================================================================= BORDERS GROUP BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2011 (ISSN XXXX-XXXX) February 17, 2011 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- BORDERS GROUP BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Michille Deiparine, Ivy B. Magdadaro and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of BORDERS GROUP BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO BORDERS GROUP BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF BORDERS GROUP INC. [00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00003] COMPANY'S BALANCE SHEET AS OF OCTOBER 30, 2010 [00004] BORDERS GROUP'S CHAPTER 11 DATABASE [00005] LIST OF DEBTORS' 30 LARGEST UNSECURED CREDITORS [00006] LIST OF DEBTORS' SECURED CLAIM HOLDERS [00007] BORDERS GROUP TO CLOSE 200+ STORES UNDER BANKRUPTCY [00008] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00009] DEBTORS' MOTION TO EXTEND DEADLINE TO FILE SCHEDULES [00010] AGREE REALTY'S STATEMENT ON BORDERS' BANKRUPTCY FILING [00011] BOOKSELLERS GROUP COMMENTS ON BORDERS' BANKRUPTCY FILING KEY DATE CALENDAR ----------------- 02/16/11 Voluntary Chapter 11 Petition Date 03/18/11 Deadline to Provide Utilities with Adequate Assurance 04/05/11 Deadline to File Schedules of Assets and Liabilities 04/05/11 Deadline to File Statement of Financial Affairs 04/05/11 Deadline to File Lists of Contracts and Leases 05/17/11 Deadline to Remove Actions Pursuant to F.R.B.P. 9027 06/16/11 Expiration of Debtors' Exclusive Plan Proposal Period 06/16/11 Deadline to Make Decisions About Lease Dispositions 08/15/11 Expiration of Debtors' Exclusive Solicitation Period 02/15/13 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO BORDERS GROUP BANKRUPTCY NEWS ----------------------------------------------------------------- BORDERS GROUP BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) BORDERS GROUP BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of BORDERS GROUP BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF BORDERS GROUP INC. ----------------------------------------------------------------- Borders Group, Inc. 101 Phoenix Drive Ann Arbor, Michigan 48108 Tel No. 734-477-1100 Fax No. 734-477-4538 http://www.borders.com/ Borders Group, Inc., through its subsidiaries, engages in the operation of book, music and movie superstores, as well as mall- based bookstores. The Company is noted to be the second largest traditional book seller in the U.S., second to Barnes & Noble Inc. At January 29, 2011, Borders Group operated 642 bookstores under the Borders, Waldenbooks, Borders Express, and Borders Outlet names, as well as Borders-branded airport stores, including 639 in the United States and 3 in Puerto Rico. Two of Borders' flagship stores are located in Manhattan. The Company also operates a proprietary e-commerce Web site http://www.Borders.com which was launched in May 2008. Borders rely on its vendors, including book publishers and music and video distributors, for goods to maintain its business. Moreover, about 90% of Borders' superstores feature a cafe under the "Seattle's Best" tradename. Founded in 1971, the Company is headquartered in Ann Arbor, Michigan. As of February 11, 2011, Borders employed a total of approximately 6,100 full-time employees, approximately 11,400 part-time employees, and approximately 600 contingent employees throughout the U.S. Borders employees are not subject to any collective bargaining agreements. The Company listed assets totaling $1,275,430,500 and debts totaling $1,293,112,600 as of December 25, 2010. On February 16, 2011, the Company and seven of its affiliates sought bankruptcy protection. In its Chapter 11 petition, the Company said it aims to pursue an operational and financial restructuring; to restore and revitalize its business as the second largest chain of bookstores in the U.S.; and to save thousands of jobs. It also seeks to regain access to capital for everyday operations and to shed about 200 stores it cannot afford to keep. Corporate Structure Borders Group, Inc. owns 100% of the equity interests in Borders, Inc. and BGP (UK) Ltd. Borders, Inc. owns 100% of the equity interests in Borders Properties, Inc., Borders Direct, LLC, Borders Online, Inc., Borders Online LLC and Borders International Services Inc. A chart presenting Borders' corporate structure is available for free at http://bankrupt.com/misc/Borders_OrgnztnalChrt.pdf The Company started out as a used books store in Michigan founded by brothers Tom and Louis Borders in 1971. The Borders brothers sold the bookstore chain in 1992 to Kmart. Kmart at that time already owned the Waldenbooks mall bookstore chain. Three years later, Kmart spun off Borders Group Inc. Entities who own 10% or more of the equity interests of Borders Group, Inc., are: % of Equity Entity Ownership ------ ----------- Pershing Square Capital Management, L.P. 31.3% LeBow Gamma Limited Partnership 15.4% BGI common stock is publicly traded on the New York Stock Exchange under ticker symbol BGP. As of February 8, 2011, Borders had 72,042,189 shares of common stock outstanding. The Company had 2,413 holders of its common stock. Trading of Borders' shares closed at 23 cents on February 15, according to data from Yahoo Finance. Capital Structure Borders' significant sources of liquidity are funds generated from operating activities, borrowings under credit agreements, and