Jan 31 – Feb 6, 2011 Edition Borders Delays Publisher Payments, Bankruptcy Looms

AUTHORLINK NEWS/January 31, 2011—Borders Group, Inc., America’s second-largest bookstore chain, said Sunday it will delay payments to publishers and other vendors, indicating it could be heading for bankruptcy.

According to The Wall Street Journal today, the company said the move is designed to preserve liquidity as it works to restructure its finances. Borders has been pressuring publishers to continue shipping books and to accept delays in payments until it can secure much-needed new loans. But publishers have been cool to the idea of keeping the company afloat.

Borders now admits that bankruptcy is a real possibility, though it said last week that it has tapped a new $550 million credit line from General Electric Co’s. finance division that would resolve its cash problem. GE, however, said it would provide the funds only if Borders met several tough conditions, including reaching an accord with publishers to convert late payments to $125 million in debt that Borders would have to repay later.

Borders has not announced a deadline for publishers to decide whether to grant late payments. But insiders say the company will decide on a restructuring plan before March.

According to The Journal, “To avoid bankruptcy, Borders needs to get concessions from publishers, renegotiate with landlords, and persuade other lenders to take on $175 million of the proposed $550 million credit line from GE Capital. “