Judge approves Borders’ liquidation bid

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A Borders Books & Music store in Ann Arbor, Mich. | AP file

Updated: July 15, 2011 1:41PM

Borders Group, the nation’s second-largest book store chain that once operated over 1,000 stores, appears headed for liquidation after a judge on Thursday approved its motion to auction itself off with a team of liquidators as its opening bid.

The move came after an offer made earlier this month from a private-equity investor disintegrated overnight.

Borders said it will accept bids until 5 p.m. Sunday and will give notice by Monday if no other bidder emerges.

Borders Group Inc., based in Ann Arbor, Mich., filed for bankruptcy protection in February, and shuttered half of its 30-plus stores in the Chicago area. Borders currently operates about 400 stores, down from its peak in 2003 of 1,249 Borders and Waldenbooks, and has about 11,000 employees.

Earlier this month a private-equity investor from Phoenix offered $215 million for the company, plus the assumption of $220 million in debt.

But on Wednesday, creditors objected, saying that the agreement would not prevent Najafi from taking possession of the company and liquidating it immediately for profit. Landlords also objected.

Creditors said a bid from liquidators Hilco Merchant Resources and Gordon Brothers is stronger. They believe it would pay out between $252 million and $284 million in cash.

Creditors said in a court filing that they were hopeful Najafi would submit a higher bid, but Najafi stood by its original offer.

On Thursday, Borders said it wouldn’t seek approval for Najafi’s bid at a scheduled hearing in the U.S. Bankruptcy Court Southern District of New York and designated the liquidators as the primary, or “stalking horse” bid.

Borders started with a single store in 1971, and helped pioneer the book superstore concept along with larger rival Barnes & Noble Inc. It was brought down by heightened competition by discounters and online booksellers, as well as the growth in popularity of electronic books.

AP