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Summary:

Yesterday’s news that the Borders bookstore chain is going to be sold off-much of it probably at fire-sale prices-means that some of the nat…

Borders
photo: Jblyberg

Yesterday’s news that the Borders bookstore chain is going to be sold off-much of it probably at fire-sale prices-means that some of the nation’s biggest publishers are going to be taking a bath, financially. Five publishing houses are owed more than $25 million by the bookstore chain, and many others are owed smaller amounts-but they’re likely to only receive a small fraction of those sums.

The chain’s liquidation is expected to make more than $250 million, but more than 3,000 claims have been filed against the Borders estate for a total of well over $1 billion. That means many of the biggest unsecured creditors-mostly book publishers-are likely to get pennies on the dollar for the millions that Borders owes them.

The publishers are “unsecured” creditors, who will only get paid after secured creditors, and others with special priority. For example, these creditors will get paid only after state governments that say they’re owed millions in taxes by Borders. And, of course, the small army of bankruptcy lawyers managing these transactions will need to be paid as well.

Following is a list of the top unsecured creditors, provided by Borders. (For a slightly longer list, see here.)

The top creditors are all publishers, and their losses are the books now sitting in Borders stores-that Borders never paid for. There are some non-print media companies with big losses too, like Sony (NYSE: SNE) Music and 20th Century Fox. The only creditor in the top 15 that’s not a content company or a book distributor? That would be Seattle’s Best Coffee, the Starbucks (NSDQ: SBUX) subsidiary that ran the cafes in many Borders stores.

These parties have different versions of what they’re owed, which is common in bankruptcy. The list below reflects the values submitted by Borders’ attorneys. But the companies owed money here often believe they’re owed more. For example, Borders admits to owing Penguin a bit over $41 million; in the claim Penguin filed with the court, the publisher says it’s owed almost $45 million. Similarly, Seattle’s Best Coffee says they’re owed just over $7 million, while Borders puts the numbers at below $5 million.

There are some important claims that aren’t on this list, such as the $7.2 million in taxes and interest that New York State says it’s owed by Borders. The State of Illinois also has a claim for $1.8 million in back taxes, as well as legal fees that raise its claim to an estimated $6 million.

Penguin Putnam Inc:: $41,118,914

Hachette Book Group USA: : $36,879,656

Simon & Schuster:: $33,757,445

Random House: $33,461,062

Harper Collins: $25,793,451

Macmillan / MPS: $11,434,306

John Wiley and Sons: $11,191,435

Perseus Distribution Services: $7,776,292

Source Interlink Companies: $6,879,906

Twentieth Century Fox: $6,445,467

Seattle’s Best Coffee: $4,991,818

F&W Media: $4,546,275

Houghton Mifflin Harcourt: $4,400,756

Sony Music: $4,273,824

Workman Publishing Company: $4,003,126

  1. This helped me understand the real story. The amounts owed to unsecured creditors is mind blowing.

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    1. As someone who was a GM and was with Borders for almost 15 years, I can provide some glimmer of understanding as to what’s happened: incompetent, inconsistent executive management. I left about 4 years ago when it became apparent that it wasn’t a matter of “If” as much as “When.” Yes, online has an impact, especially when Borders initially turned its online presence over to Amazon by “partnering” with them. But I believe people still want physical bookstores and all that comes within that building. What doomed Borders was the succession of non-book, unimaginative CEOs who came into Ann Arbor after Rich Flanagan took his passion for books and Borders and left the Company.  

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  2. You are absolutely spot on with this comment.  I was a GM and I remember Rich fondly.  When he visited a store, he would get lost in the stacks hunting down new items to read.  Things were never the same after Rich left Borders.

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  3. It’s ALWAYS management! I cannot believe these jokers get paid all the Big Bucks when all they do is take companies down. And then they move on to another company, and then another, and another, basically getting rich off of bonuses that they don’t even DESERVE, leaving a wake of disaster and mayhem. There should be penalties to pay instead of payoffs. Look at what they do to employees, creditors, suppliers, etc. These leaches should be put on the stockade, and NEVER be allowed to hold management positions after screwing up like that. It’s not just Borders; it happens over and over. But can we do? Nothing. Suck it up and watch it happen. It’s sickening. (www.haydemon.wordpress.com)

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    1. It’s simple, Monica – You *keep track* of bad executives.
      If an executive who comes to your company is certainly not worthy, employees can howl in protest, do everything possible to undermine the executive and/or make his/her life miserable. If the executive tries to retaliate, you retaliate harder.

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