credit provided by its vendors. Borders has an existing restated revolver credit facility of up to $970.5 million with Bank of America, N.A. and certain other lenders; and a $90 million term loan agreement with GA Capital LLC and certain other lenders. Both loan facilities were executed on March 31, 2010. The Revolver Facility is divided into an existing tranche maturing on July 31, 2011, and an extended tranche maturing on March 31, 2014. The Term Loan Facility is comprised of an $80 million tranche, which will mature on March 31, 2014, and a $10 million tranche. As of February 16, 2011, about $196 million was outstanding under the Revolver Facility, while about $48 million is outstanding under the $80 million Term Loan tranche. No amounts are outstanding under the $10 million Term Loan tranche. The Loan Facilities are secured by a first priority security interest in certain inventory, accounts receivable, cash and other properties of the borrowers, and a second priority security interest in other collateral of the borrowers. Prior to December 2010, Borders relied on unsecured vendor credit to finance about 44% of its inventory. As of February 16, 2011, Borders owe about $303 million to vendors for inventory. ROAD TO BANKRUPTCY Borders Chief Financial Officer Scott Henry relates that a variety of external economic and competitive factors have led to a substantial decline in Borders' profitability and liquidity. The U.S. book retailing industry has experienced little or no growth in recent years, Mr. Henry notes. Moreover, he avers, Web-based retailing has continued to increase in market share as a distribution method for book, music and movie merchandise; and the Internet has enabled changes in the formats of many of the product categories Borders offer. Borders' results of operation, he adds, are also dependent on discretionary spending by consumers, which has deteriorated significantly over the last several years. In effect, the Company reported losses in operations in the past several quarters. Amidst this scenario, by December 2010, Borders took several actions to improve liquidity including discussions with potential lenders for replacement financing through at least the beginning of 2012, pursuit of potential asset sales, cost reduction and sales generating initiatives. Borders started withholding vendor payments in December 2010, and sought to restructure vendor obligations in an effort to improve liquidity. In January 2011, Borders increased the holdback of vendor payments and began to withhold payments to landlords as well. With Borders' support and funding, (1) many of the vendors retained the law firm of Lowenstein Sandler PC as counsel and Alvarez & Marsal as their financial advisor to negotiate with Borders; and (ii) a group of major landlords retained the law firm of Kelley Drye & Warren LLP as counsel and A&M as their financial advisor to assist with the negotiations. By January 27, 2011, Borders got a tentative commitment for a $550 million credit facility from GE Capital. The commitment required syndication of $175 million of the total commitment and required the Company to raise an additional $125 million of junior capital. The Company, however, failed to obtain the necessary financing on an out-of-court basis and, thus, turned its attention to sourcing a debtor-in-possession financing. Financial advisor Jefferies & Company Inc. was commissioned by Borders to obtain proposals of a debtor-in-possession financing. After engaging in active discussions, Borders, GE Capital and GA Capital were able to agree on the terms of a $505 million DIP Loan, whose terms are noted in a term sheet dated February 14, 2011. Shortly thereafter, on February 16, Borders and its affiliates filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York. The Company attached to its bankruptcy petition schedules on a list of its operating premises, its substantial assets, litigations it is a party to, and the identity of its senior management. A copy of the Schedules is available for free at: http://bankrupt.com/misc/Borders_1stDaySchedules.pdf Simultaneous with its bankruptcy filing, Borders said it will undertake the elimination of certain of its unprofitable stores. The Company has begun discussions with experienced liquidators and has begun a bidding process, which culminated with the selection of a stalking horse bidder. Restructuring Goals Borders believes that the bankruptcy proceedings are the best avenue to restructure its debts and eliminate burdensome costs. The Company avers that its post-bankruptcy operational strategy will focus on five key areas: (1) continuing the expansion and enhancement of the Borders Rewards Plus Program, (2) strengthening the company's position as a purveyor of content by aggressively growing Borders.com and eBook market share; (3) expanding the company's overall retail mix to improve profitability and offset the digital effect; (4) aggressively reducing costs across the business; and (5) making strategic investments in IT to improve customer experience. DIP Financing Tiffany Kary at Bloomberg News notes in a February 17 report that Judge Arthur Gonzalez has granted Borders interim access to at least $400 million of the proposed $505 million financing facility from lenders led by GE Capital. Judge Gonzales, according to Bloomberg, first demanded that a budget for Borders' intended use of the loan be filed with the Court. In