Borders Group Inc.’s likely liquidation has been sealed, even as its shift from an ongoing business to a bundle of assets will cause problems, said landlords, creditors and e-book maker Kobo Inc.
Borders will wind down its remaining 399 stores starting July 22 after it couldn’t reach an agreement with an earlier bidder, Najafi Cos., about an offer to keep the company running. The company won’t hold an auction as there have been no proposals to keep the company operating, it said in a statement Monday.
“We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, eReader revolution, and turbulent economy, have brought us to where we are now,” said Borders Group President Mike Edwards in a statement.
Ann Arbor, Mich.-based Borders closed three central Indiana locations as part of the reorganization following its Feb. 16 filing. Last month, the company identified another 51 stores it could be forced to liquidate to meet terms of an agreement with its lenders, including the Indianapolis airport location. It also has locations in Castleton, Greenwood and Noblesville.
Liquidators led by Hilco Merchant Resources and Gordon Brothers Retail Partners LLC, who were the opening bidders for the planned auction, will now buy the chain’s assets and liquidate them, subject to bankruptcy court approval. The deadline for bids passed without any offers.
Borders has about 10,700 employees, and a phased rollout will close its stores by September. The company said it will complete the wind-down under Chapter 11 and expects to be able to pay its business partners.
The sale to liquidators, still subject to bankruptcy court approval, leaves no one to assume the company’s business contracts, creditors said in objections filed in Manhattan bankruptcy court Monday.
“The debtors are proposing a hurried and confusing sale process that leaves parties such as Kobo uninformed as to precisely what will be sold or how the debtors intend to proceed,” lawyers for Kobo wrote.
Kobo, a Toronto-based maker of electronic books, said it should have the right of first refusal for any transfer of Borders’ 11 percent stake in its equity, and Borders’ shouldn’t be allowed to sell information that Kobo has licensed to Borders.
The new sales motion isn’t consistent with Borders’ past practices and violates “critical landlords rights and protections” under leases, said lawyers for Macerich Co. and other landlords.