Borders, the national bookseller trying to emerge from Chapter 11 bankruptcy protection, is still struggling to find a buyer and is now faced with closing 51 additional stores because it has failed to negotiate an extension with landlords.
Thursday's disclosure, made in a bankruptcy court filing in New York, said that Borders had secured lease extensions at 365, or about 90 percent, of its remaining stores, but that it hasn't come to terms with landlords at 51 locations.
Borders' bankruptcy financing terms require that it initiate the liquidation process if leases are not extended, so it has no choice but to close some of its "most profitable" stores.
Borders representatives are continuing discussions with landlords and "believe that, with additional time, they can obtain extensions at many of the remaining 51 locations," the filing says.
The Borders' bankruptcy has become in essence a race against time. Borders is in the unfortunate position of having failed to secure an effective prepackaged bankruptcy that would have spelled out lease terms with its most important landlords. Because of this gaping hole in its pre-bankruptcy planning, the bookstore may need to close many stores, including those that would have been desirable to any potential buyer. The downside to this bankruptcy situation is that if Borders closes a significant number of profitable stores, finding a buyer may become next to impossible. Even if the bookstore is able to find a buyer after closing profitable stores, they may not be able to sell the company for an amount that is acceptable to creditors. If that is the case, the bookstore may lose its battle and need to liquidate in Chapter 7 bankruptcy .