Borders Declares Bankruptcy, Owes Diamond $3.9 Million
In a move that Publisher's Weekly is calling "inevitable," Borders Group has filed for protection under Chapter 11 of the United States Bankruptcy Code. The news is unsurprising given the bookseller's ongoing trouble with paying publishers, distributors and other vendors in a timely manner. Diamond Book Distributors, the leading distributor of comic books and graphic novels, is on the hook for $3.9 million.We reported last month that Diamond had cut off Borders from the sweet spigot of comic books, which obviously turned out to be a smart move on behalf of the graphic novel distributor. $3.9 million is a lot of money, but Diamond got off relatively light compared to book publishers like Penguin, who's owed a startling $41.1 million.
"It has become increasingly clear that in light of the environment of curtailed customer spending, our ongoing discussions with publishers and other vendor related parties, and the company's lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term.," said Borders president Mike Edwards in a statement explaining the decision to file for Chapter 11. "This decisive action will give Borders the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganize in order to reposition itself to be a successful business for the long term," said Edwards.
For its part, Borders has secured over $500 million in special financing to proceed with its immediate plans, which include closing 30% of its stores, honoring customer initiatives like rewards and gift cards, and make payroll. The company's online bookstore will remain open as well.