Borders Group, owner of the second largest U.S. bookstore chain, said in its Chapter 11 bankruptcy filing that it will close down around 200 stores nationwide, sending store landlords into a tizzy.
Borders President Mike Edward said the decision was difficult but unavoidable as his chain does not have the capital resources it needs to be a viable competitor. The decision will affect 6,000 jobs but the stores it wants to close were losing a combined $2 million a week. Borders currently runs 659 stores nationwide.
The Chapter 11 filing is expected to give the company a fillip and help it compete against bigger rival Barnes & Nobel Inc. and stave off challenges from discounters such as Wal-Mart Stores Inc and Costco Wholesale Corp, Web retailers like Amazon.com Inc. and e-readers such as Kindle and iPad.
Most importantly, the decision is expected to help the company manage its finances better - as of Dec. 25, according to the documents filed on Wednesday, Borders had liabilities of $1.29 billion and assets of $1.28 billion.
The announcement, however, has sent Borders' landlords into a tizzy as the rental market is still soft and vacancy rates are high, even in prime shopping locations. Each of the Borders store, which will begin shutting down from this weekend, average 24,000 square feet.
Borders' landlords include mall owners Simon Property Group, Westfield Group and General Growth Properties Inc, which recently emerged from bankruptcy.