Borders secures loan commitment, raises possibility of bankruptcy
Borders Group announced on Thursday it has secured $550 million in refinancing from G.E. Capital, so long as the struggling bookseller meets certain requirements — including convincing major publishers and distributors to convert late payments into $125 million in loans.
That’s a major obstacle, as publishers already seemed poised to reject the proposal, which followed an announcement in late December that the retailer would delay payments to some publishers and distributors. The news led some, such as Diamond Book Distributors, to stop shipping to Borders, the second-largest book chain in the United States.
The company had pushed for an answer on its offer by today, when January checks are supposed to go out to publishers. But according to Publishers Weekly, publishers turned down Borders’ request for another meeting earlier this week, which would suggest that acceptance is unlikely.
Borders, however, isn’t limiting its options: For the first time in public, the bookseller raised the possibility of bankruptcy.
“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,” President Mike Edwards said in a statement. “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.”