court filings, Borders said that it needs the additional financing to pay current and ongoing operating expenses. As of press time, the Court has not ruled on Borders' request for permission to commence closing sales for 200+ of its underperforming stores, Bloomberg relays. Post-Bankruptcy Payments & Obligations Within the 30-day period after their bankruptcy filing, the Debtors estimate these payments to be paid to their employees, executives and consultants: Payments to Employees $20,514,995 Payments to Officers $850,662 Payments to Financial & Business Consultants $0 The Debtors also estimate these cash receipts and disbursements for the 30-day period after their bankruptcy filing: Cash Receipts $230,000,000 Cash Disbursements $138,000,000 Net Cash Gain $92,400,000 Unpaid Obligations $135,500,000 Unpaid Receivables $173,000,000 Winners & Losers in the Borders Bankruptcy Borders' bankruptcy filing comes a month after the Company revealed that it was exploring the possibility of a restructuring process under Chapter 11. Mae Anderson of The Associated Press relates that entities that stand to gain from the Borders bankruptcy are Barnes & Noble, Amazon.com, and Books-A-Million. AP notes that Credit Suisse analyst Gary Balter said the announced Borders store closings could tip up Barnes & Noble's sales by 6%, and if Borders goes out of business entirely, that can translate to a 26% increase in Barnes & Noble sales. Consumers who don't head to Barnes & Noble will likely head to Amazon.com, Forrester Research analyst Sucharita Mulpuru said, according to AP. Alabama-based Books-A-Million, the third largest U.S. bookstore chain, might also get its share of the market as a result of Borders' tumble into Chapter 11. Among those who stand to lose in the Borders bankruptcy are the Company's employees, stockholders and publishers, AP points out. The report relays that 6,000 Borders workers are expected to lose their jobs while the Company strives to restructure. AP adds that investor William Ackman and Borders CEO Bennett Lebow, each with about a 15% stake in the Company, also stand to see their investments vanish. Publishers already felt the crunch when Borders ceased vendor payments in December. Earlier, publisher John Wiley & Sons Inc. disclosed it recorded $9 million in bad debt because of non-payment by Borders, AP cites. With Borders set to close 200+ stores, publishers will lose more retail space to feature their products. ----------------------------------------------------------------- [00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ----------------------------------------------------------------- Secures Commitment for $505 Million in Debtor-in-Possession Financing Borders to Continue to Conduct Business in Ordinary Course Chapter 11 Provides Borders with Best Route to Reorganize and Reposition Company for the Long-Term ANN ARBOR, Michigan -- February 16, 2011 -- "It has become increasingly clear that in light of the environment of curtailed customer spending, our ongoing discussions with publishers and other vendor related parties, and the company's lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term. To position Borders to remedy this condition, Borders Group, with the authorization of its board of directors, has filed a petition for reorganization relief under Chapter 11 of the Bankruptcy Code. This decisive action will give Borders the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganize in order to reposition itself to be a successful business for the long term," said Mike Edwards, Borders Group President. "In this regard, operating under Chapter 11, Borders has received commitments for $505 million in Debtor-in-Possession (DIP) financing led by GE Capital, Restructuring Finance. This financing should enable Borders to meet its obligations going forward so that our stores continue to be competitive for customers in terms of goods, services and the shopping experience. It also affords Borders the opportunity to move forward in implementing the appropriate business strategy designed to reposition Borders to be a potentially vibrant, national retailer of books and other products," Mr. Edwards emphasized. The company said that it is serving customers in the normal course, including honoring its Borders Rewards program, gift cards and other customer programs. Additionally, the company expects to make employee payroll and continue its benefits programs for its employees. Borders said that it has many strengths upon which to build a solid plan of reorganization and implement a new business model for Borders to address the changing needs of the American reader. "For decades, Borders has been a beacon of engagement - a highly frequented destination for consumers and a significant venue for authors and vendors to showcase new books and merchandise. We have the ability, based on our brick and mortar presence nationally; the on-line capabilities we have in place; the loyalty of, and access to, our customers; and the products and services we offer to be an important and easy access destination of exploration and purchase for readers across the country," commented Mr. Edwards. The company noted that, among other initiatives and subject to court approval, Borders plans to undertake a strategic Store Reduction Program to facilitate reorganization and its repositioning. Borders has identified certain underperforming stores - equivalent to