Borders, the bankrupt bookstore chain, has asked a judge to overrule objections of landlords to the sale of the chain's assets. Borders told the bankruptcy judge it will provide more information about property leases next week in the effort to get the landlords' objections overruled.
Several landlords in markets where Borders has bookstores have objected to the deal Borders has made to sell its assets to Direct Brands, a portfolio company of Najafi, for $215.1 million. The landlords say Borders has not told them what leases it intends to keep or reject in the sale to Najafi, arguing they don't have time to know whether they agree or disagree with the sale of assets.
Borders responded to the landlords' objections in U.S. Bankruptcy Court in Manhattan Tuesday. The structure of the deal, still requiring an auction to test for higher bids, is set to go before U.S. Bankruptcy Judge Martin Glenn tomorrow.
The company said in a statement that Borders stores truly value their relationships with landlords, who have worked constructively with the debtors throughout these cases in their continuing efforts to rationalize their store footprint and their occupancy costs.
Borders is the second largest bookstore chain in the U.S. behind Barnes and Noble. Borders filed for bankruptcy in February after closing more than 200 stores. It has 405 remaining open.
Borders made a deal with Direct Brands two weeks ago to purchase Borders' assets for $215.1 million in addition to assuming roughly $220 worth of liabilities, if the deal is approved by the bankruptcy court. The purchase and debt assumption is subject to approval from the bankruptcy court. The deal will be considered on July 21.
Borders agreed to the deal, a stalking horse bid, after considering two offers, and the Ann Arbor, Mich.-based company plans to seek approval from the bankruptcy court.
Borders believes a sale provides the best path forward to reposition the business for a successful future and to maximize value for the company's stakeholders, the company said in a release.
Najafi bought direct brands in 2008. Direct Brands is the owner of Book-of-the-Month Club, Doubleday Book Clubs and Columbia House.
Private-equity investor Alec Gores was also trying to buy Borders through the stalking horse bid process for Borders.
Brick-and-mortar bookstores have struggled since the recession and the fast growth of digital books. Late last year Barnes and Noble, America's largest bookstore chain, said it was in discussions for a possible sale and looking at other strategic options for the future since it it was losing money as buyers pulled away from hardcover books, the most lucrative product brick-and-mortar stores have traditionally sold.
Borders has struggled for years. The company opted for a decade to avoid developing its own online bookstore, as Barnes and Noble did, partnering for many years with Amazon instead before launching its own online bookstore in the past year. That move was viewed by many industry observers as costly to Borders' future.
Borders said there would be no changes in its day-to-day operations pending approval of the sale.