DETROIT — Borders Group could be forced to close 51 of its most profitable locations — including its Auburn, Maine, store — because landlords of those stores haven’t agreed to give the bookseller more time to decide whether it wants to keep the leases.
The Ann Arbor, Mich.,-based bookseller needs all its landlords to sign off on a request that gives it more time to decide to accept or reject those leases during its Chapter 11 bankruptcy protection process that began Feb. 16.
Without the affected landlords agreeing to give Borders more time, it could jeopardize its debtor-in-possession financing arrangements that are critical to move through the bankruptcy process.
Paul Magy, a Southfield, Mich.,-based bankruptcy attorney who represents 28 landlords with Borders stores, said he wouldn’t be surprised if some of the stores fall off that list. For example, he represents the landlord on the Key West, Fla., location who agreed to the extension weeks ago.
“It’s bizarre. It is a very unusual filing. Borders is basically saying, ‘We don’t want to do this, but our loan documents are requiring that we do this,’” Magy said.
Borders also didn’t request that the court set a hearing date nor did the filing indicate a deadline for reluctant landlords to agree to the extension, he said.
“What landlord is going to make a deal with a company that may not exist in three months?” Magy said, referring to negotiations Borders has with two potential bidders, Gores Group, a private equity firm in Los Angeles, and Najafi, a private equity firm in Phoenix.
Borders has received the signoffs for 365, or 90 percent, of its leased locations, according to a filing Thursday with the U.S. Bankruptcy Court in Manhattan.
Borders spokeswoman Mary Davis said Thursday that while the filing mentions 51 store locations, she expects that a far smaller number would actually close.
“We would like to continue to operate most of these,” Davis said. “We are in discussions with our DIP lenders to seek relief from this requirement, and we are actively working with our landlords to obtain the required stipulations. In the meantime, all of these stores are open and serving customers as usual.”
While the Auburn, Maine, store is on the list of potential closures, the company’s other Maine locations in Bangor and South Portland are not mentioned in the bankruptcy filing.
Jeff Tuttle of the Bangor Daily News contributed to this report.