approximately 30 percent of the company's national store network - that are expected to close in the next several weeks. At the same time, the company noted that a major strength of Borders is its national presence, and its extensive network of remaining stores as well as Borders.com, will continue to run in normal course. The company emphasized that the closings were a reflection of economic conditions, cost structures and viability of locations, among other factors, and not on the dedication and productivity of the workforce in these stores. "We are confident that, with the protection afforded under Chapter 11 and with the support of employees, publishers, suppliers and creditors, and the reading public, a successful reorganization can be achieved enabling Borders to emerge from the process as a stronger and more vibrant book seller," concluded Mr. Edwards. "We are very pleased to be able to make this commitment to Borders as support for their plan to re-organize the company," said Tim Tobin, Managing Director, Retail Restructuring, GE Capital, Restructuring Finance. The Chapter 11 petition for relief was filed in the U.S. Bankruptcy Court, Southern District of New York. Completion of the company's DIP financing arrangements is subject to approval of the Bankruptcy Court and the satisfaction of certain conditions provided in the financing commitments received by the company from the lenders providing such financing. Additional information about the reorganization is available at www.bordersreorganization.com or by telephone at (877) 906- 7675. About Borders Group, Inc. Headquartered in Ann Arbor, Mich., Borders Group, Inc. (NYSE: BGP) is a leading specialty retailer of books as well as other educational and entertainment items. Online shopping is offered through borders.com. Find author interviews and vibrant discussions of the products we and our customers are passionate about online at facebook.com/borders, twitter.com/borders and youtube.com/bordersmedia. For more information about the company, visit borders.com/media. ----------------------------------------------------------------- [00003] COMPANY'S BALANCE SHEET AS OF OCTOBER 30, 2010 ----------------------------------------------------------------- Borders Group, Inc. Condensed Consolidated Balance Sheets Unaudited As of October 30, 2010 ASSETS Current assets: Cash and cash equivalents $23,100,000 Merchandise inventories 895,800,000 Accounts receivable and other current assets 60,500,000 Deferred income taxes - Current assets of discontinued operations - -------------- Total current assets 979,400,000 Property and equipment, net of accumulated depreciation 325,200,000 Other assets 48,100,000 Deferred income taxes 3,900,000 Non-current assets of discontinued operations - -------------- Total assets $1,356,600,000 ============== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Short-term borrowings and current portion of long-term debt $298,400,000 Trade accounts payable 444,900,000 Accrued payroll and other liabilities 215,800,000 Taxes, including income taxes 31,800,000 Deferred income taxes 3,800,000 Current liabilities of discontinued operations - -------------- Total current liabilities 994,700,000 Long-term debt 55,800,000 Other long-term liabilities 346,900,000 Long-term liabilities of discontinued operations - -------------- Total liabilities 1,397,400,000 -------------- Stockholders' equity (deficit): Common stock 187,700,000 Accumulated other comprehensive income - Retained deficit (228,500,000) -------------- Total stockholders' equity (deficit) (40,800,000) -------------- Total liabilities and stockholders' equity (deficit) $1,356,600,000 ============== ----------------------------------------------------------------- [00004] BORDERS GROUP'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: Borders Group, Inc. 100 Phoenix Drive Ann Arbor, MI 48108 Bankruptcy Case No.: 11-10614 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Borders, Inc. 11-10615 Borders International Services, Inc. 11-10616 Borders Direct, LLC 11-10617 Borders Properties, Inc. 11-10618 Borders Online, Inc. 11-10619 Borders Online, LLC 11-10620 BGP (UK), Limited 11-10621 Chapter 11 Petition Date: February 16, 2011 Bankruptcy Court: U.S. Bankruptcy Court Southern District of New York (Manhattan) Bankruptcy Judge: The Honorable Martin Glenn Debtors' Legal Counsel: David M. Friedman, Esq. David S. Rosner, Esq Andrew K. Glenn, Esq. Jeffrey R. Gleit, Esq. KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Facsimile: (212) 506-1800 E-mail: DFriedman@kasowitz.com DRosner@kasowitz.com AGlenn@kasowitz.com JGleit@kasowitz.com Debtors' Financial Advisors: JEFFERIES & COMPANY'S INC. Debtors' Lease and Real Estate Services Provider: DJM PROPERTY MANAGEMENT Debtors' Interim Management and Restructuring Services Provider: AP SERVICES LLC Debtors' Claims and Notice Agent: THE GARDEN CITY GROUP, INC. P.O. Box 9690 Dublin, Ohio 43017-4990 Counsel for the DIP Agents: MORGAN, LEWIS & BOCKIUS LLP Wendy Walker, Esq. Sandra Vrejan, Esq. Counsel for the Working Capital Agent RIEMER & BRAUNSTEIN LLP Donald E. Rothman, Esq. Counsel for GA Capital LLC Attorneys for Bank of America, N.A., Agent for Prepetition Revolving Lenders: Julia Frost-Davies, Esq. Andrew Gallo, Esq. BINGHAM MCCUTCHEN LLP The petitions were signed by Scott Henry, the Debtors' chief financial officer. ----------------------------------------------------------------- [00005] LIST