Borders Files for Chapter 11 Bankruptcy

I just reviewed the list of the 200 Borders stores that are scheduled to close. There are seven in North Texas:

1. 10720 Preston Road, Dallas
2. 1601 Preston Road, Plano
3. 2403 S. Stemmons, Lewisville
4. 5615 Colleyville Boulevard, Colleyville
5. 1131 N. Burleson Boulevard, Burleson
6. 2709 N. Mesquite, Mesquite
7. 3600 McKinney Avenue, Dallas

Dallas will retain the store on Greenville Avenue, Fort Worth will keep its store open, and the location at the D/FW Airport will continue to operate along with the stores in Allen and in Arlington.

Of the 28 stores operating in Texas, eighteen will remain open, including all three locations in San Antonio and the four locations in Houston.

You can see the entire list of 200 stores scheduled to close here.

Today's Shelf Awareness reported this morning that:

While Borders plans to close 200 superstores in the next several weeks ... it may close up to 75 additional stores after that.

Don't forget that Borders still operates a lot of Waldenbooks in addition to a fair number of other non-superstores.

Shelf Awareness also said:

Borders estimated that it loses about $2 million a week combined on the stores set for closing.

I'm always sad to see a bookstore shutter its windows but--with numbers like that--it's not hard to see why Borders is taking this action.

So what do all these bookstores closing and Borders filing for protection under Chapter 11 mean?

Well, this is not great news for the publishing industry at a time when publishers are still trying to figure out how to make money in the brave, new digital world. In addition to having fewer venues in which to sell their wares, the Big Six publishing houses are Borders' largest unsecured creditors. You can go here to read Borders' bankruptcy filing. Scroll forward to the list of the 30 largest unsecured creditors. Borders owes Penguin (#1) $41 million, and Macmillan (#6) $11 1/2 million.

A friend called me today to say that this would just escalate the move to e-books. I'm not sure there is a direct correlation between the two although I'm intrigued by the fact that all three Austin Borders are closing. Austin is the Silicon Valley of Texas with a very young, very e-savvy population.

On the other hand, Austin still has five Barnes & Nobles stores.

According to Publishers Weekly here, most of the 200 stores being closed have over 20,000 square feet including a 42,770 sq. ft. operation in Chicago and a 42,600 sq. ft. store on Park Avenue in New York.

But, let's face it, consumers in Chicago and New York are not as likely to be hurt by this the move as those living in more remote locations with less access to bookstores. Those consumers may have to turn to the Internet for their books.

But will they order physical books from Amazon or e-books? Either way, this event is likely to benefit Amazon's business.

Yesterday's Wall Street Journal reported here:

The Ann Arbor, Mich., company's $505 million bankruptcy debt from GE Capital to fund its operations while in bankruptcy comes in many tranches, and includes both a $55 million term loan and a $410 revolving loan ... The filing comes after Borders unsuccessfully sought to avoid bankruptcy by striking a tentative deal with GE Capital for a new $550 million secured line of credit. But the retailer first had to hit certain benchmarks, such as negotiating more favorable store leases with its landlords and finding other lenders to take on $175 million of the credit line.

The fact that GE Capital is willing to risk $505 million suggests that Borders has a least a chance of being able to successfully manuever out of the hole it's dug for itself.

Borders previous management made huge mistakes--not the least of which was handing over their Internet business to Amazon to manage for them. B&N was much quicker in trying to adapt to the new reality of the Internet and digital books while Borders focussed on building more and bigger bricks-and-mortar stores.

Stay tuned ...