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MrDebtBuster
Borders, which helped pioneer the big-box bookseller concept and once operated more than 1,000 stores before shrinking to its current 400, last week assigned the opening bid in its auction process set for Tuesday to two liquidation firms, Hilco Merchant Resources and Gordon Brothers Group. The move came after a bid fell through from private-equity firm Najafi Companies that could have kept the chain a going concern. Creditors and landlords said liquidation was a better deal.
If no other bids materialize, the auction will be canceled and a final court approval hearing on the liquidators' bid will be held Thursday.
Borders spokeswoman Mary Davis had no commit on the bidding process.
If Borders liquidates, it will be a "sad day in book publishing's history and will do severe and lasting damage to the industry's ecosystem," said Simba Information senior trade analyst Michael Norris.
"There are so many people who buy a small number of books in a given year that the absence of a nearby store that they like can really curb how much they buy," he said. "They won't go to another store or online like flicking a switch."
The disappearance of Borders would likely hurt e-book sales as well, since some e-book readers visit bookstores to see what books they might like to read before buying the electronic version for their e-book reader, Norris added.
In addition, the loss of Borders stores would deal a big blow to malls nationwide, according to real estate sources.
Borders' move to close 228 stores while it reorganized in bankruptcy protection already increased the collective vacancy rate of shopping centers that contained a Borders to 9.3% from 4.2%, estimated Chris Macke, senior real estate strategist at CoStar Group, the nation's largest provider of real estate data. He calculated the liquidation of the rest of the chain could increase the vacancy rate on that same basis to 18.8%. Borders stores average about 25,000 square feet, about half the size of a football field.
While some of the space vacated by Borders has been filled with stores like Best Buy, Dick's Sporting Goods and Books-A-Million, or broken up to accommodate several smaller merchants, leasing has been slow, real estate analysts said. The dumping of 400 stores could further slow any new development of what's known as "power centers," which house supersized stores, says John Bemis, head of Jones Lang LaSalle's retail leasing team.
That would hurt the ability to fill them quickly, Bemis added.
Borders filed for bankruptcy protection in February. The company started with a single store in 1971, and helped pioneer the book superstore concept along with larger rival Barnes & Noble. It was brought down by heightened competition by discounters and online booksellers, as well as the growth in popularity of electronic books. It currently operates about 400 stores, down from its peak in 2003 of 1,249 Borders and Waldenbooks, and has about 11,000 employees.
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