OF DEBTORS' 30 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity/Person Nature of Claim Claim Amount ------------- --------------- ------------ Penguin Putnam Inc. Trade Debt $41,118,914 200 Old Tappan Road Bldg. 1 Attn: Lindsay Carter Old Tappan, NJ07675 Attn: Jim Crofton Phone: (201) 767-2918 Fax: (201) 767-5029 E-mail: jim.crofton@us.penguingroup.com Hachette Book Group Trade Debt $36,879,656 USA P.O. Box 8828 Boston, MA 02114-8828 Attn: Tom Maciag Phone: (800) 759-0190 Fax: (800) 286-9471 E-mail: Tom.Maciag@hbgusa.com Simon & Schuster Inc. Trade Debt $33,757,445 JP Morgan Attn: Lockbox 70660 131 S. Dearborn 6th Fl. Chicago, IL 60603 Attn: Dennis Eulau Phone: (800) 732-1685 Fax: (201) 767-5029 E-mail: dennis.eulau@simonandschuster.com Random House Trade Debt $33,461,062 Box 223384 500 Ross Street 154-0455 Pittsburgh, PA 15262 Attn: Anne Davis Phone: (410) 386-7414 Fax: (410) 386-7439 E-mail: andavis@randomhouse.com Harper Collins Trade Debt $25,793,451 Publishers P.O. Box 360846 Pittsburgh, PA 15251-6846 Attn: Janet Gervasio Phone: (570) 941-1495 Fax: (570) 941-1553 E-mail: janet.gervasio@harpercollins.com Macmillan/MPS Trade Debt $11,434,306 175 Fifth Avenue New York, NY 10010 Attn: Peter Garabedian Phone: (540) 672-7600 ext. 7544 Fax: (540) 672-7540 E-mail: Peter.Garabedian@macmillan.com John Wiley and Sons Inc. Trade Debt $11,191,435 Attn: Kevin Glennon 432 Elizabeth Avenue Somerset, NJ 08873 Phone: (732) 302-2210 Fax: (732) 320-2300 E-mail: kglennon@wiley.com Perseus Distribution Services Trade Debt $7,776,292 15636 Collections Center Drive Chicago, IL 60693 Attn: Charles Gallagher Phone: (212) 223-2969 ex. 134 Fax: (212) 223-1504 E-mail: Charles.gallagher@PerseusBooks.com Source Interlink Companies Trade Debt $6,879,906 275000 Riverview Center Boulevard Suite 201 Bonita Springs, FL 34134 Attn: Alene Mangino Phone: (239) 949-4450 Fax: (239) 495-5158 E-mail: Alene.Mangino@sorc.com Twentieth Century Fox Trade Debt $6,445,467 Bank of America Attn: Lockbox #402665 6000 Feldwood Road College Park, GA 30349 Attn: Al Leonard Phone: (310) 369-5083 Fax: (310) 369-8799 E-mail: Al.Leonard@fox.com Seattle's Best Coffee Inc. Trade Debt & $4,991,818 P.O. Box 84348 Commission Seattle, WA 98124-5648 Attn: Frank Smith Phone: (206) 318-5258 Fax: (206) 624-3262 E-mail: frank.smith@seattlesbest.com F&W Media Inc. Trade Debt $4,546,275 P.O. Box 715157 Columbus, OH 43271-5157 Attn: Amanda Enderle Phone: N/A Fax: (513) 531-4082 E-mail: Amanda.Enderle@fwmedia.com Houghton Mifflin Harcourt Trade Debt $4,400,756 Attn: Mary A. Durrance, Finance Credit Department 9400 South Pk Center Loop Orlando, FL 32819 Attn: Jim Diamond Phone: (800) 521-3185 ext. 3234 Fax: (407) 363-6917 E-mail: James.Diamond@hmhpub.com Sony Music Entertainment Inc. Trade Debt $4,273,824 c/o Mellon Bank Dept. Ch 10247 Palatine, IL 60055-0247 Attn: Neil Carfora Phone: (800) 444-6922 Fax: (201) 777-3694 E-mail: Neil.Carfora@sonymusic.com Workman Publishing Company Trade Debt $4,003,126 225 Varick Street 9th Floor New York, NY 10014-4381 Attn: Phil Gerace Phone: (212) 254-5900 Fax: (212) 254-8098 E-mail: phil@workman.com Diamond Comic Distributors Trade Debt $3,906,550 1966 Greenspring Dr. #300 Timonium, MD 21093 Attn: Larry Swanson Phone: (410) 427-9339 Fax: (212) 254-8098 E-mail: phil@workman.com U M G D Trade Debt $3,754,699 c/o Bank of America P.O. Box 98279 Chicago, OK 60693 Attn: Joe Flores Phone: (800) 779-6699 Fax: (317) 595-5190 E-mail: jlflores@umusic.com Warner Elektra Atlantic Trade Debt $3,396,812 Dept Ch 10125 Palatine, IL 60055-0125 Attn: James Theodoulou Phone: (818) 238-6489 Fax: (818) 729-3568 E-mail: James.Theodoulou@wmg.com The McGraw-Hill Companies Trade Debt $3,093,871 P.O. Box 2258 Carol Stream, IL 60132-2258 Attn: Phil Ruppel Phone: (800) 722-4726 Fax: (614) 755-5654 E-mail: philip_ruppel@mcgraw-hill.com Sony Pictures Home Entertainment Trade Debt $2,930,139 c/o Mellon Bank P.O. Box 120001 Dept. 0648 Dallas, TX 75312-0648 Attn: Neil Carfora Phone: (310) 255-5593 Fax: (310) 861-5068 E-mail: Neil.Carfora@sonymusic.com Pearson Education Inc. Trade Debt $2,784,766 200 Old tappan Road Old Tappan, NJ 07675 Attn: Jim Crofton Phone: (201) 964-6104 Fax: (201) 767-5029 E-mail: jim.crofton@us.penguingroup.com Rosetta Stone Ltd. Trade Debt $2,226,553 Dept. Ch 17714 Palatine, IL 60055-7714 Attn: Matt Sysak Phone: (540) 236-5428 ext. 5135 Fax: (540) 432-0953 E-mail: msysak@rosettastone.com National Book Network Inc. Trade Debt $1,956,713 P.O. Box 62188 Baltimore, MD 21264-2188 Attn: Jeff Harris Phone: (717) 794-3800 Fax: (717) 794-3804 E-mail: jharris@nbnbooks.com WW Norton & Company Inc. Trade Debt $1,940,826 Box 2626 P.O. Box 8500 Philadelphia, PA 19178-2626 Attn: Katherine Pinto Phone: (212) 354-5500 Fax: (800) 458-6515 E-mail: kpinto@wwnorton.com Zondervan Corporation Trade Debt $1,886,752 Department CH10303 Palatine, IL 60055-0303 Attn: Angela Harms Phone: (800) 727-1309 Fax: (616) 698-3350 E-mail: angela.harms@zondervan.com EMI Music Trade Debt $1,782,358 Dept. CH 17714 Palatine, IL 60055-0380 Attn: Gil Castaniada Phone: (323) 871-5414 Fax: (800) 288-2362 E-mail: Gil.Castaniada@emicap.com Hay House Inc. Trade Debt $1,725,589 P.O. box 5100 2776 Loker Ave W Carlsbad, CA 92018 Attn: Reid Tracy Hone: (760) 431-7695 Fax: (760) 929-2035 E-mail: RTracy@HayHOuse.com Elsevier Science Trade Debt $1,606,992 P.O. Box 0848 Carol Stream, IL 60132-0848 Emmett Hamilton Phone: (314) 