As has been predicted (see Borders Bankruptcy Looms”) the nation’s second largest bookselling chain, The Borders Group, filed for Chapter 11 bankruptcy protection today. The company plans to close 193 of its 642 stores over the next few weeks and, according to Bloomberg, is seeking the bankruptcy court’s permission to close up to 275 locations as part of a restructuring plan. Borders announced that it had received $505 million in financing from lenders led by G.E. Capital that would allow it to keep operating during the restructuring process.
 
According to the New York Times, Borders, in its Chapter 11 filing, listed $1.29 billion in debt and $1.27 in assets. One of the major problems going forward could be publishers’ reluctance to ship more books to the beleaguered chain. In its filing Borders claims it owes $178.8 million to vendors. Penguin Putnam is the largest unsecured creditor with a $41 million claim, followed by Hachette with $36.9, Simon & Schuster with $33.8, and Random House with $33.5. Diamond Book Distributors, which represents a number of key graphic novel publishers, is owed $3.9 million. In its filing Borders did indicate that it expects to be able to pay some claims of the unsecured creditors.
 
Aside from the publishers, who are unlikely to receive 100 cents on the dollar for their claims, the big losers in the bankruptcy could be Borders’ largest equity holders. William Ackman’s Pershing Square Capital Management hedge fund is the company’s largest stakeholder with 31.3% of the stock, while Bennet S. LeBow, who invested $25 million in Borders last May (see “Ben LeBow Named New Borders CEO”), holds 15.4% of the stock. Ackman wanted to pursue a merger of Borders and Barnes & Noble (see “Borders Considering an Offer for Barnes & Noble”), and according to the Times, still supports a deal “if Borders is able to shed enough underperforming stores.”