UPDATE: Borders UK Placed In Administration
(Adds detail, background)
By Ainsley Thomson
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Bookselling chain Borders U.K. has been placed in
administration, putting 1,150 jobs at risk, the company's administrators MCR
said Thursday.
MCR said it is working with Borders' management to get the best returns
possible for the company's creditors.
"All stores currently remain open for business as normal whilst the
administrators undertake a review of the company's affairs and seek a purchaser
for all or some of the company's stores in which there has already been
interest," joint administrator Philip Duffy, said, adding that employees' wages
are up-to-date and wages for retained staff will continue to be paid as an
expense of the administration.
Borders U.K., which has 45 stores, was rumored to be teetering on the verge of
insolvency for days after the company stopped taking online book orders Monday.
The company has also been affected by the withdrawal of credit insurance,
resulting in some publishers cutting off stock, and stiff competition from
supermarkets and online retailers offering cheaper books.
MCR said as a result Borders UK suffered a severe cash flow crisis.
"The appointment of MCR as administrators to the business is indicative of the
weakening position of book retailers in the current market with competition on
bestsellers from supermarkets and the growing strength of the digital and on-
line markets in this sector," Duffy said.
Administration is a U.K. insolvency law process to manage companies in
financial distress for the benefit of creditors.
Borders UK was owned by its U.S. namesake until 2007 when it was sold to
private equity firm Risk Capital Partners for GBP20 million.
Then in July this year, the company's chief executive, Philip Downer, led a
management buyout of the chain, backed by private equity firm Valco Capital
Partners. Only a week earlier, Borders sold five stores, including its flagship
Oxford Street store, to U.K. fashion clothing and accessories value retailer New
Look, in an early signal of its financial difficulties.
In recent weeks, Borders U.K. had hired Clearwater Corporate Finance to find a
buyer for its business.
Private equity and turnaround specialists, including Endless, which bought
discount book retailer 'The Works' out of bankruptcy last year, considered
buying the business, as did some of its industry peers, including Waterstone's
owner HMV Group PLC (HMV.LN). However, no buyer was forthcoming.
The period leading up to Christmas is notoriously difficult for struggling
retailers, as extra pressure is placed on their cash flow to buy additional
stock in order to compete with rivals. Last November, iconic U.K. general
retailer Woolworths Group PLC and U.K. furniture retailer MFI Group both
collapsed into administration.
Borders opened in Britain in 1997, 26 years after brothers Tom and Louis
Borders established its American parent.
Borders in the U.S. is no longer connected to the U.K. company and is
unaffected by Thursday's announcement.
-By Ainsley Thomson, Dow Jones Newswires; 44 20 7842 9318; ainsley.thomson@
dowjones.com
(Kathy Sandler and Marietta Cauchi in London contributed to this report)
(END) Dow Jones Newswires
11-26-091303ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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