523-5036 Fax: (314) 453-7020 E-mail: E.Hamilton@Elsevier.com Papyrus-Recycled Greetings Trade Debt $1,490,891 3613 Solutions Center Chicago, IL 60677-3006 Attn: Connie Holland Phone: (800) 777-9498 Fax: (773) 868-8329 E-mail: Connie.Holland@prgreetings.com Publications Intl Ltd Trade Debt $1,079,421 Dept 77 3401 Chicago, IL 60678-3401 Attn: Tom Broughton Phone: (212) 986-1782 Fax: (847) 676-3671 E-mail: TBroughton@pubint.com ----------------------------------------------------------------- [00006] LIST OF DEBTORS' SECURED CLAIM HOLDERS ----------------------------------------------------------------- Type of Entity/Person Claim Amount Collateral ------------- --------------- ------------ Bank of America, N.A., $196.05 million Substantially as administrative agent all assets, 100 Federal Street other than Boston, Massachusetts 02110 real estate Attention: Kathleen Dimock interests Phone: (617) 434-3830 Fax: (617) 434-4312 GA Capital Inc., $48.6 million Substantially as administrative agent all assets, One Post Office Square, Suite 3765 Boston, Massachusetts 02109 Attention: Daniel Platt Phone: (617) 692-8308 Fax: (617) 692-8301 ----------------------------------------------------------------- [00007] BORDERS GROUP TO CLOSE 200+ STORES UNDER BANKRUPTCY ----------------------------------------------------------------- Borders Group Inc. and its debtor affiliates seek authority from the U.S. Bankruptcy Court for the Southern District of New York to sell certain assets, consisting of merchandise and owned furniture, fixtures and equipment located at about 200 of their stores, through store closing sales, free and clear of liens, claims and encumbrances. The Debtors also seek permission to close, at their option, up to 75 of 136 potential other stores. The Debtors assert that closing at least 200 of their 642 stories is absolutely critical to any reorganization process, especially since they are losing approximately $2 million per week at those stores. To the extent the Debtors cannot negotiate favorable lease concessions from landlords, closing up to 75 more stores may also be necessary, David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, relates. Hilco Stalking Horse Bid Before the Petition Date, the Debtors contacted potential liquidators to solicit interest in bidding on the right to conduct the Store Closing Sales or SCSs. The process resulted in a higher and better bid offered by Hilco Merchant Resources, LLC, SB Capital Group, LLC, and Tiger Capital Group, LLC, which would pay the Debtors: (1) a guaranteed amount of 73% of the cost value of all Merchandise located at the Closing Stores and which the Debtors estimate will bring at least $131 million and as much as $148 million into the estates, plus (ii) a 50% share of any proceeds received during the SCSs after a 5% fee and recovery of expenses. Moreover, during the SCSs, the Hilco Group, as the Stalking Horse Bidder, would fund store level expenses as well as overhead expenses allocable to Closing Stores relieving the Debtors of such burdens. The Hilco Group has agreed to subject its Stalking Horse Bid to an auction, conditioned on certain customary stalking horse protections including, without limitation, a minimal break-up fee of $1,000,000 payable if the Stalking Horse Bidder is not the successful bidder at the Auction. In exchange for the break-up fee, the Debtors were able to negotiate certain other valuable provisions including the sale of the periodicals inventory, cost to retail factors and a broader merchandise threshold. The Debtors worked with the Hilco Group to finalize an agency agreement executed by the parties on February 15, 2011. The Hilco Agency Agreement, including explicitly the break-up fee, has been approved by the Debtors' key constituencies including the Debtors' two proposed DIP Facility Agents, according to Mr. Friedman. Expedited Auction is Necessary The Debtors believe it is critical that the winner of the Auction commence the SCSs by no later than Saturday, February 19, 2011. The Debtors contend that delaying the sales until after the Presidents' Day long weekend will only lower the sale price by as much as 1-2% off the guaranty percentage paid by the liquidators, equal to approximately $2 million to $4 million of value. Against this backdrop, the Debtors maintained that they needed to proceed quickly and aimed to conduct a final auction for a liquidator by February 16, 2011. Terms of Agency Agreement The successful bidder at the Auction will be deemed the Liquidating Agent. The Debtors aver that the need to retain a professional liquidator will enable them to maximize sale proceeds while minimizing distraction from their restructuring efforts. In line with the need to conduct an expedited auction process, the Debtors seek the Court's authority to enter into the Agency Agreement with the Stalking Horse Bidder or enter into a similar agreement with the Successful Bidder at the Auction. Regardless of who the Liquidating Agent will be, the terms of the Agency Agreement will not change, other than possible economic improvements, says Mr. Friedman. Under the Agency Agreement, assets to be sold are all merchandise at the Closing Stores, which initially consist of 200 stores, a list of which is available for free at: http://bankrupt.com/misc/Borders_StoreClosureList.pdf As a guarantee of its performance, the Liquidating Agent will ensure the Debtors' receipt of a