Borders Books at 1807 Fordham Boulevard in Cha... Publishers Balk At Borders’ Request As Bookstore Inches Closer To Bankruptcy–Image via Wikipedia

A Borders bookstore Chapter 11 bankruptcy may be difficult to avoid as publishers balk at the company’s request that they accept an interest bearing promissory note in lieu of payments.  Borders says that it can avoid bankruptcy if the bookstore is able to get $125 million in financing in the form of publishers forgiving payments.  But the bookstore is facing fierce resistance from publishers who have expressed a total lack of faith in Borders’ future. On Thursday evening, one publisher said it was unimpressed by the Borders plans and indicated that it wouldn’t accept an interest-bearing promissory note in exchange for a missed December payment for books. “In order to accept the note, you have to believe that their strategy will work, but their strategy is to continue doing what they’ve been doing,” this person said.

A second publisher also said it was unwilling to accept an interest-bearing note. “They haven’t shared a plan that makes their long-term future look more sustainable than of late,” said this person. “It compromises our relationships with other customers. Also, we aren’t bankers to our customers.”

Borders has indicated that they are also in talks with GE and Bank of America about the possibility of debtor-in-possession financing (DIP) in case they need to file Chapter 11 bankruptcy. But it is very important that Borders convince its creditors that their company is viable. Creditors need to believe that Borders’ Chapter 11 bankruptcy plan will result in a stronger and more competitive company.  But as indicated by the quotes above, many publishers don’t have faith in Borders’ current way of doing business. Unless the bookstore makes a drastic change in any Chapter 11 bankruptcy they file, it will be an uphill battle getting all creditors on board with their plans.

(source: )