Borders to seek court's OK on plan to shut doors

Thu Jul 21, 2011 12:01am EDT

* Hearing in U.S. Bankruptcy court Thursday

* Plans to hold closing sales starting Friday

By Nick Brown

NEW YORK, July 21 (Reuters) - Borders Group Inc BGPIQ.PK is set to seek court approval on Thursday for the effective end of its 40-year-old business by hiring liquidators to conduct closing sales at its nearly 400 stores.

Lawyers for the bankrupt bookstore chain are expected to ask for Manhattan U.S. Bankruptcy Judge Martin Glenn's blessing on the liquidation plan. The agreement would likely bring in between $250 million and $284 million the company can use to pay back creditors.

Borders, which helped pioneer the concept of book superstores, thought it had a buyer willing to keep the business alive when private-equity firm Najafi Cos, owner of the Book-of-the-Month Club, offered $215 million in cash and $220 million in assumed liabilities for the company.

But the deal fell apart amid objections from creditors, forcing the second-largest book retailer to announce plans to close its doors.

Assuming the liquidation plan is approved, a consortium of liquidators led by Hilco Merchant Resources and Gordon Brothers Retail Partners will sell off Borders' merchandise and furniture in a process likely to start as early as Friday and be completed by September, according to plans set out in court papers.

Borders will keep the rights to its brand name and leases and hold separate auction processes for those assets. Gordon Brothers unit DJM Realty will market the leases, although a timeline for that sale process has not been set.

Borders, founded in 1971, had hoped a "white knight" buyer would emerge, but it canceled a planned auction Monday night after receiving no bids.

The company said in court papers on Monday it was entertaining a potential offer for about 30 of its stores, but a deal appeared unlikely now that bidding deadlines have passed.

Borders, which declared bankruptcy in February, was unable to overcome competition from larger rival Barnes & Noble Inc (BKS.N) and from Amazon.com Inc (AMZN.O), which began to dominate book retail when the industry shifted largely online. The company also never caught up to its rivals' e-reader sales, namely Amazon's Kindle and Barnes & Noble's Nook.

The case is In re Borders Group Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-10614. (Reporting by Nick Brown; editing by Andre Grenon)

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