certain percentage of the cost value of the Merchandise. The Liquidating Agent will sell the FF&E at the Closing Stores, in exchange for a certain fee calculated as a percentage of the net proceeds from the sales. The Stalking Horse Bidder has agreed to a fee of 20%. The Liquidating Agent will be responsible for all expenses incurred in conducting the Sale. These include occupancy expenses, payroll, onsite supervision costs, and promotional costs. The Liquidating Agent will have the right to use the Debtors' store level employees, and will reimburse the Debtors for payroll. The SCSs may be conducted upon the entry of the Court's consent, and will continue through April 30, 2011. A full-text copy of the Agency Agreement and its accompanying exhibits are available for free at: http://bankrupt.com/misc/Borders_AgencyAgreement_.pdf Furthermore, the Debtors seek the Court's authority to abandon any unsold property following the SCSs. They contend that retaining the unsold property will be burdensome to their estates. The Debtors and the Liquidating Agent assure the Court they will utilize all commercially reasonable efforts to remove or cause to be removed any confidential or personal identifying information in any of the Debtors' hardware, software, computer or cash registers or similar equipment that are to be sold or abandoned. Hilco Consulting Agreements The Debtors entered into agreements with Hilco before filing for bankruptcy to obtain Hilco's consulting services with respect to store closing sales run by the Debtors at 19 locations, relates Mr. Friedman. Each agreement entitles Hilco to reimbursement of its expenses for conducting those sales. With respect to Waldenbooks locations, that is Hilco's only compensation, explains Mr. Friedman. At Borders SuperStore locations, Hilco also receives a commission of 1.25% of gross proceeds. The Debtors assert that as of the Petition Date, they have paid all obligations due to Hilco with respect to the agreements. The Debtors maintain that they need Hilco's continued consulting services postpetition. They, thus, seek the Court's permission to assume the Hilco Consulting Agreements. Necessary Waivers and Exemptions The Debtors also seek certain related relief to obviate any contractual or state or local laws that could inhibit the SCSs. The Debtors specifically ask the Court to authorize them to conduct the SCS without the necessity of, and the delay associated with, obtaining various state licenses or permits, observing state and local waiting periods or time limits, and satisfying additional requirements, with respect to advertising, conducting the SCSs or transferring merchandise from the distribution centers to the Closing Stores. The Debtors further seek to be exempted from state "fast pay" laws and regulations that require an employer to pay its employee contemporaneously with his or her termination. The Debtors note that the process could take them several days given the termination scale necessitated by the SCSs, but nevertheless maintain that they intend to pay their terminated employees as expeditiously as possible. Holly Felder Etlin of AP Services LLP, the Debtors' restructuring advisors, filed a declaration with the Court supporting the Debtors' contention that commencement of the SCSs as soon as possible is warranted. She assured the Court that proceeding with the SCSs in an expedited basis will in no way impair recoveries as the solicitation process used is mostly customary and the Debtors' proposed postpetition financing facility agent had direct input in the process. ----------------------------------------------------------------- [00008] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- Borders Group, Inc. and its debtor affiliates sought and obtained an order from the U.S. Bankruptcy Court for the Southern District of New York for the joint administration of their Chapter 11 cases for procedural purposes. Rule 1015(b) of the Federal Rules of Bankruptcy Procedure provides in relevant part that if two or more petitions are pending in the same court by or against a debtor and an affiliate, the court may order a joint administration of the estates. David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, relates that the Debtors anticipate that numerous notices, application, motions, other pleadings, hearings, and orders in their cases will affect many or all of their affiliates. Against this backdrop, joint administration will relieve the Court of the burden of entering duplicative orders and keeping duplicative files. The rights of the creditors of each of the Debtors, Mr. Friedman assures the Court, will not be adversely affected as the joint administration of the cases is purely procedural and is in no way intended to affect substantive rights. Supervision of the administrative aspects of the Debtors' Chapter 11 cases by the Office of the United States Trustee for Region 2 also will be simplified, he adds. The Court also modified the caption of the Debtors' Chapter 11 Cases to be used by all parties in all pleadings in the jointly administered cases: United States Bankruptcy Court Southern District of New York ------------------------------------ | In re | Chapter 11 | BORDERS GROUP, INC., et al., | Case No. 11-10614 | Debtors. | Jointly Administered | ------------------------------------- The Court also permitted the Debtors to file their monthly operating reports required by Operating