DETROIT — Borders Group threw in the towel Monday afternoon and agreed to submit a previously announced liquidation plan to the U.S. Bankruptcy Court in Manhattan on Thursday.
The Ann Arbor, Mich.-based bookseller had been trying to reorganize for five months, but was overwhelmed with debt, losses and changing consumer tastes.
Borders now operates 399 stores and employs approximately 10,700 workers. Borders has three stores in Maine, in South Portland by the Maine Mall, in Bangor by the Bangor Mall and in Brunswick. It also operates a Waldenbooks at the Auburn Mall. According to a company spokesman, Borders averages between 20 and 40 employees at its stores, depending on the size of the business, with between 12 to 17 at its Waldenbooks locations.
“Following the best efforts of all parties, we are saddened by this development,” said Borders Group President Mike Edwards in a statement. “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time including the rapidly changing book industry, e-reader revolution and turbulent economy have brought us to where we are now.”
The deadline to submit a bid for the Ann Arbor-based bookseller as a going concern came and went Sunday without a bid. Barring any other bids, the court was expected on Thursday to approve the back-up bid — a full chain liquidation led by Hilco Merchant Resources and Gordon Bros. Retail Partners.
An auction planned for Tuesday will not happen now.
The news seemed like a formality after a bid for Borders fell apart last week, said Laura Bartell, a bankruptcy law professor at Wayne State University. “The physical bookstore has become a thing of the past,” she said.
The failed bid by Najafi, a Phoenix-based private equity firm, had seemed like the best hope for the book seller to survive. The bid emerged July 1 when Najafi made an offer of $215 million in cash, $220 million in assumed debt and $15 million for unsecured creditors.
But creditors objected to the bid, indicating that the bid from Hilco and Gordon Bros. would give creditors between $252 million and $284 million in cash.
Najafi, which owns Book-of-the-Month Club, Doubleday Book Clubs and Columbia House, seemed like a good fit to operate Borders as a going concern.
Paul Magy, a Southfield, Mich.-based bankruptcy attorney who represents 28 landlords with Borders stores, said there is still a possibility, no matter how small, that a bidder would step forward yet this week.
“It does look grim for anything other than a liquidation at this point,” Magy said. “That would be a very sad occurrence and the loss of a Michigan-based retailer and 11,000 jobs. It really is beyond Borders’ control right now.”
“For decades, Borders stores have been destinations within our communities, places where people have sought knowledge, entertainment, enlightenment and connected with others who share their passion. Everyone at Borders has helped millions of people discover new books, music, movies, and we all take pride in the role Borders has played in our customers’ lives,” Edwards said. “I extend a heartfelt thanks to all of our dedicated employees and our loyal customers.”