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Is bankruptcy the final chapter for Borders?

According to newspaper reports, Borders Group, Inc. has hired bankruptcy attorneys and may well be filing for Chapter 11 bankruptcy relief in the near future. In this bleak economy, the retailer is facing declining sales while competing with internet retailers, such as Amazon.com, with lower overhead and lower prices. Borders recorded a $74 million dollar loss in its latest quarterly report and is currently negotiating deals with creditors whom they do not have the ability to pay according to the original terms of their agreements.

A bankruptcy filing does not necessarily mean the end of Borders, however. Filing Chapter 11 will give Borders an opportunity to reorganize. It is, however, almost inevitable that there will be store closings and employee lay-offs in the near future.

So what does this mean for you as a Borders customer? Not much really. A location near you may end up being shut down, but ultimately your gift cards and Borders bucks should be safe, unless they decide to file Chapter 7 to liquidate all their assets and dissolve the business altogether.

There is also speculation that Borders may merge with it’s rival Barnes & Noble. These types of mergers are not uncommon during a Chapter 11.

Whatever course of action Borders takes, it is clear that a lot of people are likely to lose their jobs and may end up having to seek bankruptcy relief of their own.

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