorganize its business model and reinvent itself. Elements of this plan included aggressively growing Borders.com; expanding its eBook market share; expanding and enhancing its retail offerings (including non-book items); and promoting Borders Rewards Plus, its loyalty program that boasted 40 million members last year, per the bookseller's web-site. At the same time, Borders executives were looking to find a buyer. Last month, a bid from Arizona-based private equity firm Najafi Companies fell through. There were talks that 30-35 Borders stores could be sold to rival bookseller Alabama-based Books-a-Million, but that also fell through. Once Borders goes out of business, Books-a-Million will become the No. 2 bookseller in the nation (Barnes & Noble - Borders' main rival - is No. 1). On July 21 in Manhattan, a U.S. Bankruptcy Court judge approved Borders' liquidation plan since a buyer could not be found. Consequently, Borders went from Chapter 11 to Chapter 7, which is when a troubled business badly in debt isn't able to pay its creditors and debts files for bankruptcy in a federal court. Liquidation firms Hilco Merchant Resources and Gordon Brothers Group are currently selling Borders' remaining assets, holding going-out-of-business sales at all Borders stores, which began July 22. ''We come here a lot. It's very disappointing,'' said Lauren Anastos, 22, of Farmington Hills. She and her brother Drew, 14, took advantage of the sales at the Novi store July 22, where the parking lot was nigh filled to capacity as was the case across Borders stores all over Metro Detroit. Currently, sales at Borders stores are 40-60 percent off on all its products. Even furniture and fixtures are selling at a discounted rate. All stores are slated to close their doors for the final time in September. Mike Edwards, president of Borders Group, released a statement that read: ''All of us have been working hard towards a different outcome, and I wish I had better news to report to you today. The truth is that Borders has been facing headwinds for quite some time, including a rapidly changing book industry, eReader revolution, and turbulent economy. We put in a valiant fight, but regrettably in the end we weren't able to overcome these external forces.'' Beginnings Borders was founded in 1971 by brothers Tom and Louis Borders, who were University of Michigan students. Originally called Borders Book Shop, it was located in a 800-square-foot building on South State Street in downtown Ann Arbor (currently, Borders in downtown Ann Arbor is located at Liberty and Maynard in what was once Jacobson's Department Store - another defunct Michigan-based business - and is considered the flagship store). Louis Borders developed cutting-edge inventory management software, making Borders unique amongst its competitors. Borders revolutionized the retail bookselling industry. Its employees had to be knowledgeable about authors and were renowned for excellent customer service. It offered a wide variety of books and encouraged customers to sit and read in their plush, comfortable chairs. It also sold coffee, pastries, and other treats in its café. In 1992, the Borders brothers sold their business to the Kmart Corp. (another Michigan-based business that has seen its share of troubles), which also owned Waldenbooks, a bookstore chain located mainly in shopping malls across the U.S. Kmart merged both booksellers, forming the Borders-Walden Group. In 1995, Kmart spun off Borders in a highly-structured stock-purchase plan as the bookseller went public through an initial public offering. Additionally, the Borders-Walden Group was renamed Borders Group, Inc. In 2001, Borders formed a partnership with online bookseller Amazon.com, offering online shopping eventually launching Borders.com, its own e-commerce site, in 2008. Businesses such as Dearborn-based Green Brain Comics are feeling the ripple effects Borders will leave in its wake. "Borders closing is a huge deal for the comic book business," explained Dan Merritt, who co-owns Green Brain with his wife Katie. "First, they leave behind millions of customers for us hardworking mom-and-pop-owned bookstores to cozy up to and impress with our awesome service and unparalleled selection. And secondly - and most importantly - Borders left behind a bazillion dollars in unpaid bills to distributors like Diamond Comics Distribution. Our biggest vendor is on the hook for nearly 4 million dollars of unpaid invoices, of which they can only expect pennies on the dollar through Federal Bankruptcy Court. This is a tragic example of how giant corporations sometimes poison the waters for us small business people.'' Authors also feel the loss. The end of Borders will cut down tremendously on opportunities for people to discover new authors, making that much harder for someone trying to break into print, according to novelist Colleen Gleason, best-known for her ''Gardella Vampire Chronicles'' series. ''I'm terribly sad, I'm absolutely devastated,'' said Gleason, of Livingston County. ''I wrote 12 of my books at the café in the Borders in Brighton. It's the right environment, the right place to work from the employees to the table I wrote at, and the music wasn't so loud. I'm absolutely devastated. We can look at the things they did wrong, but at the end of the day, we're short a bookstore chain people loved. We now have one fewer bookstore chain where people could browse and go to meet other people.'' Published: Mon, Sep 5, 2011

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