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Borders’ final chapter looms

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Borders bookstore is on verge of bankruptcy. Photo by Cy Kondrick / Cy.Kondrick@Marquette.edu

The nation’s second-largest bookseller may soon be turning its final pages. Borders Group Inc. said Sunday it will delay payments to landlords and other vendors for the second straight month.

The Ann Arbor, Mich. company stopped payments to some publishers in late December, and last Thursday announced a $550 million loan from GE Capital. The loan requires Borders to renegotiate with publishers and turn the missed payments into a $125 million debt to be paid later. Publishers have reportedly rejected this idea so far.

“Given the recent financing commitment from GE Capital, whether Borders files for bankruptcy depends on it striking a deal with publishers to restructure its debt,” said Joseph Daniels, a professor of economics, in an e-mail. “Basically, Borders needs to convert its debt by extending payments long term.”

Daniels said Borders’ future depends both on acquiring the time and money it needs to restructure its business, and having a viable business plan to guide that restructuring.

“To date, Borders has not provided much information on its business plan for the future,” he said. “This in turn is partially affecting publishers’ decisions (on whether or not) to restructure its debt.”

The rise of e-readers like Barnes & Noble Inc.’s Nook and Amazon.com Inc.’s Kindle has likely contributed to Borders’ decline, said Virginia Chappell, an associate professor of English, in an e-mail.

“The digital world is fostering so many new and different modes of literacy and interpersonal connections,” she said. “My guess is that Borders missed the boat on diversification.”

Daniels agreed, and said changing its business plan to focus more on technology could be key to Borders’ long-term viability.

“To survive, Borders must make a substantial investment in technology, refocus on customer service, and offer other types of merchandise to differentiate its business,” he said.

But some are pleased with Borders’ customer service, and fear that a Borders bankruptcy could negatively affect the rest of the bookselling industry.

“Their rewards system is far better than anything Barnes & Noble has,” said Brian Keogh, a freshman in the College of Arts & Sciences.

Daniels said a Borders bankruptcy would affect the publishing industry as a whole.

“Losing a major retailer and distributor of books, movies and music would certainly affect the sales of publishers, at least in the short run,” Daniels said. “In addition, publishers are likely to lose a substantial portion of what Borders owes them if it goes into bankruptcy. Losing a major retailer will likely accelerate the shift to online retailing and e-readers.”

It’s a shift that Chappell, for one, wishes she could slow down.

“The sad thing to me is the shrinking of the small, independent bookstores with knowledgeable booksellers,” Chappell said.

She said she still enjoys the simplicity of “devouring a purely entertaining novel, in a book with pages (she) can turn in order to glimpse ahead or backward. By contrast, everything on a Kindle looks the same.”

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