So sneaking out the news on a Sunday night, Borders put out an official press release to say it's not paying publishers for January, and now starting to skip rent payments as well. This follows a press release last week to say that they had a contingency-riddled commitment to new financing.
It's going from sad to worse. Borders is so poorly managed right now that it can't even go bankrupt right.
As I mentioned on New Year's Eve day, you have to pay your landlord before you pay anyone else, because your landlord is the one person who can change the locks and keep you from accessing your inventory. And if things are so bad you aren't paying your landlord, then you should have just gone into Chapter 11 long before, but as I suggest here that poses ego issues and money issues to some very rich people who've made some bad bets on Borders. Because of those rich person egos, Borders has engaged in a long drawn-out process that has pissed off employees, publishers, landlords, pretty much anyone whose help you'd need to get you through a crisis.
In the midst of this, they still aren't engaging the main long-term problems with the business. Their salvation plan if people help them is to do more with Borders Rewards Plus, gain internet and e-book marketing share, change the product mix to alleviate the digital migration in books, reduce costs, and invest in IT to improve customer experience. For almost all of these things, they're late to the party. And I don't see the supply chain discussed anywhere. For fifteen years, the top people at Borders have been immune to the idea that you can't be in competition forever taking eight weeks to do what your competitor does in eight days, but that's been the story of Borders existence, late not just to that but to the internet and to e-reading and to everything else.
Publishers are not persuaded by this. Why should they be? There's that definition of insanity as doing the same thing over and over with hopes of a different outcome. So the $125 million in "junior debt financing provided be certain vendors and other lendors" isn't going to happen.
There's also a requirement to have financing arrangements with vendors, landlords and other financing parties. Not gonna happen.
And finalization of a store closing program to identify underperforming stores to be closed as soon as practicable. And this is a problem. Borders has only 12 leases expiring in 2012, and of the 508 superstores open for business around a year ago, 369 had leases that were ending five or more years in the future. If the business was going well, or if the economy wasn't in a spin where leases can today be renewed at lower rentals in many instances, people would look at all of these long leases and think the people at Borders were geniuses. But when things are going bad, they tend to go really bad. And since Borders isn't certain to be paying its rent tomorrow anyway, no landlord has a big huge interest in working with Borders to protect rent that's due a year or five years from today.
The word from Publishers Weekly is that some publishers are so discouraged they might try to make a fuss if Borders goes to court with debtor-in-possession financing, which is the credit line you get when you go bankrupt to keep you afloat during the reorg, which is given priority over all other loans for repayment. If you're refused that financing, you can't keep going during Chapter 11, and would have to liquidate.
I'm not sure there's anything left to save in a Chapter 11. If I thought there were good solutions that current management or any management at Borders could execute which might keep 200 or 350 or some number of stores profitable moving forward, I'd want that very very much as would everyone in the publishing industry. But when I'm looking at how miserably this final descent into bankruptcy is being managed, when I'm looking at the competition from the internet and e-books where Borders is so far behind the curve, when I'm looking at the continued failure of management even today to recognize the core realty that the company has to upgrade supply chain and replenishment and inventory consistency/brand identity... And all that doubly and triply so because the non-bankruptcy of the company the past five weeks has so damaged relations with anyone and everyone.
And I'm not even thinking about the customers. Unless Ingram is still supplying Borders during all of this, the shelves are going to start to look empty and depleted and who'll be left wanting to shop there...
I have a stock certificate from when Borders had a stock split in 1996, and those few dozen shares will soon be suitable for framing. The original shares from pre-split I'd sold off long ago and recovered costs. It's not worth the effort to send the certificate by registered mail to the broker to sell.
I've been to 233 Borders locations (for Australia, I counted any store which Borders originally opened, but not stores like the one by the WorldCon hotel that opened subsequent to the sale of the operations Down Under), 216 of those are US superstores. I'm torn between wanting to accumulate a few more notches in my belt before they disappear, or finding something morbid about it. Borders had somewhere between 540 and 550 total US superstores opened, if you look at stores that relocated and which need to count twice, we might be talking about 570 or 580, something like 475 in operation now and 25 more already scheduled to close, so I've visited not quite 40% of the total US store base. If I can perform death watch at another 20 stores, I can lay claim to a pretty clear 40% inclusive of relocations.
- The Brillig Blogger
- A blog wherein a literary agent will sometimes discuss his business, sometimes discuss the movies he sees, the tennis he watches, or the world around him. In which he will often wish he could say more, but will be obliged by business necessity and basic politeness and simple civility to hold his tongue. Rankings are done on a scale of one to five Slithy Toads, where a 0 is a complete waste of time, a 2 is a completely innocuous way to spend your time, and a 4 is intended as a geas compelling you to make the time.