Borders Group Inc. filed for Chapter 11 protection Wednesday and said it will close about 30% of its stores nationwide in the coming weeks.
The struggling operator of the Borders and Waldenbooks chains sought protection from its creditors in the U.S. Bankruptcy Court in Manhattan a month after it warned it may have to restructure the company in Chapter 11.
“It has become increasingly clear that in light of the environment of curtailed customer spending… and the company’s lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor,” said Borders Group President Mike Edwards in a statement.
The Chapter 11 filing will allow Borders to access new capital and reorganize its operations, Mr. Edwards said.
The company is launching a strategic review of its locations with the aim of closing underperforming stores. Earlier this week, a count of Borders stores using its store locator found it had 644 stores in 48 states, Washington, D.C., and Puerto Rico. A spokeswoman for Borders didn’t immediately return a call seeking comment.
The Ann Arbor, Mich., company also said it has lined up a $505 million loan from GE Capital to fund its operations while in bankruptcy. Access to such a loan is subject to court approval.
In its bankruptcy petition, Borders listed assets of $1.28 billion and liabilities of $1.29 billion as of Dec. 25.
Borders’ five largest unsecured creditors are the book publishers Penguin Putnam Inc., Hachette Book Group, Simon & Schuster Inc., Random House and Harper Collins Publishers.
On its website Wednesday, Borders told customers that it will continue business operations “as normal.” All reward programs and gift cards will be honored, the company says.
The filing comes after Borders unsuccessfully sought to avoid bankruptcy by striking a tentative deal with GE Capital for a new $550 million secured line of credit. But the retailer first had to hit certain benchmarks, such as negotiating more favorable store leases with its landlords and finding other lenders to take on $175 million of the credit line.
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