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Why All the Hand Wringing About A Borders Bankruptcy?

Posted By admin || 17-Feb-2011

Borders in San Mateo, California.

Everyone seems to be distressed about a possible bankruptcy filing by Borders Group Inc. But why?  It seems that when you speak of bankruptcy many only look at it as a negative, some indicator of impending doom.  But the reality is that bankruptcy is often the lifesaver that debtors need.  For businesses such as Borders, bankruptcy is the shock that a heavily indebted company could use to infuse new life into the dying brick and mortar bookselling business.  Let's go back a few years.

Remember the loud proclamation that GM and Chrysler were on their death beds?  What happened?  They filed bankruptcy is what happened.  They filed bankruptcy and used the opportunity that largely reduced debt offered to raise their companies from the ashes and become profitable again. The success stories of bankruptcy are often forgotten when we hear of companies such as Borders considering a bankruptcy filing.  We forget that bankruptcy is there to save companies and individuals from crushing debts which could destroy them fiscally. Right now Borders is on the cusp of potential success.

A bankruptcy filing could free them of debt which may be preventing them from engaging in the type of innovation that could help them effectively compete with behemoths such as Amazon who have challenged the dominancy of the brick and mortar book-selling business model. Chapter 11 bankruptcy will give Borders the power to negotiate with publishers so that they can bring their costs in line with the new realities of their business, and that's something that they and their investors can be happy about.

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