January 13th, 2011 by Reed Allmand 
Borders Facing Bankruptcy?--Image via Wikipedia
Borders, a national bookstore chain has announced that they will be delaying payments to publishers because they simply don’t have the cash due to cuts in their credit lines.
Company spokeswoman Mary Davis said that the firm would work with the publishers that supply it with books in order to restructure their payment arrangements.
Borders benefits from “vendor finance”, by which suppliers provide the retailer with books for sale in its stores well in advance of receiving payment.
The company warned there could be “no assurance that it will be successful in refinancing its senior credit facilities or restructuring its vendor financing arrangements”.
Failure to do so could leave the company without cash in the next three months.
Could we see a Borders books bankruptcy? It’s possible. The bookstore industry is dependent upon credit to function and when credit becomes tight it can push the company into financial crisis making bankruptcy a necessity. But if Borders does file bankruptcy, it will most likely choose Chapter 11 bankruptcy and restructure its debts. It might also force publishers to accepted modified agreements that make it easier for the bookstore chain to get inventory without “bleeding” cash. Closings of less profitable Borders’ stores are also a possibility in a Chapter 11 bankruptcy. A matter of fact, we could see several store closings in the weeks or months before a bankruptcy filing if Borders chooses that route. We could also see some negotiations becoming finalized in a prepackaged bankruptcy agreement which will make the bankruptcy process easier and faster.
(source: http://www.bleedingcool.com/2010/12/31/borders-delay-payments-to-publishers/ and http://www.bbc.co.uk/news/business-12097769)
About Reed Allmand
Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."
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