(Updates with excerpt from filing in third paragraph.)
July 13 (Bloomberg) -- Borders Group Inc. asked a bankruptcy judge to overrule landlords’ objections to the proposed sale of the bookstore chain’s assets and promised to provide more information about leases by next week.
Borders is trying to resolve objections from landlords at several locations, the company said in papers filed yesterday in U.S. Bankruptcy Court in Manhattan. The structure of the $215.1 million sale to Najafi Cos., which still requires an auction to test for higher bids, is set to go before U.S. Bankruptcy Judge Martin Glenn tomorrow.
Borders stores “truly value their relationships with landlords, who have worked constructively with the debtors throughout these cases in their continuing efforts to rationalize their store footprint and their occupancy costs,” the Ann Arbor, Michigan-based chain said.
The “compressed timeframe” of the sale has prevented Borders from giving landlords more disclosure, the company said. The objections should be overruled because they aren’t central to Borders’ request for court approval of the deal’s structure and a proposed breakup fee for Najafi, Borders said.
Najafi, a Phoenix-based private-equity firm, owns Direct Brands LLC, a direct marketer that owns Book-of-the-Month Club. The firm bid $215.1 million for Borders stores and would assume $220 million of liabilities. A final deal is scheduled to be approved by the bankruptcy court at a hearing on July 21, after a July 19 auction.
Landlords said the company hadn’t told them which leases it intends to keep or reject, giving them little time to decide whether they agree with the proposed sale. Current timelines “do not provide the Objecting Landlords with sufficient notice,” said Glimcher Properties Ltd., manager of five locations where Borders leases space.
Borders has a backup bid to liquidate all of its assets from liquidators including Hilco Merchant Resources and Gordon Brothers Retail Partners LLC. Borders pursued a “dual-track process” so it could proceed with a sale to liquidators if it isn’t acquired as a going concern, according to court filings.
Borders, the second-largest U.S. book chain after Barnes & Noble Inc., filed for bankruptcy in February. The company, founded 40 years ago as a single used-book store, had 642 stores in February when it sought court protection. It closed 237, leaving 405 operating.
The case is In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--With assistance from Edvard Pettersson in Los Angeles. Editors: Stephen Farr, Andrew Dunn.
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