Guidelines of the U.S. Trustee for Region 2 on a consolidated basis; provided that the Debtors will list disbursements separately for each individual Debtor. ----------------------------------------------------------------- [00009] DEBTORS' MOTION TO EXTEND DEADLINE TO FILE SCHEDULES ----------------------------------------------------------------- The Debtors ask the Court to grant them additional time to file their (i) schedules of assets and liabilities, (ii) schedules of executory contracts and unexpired leases and (iii) statements of financial affairs. David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, asserts that due to the complexity and diversity of their operations, the Debtors anticipate that they will be unable to complete their Schedules and Statements in the 15-day period provided under Rule 1007(c) of the Federal Rules of Bankruptcy Procedure. He points out that while the Debtors' books and records are maintained at their corporate headquarters, the Debtors currently have about 642 retail stores operating within the United States and Puerto Rico. To prepare their Schedules and Statements, the Debtors must necessarily compile information relating to, among other things, sales, returns, exchanges, gift cards and other customer programs, employee wages, business interruptions, litigations, locations and values of the Debtors' leased property, and lists of all of the Debtors' personal property, he stresses. The Debtors maintain that while they have began the task of collecting the necessary information for the preparation and finalization of their Schedules and Statements before the Petition Date, with the assistance of their professionals, substantial work remains to be done. Given the facts and the competing demands on the Debtors' employees and professionals to assist in efforts to stabilize business operations during the initial postpetition period, the Debtors will not be able to properly and accurately complete the Schedules and Statements within the required 15-day time period, Mr. Friedman says. The Debtors thus anticipate that they will require 45 days to complete their Schedules and Statements. At the Debtors' behest, the Court extended the 15-day period to file their Schedules and Statements for another 30 days, through and including April 5, 2011. In light of certain schedules attached to the First Day Declaration submitted to the Court by Scott Henry, Borders Group's chief financial officer, the Debtors believe that the Court, their creditors and other parties-in-interest have substantial information regarding the Debtors' estates so as to minimize any prejudice caused to those parties by a delay in the submission of the Schedules and Statements. ----------------------------------------------------------------- [00010] AGREE REALTY'S STATEMENT ON BORDERS' BANKRUPTCY FILING ----------------------------------------------------------------- FARMINGTON HILLS, Michigan -- February 16, 2011 -- Borders Group, Inc. (NYSE: BGP) and certain of its subsidiaries, including Borders, Inc., filed a bankruptcy petition under Chapter 11 and an anticipated store closing list with the bankruptcy court. Agree Realty Corporation (the "Company") currently has 14 properties leased to Borders, Inc. under triple net leases, including 13 retail properties and the Borders Group, Inc. corporate headquarters in Ann Arbor, Michigan. Two of the Borders retail locations are not occupied by Borders, but are occupied by subtenants under sublease agreements. The Company records annualized rental revenues of approximately $7.4 million, including approximately $1 million in non-cash rental revenues annually, from Borders, Inc. The revenue from Borders amounts to approximately 20% of the Company's annualized base rental revenues. Borders filed an anticipated store closing list with the bankruptcy court that included five of the Company's properties, which five stores generate approximately $2.6 million of the Company's annualized base rental revenues. The various leases are with Borders, Inc. and are guaranteed by Borders Group, Inc. The Company has provided substitute borrowing base properties to replace Borders stores under its $55 million credit facility, and the credit facility banks have acknowledged that the financial condition of Borders and any default under any of the non-recourse loans secured by a property leased to Borders shall not be deemed a default under the credit facility. "We wish Borders success in their plans announced today to restructure and operate under Chapter 11," said Joey Agree, President and Chief Operating Officer of the Company. "While uncertainty has clouded Borders for the past three years, our organization has anticipated such an event and worked to diversify our portfolio with leading national retailers." The Company has filed a current report on Form 8-K with the SEC regarding the bankruptcy. The Company is engaged in the ownership, management and development of properties which are primarily single tenant properties leased to major retail tenants and neighborhood community shopping centers. The Company owns and operates a portfolio of 80 properties, located in 17 states and containing 3.5 million square feet of leasable space. For additional information, visit the Company's home page on the Internet at http://www.agreerealty.com ----------------------------------------------------------------- [00011] BOOKSELLERS GROUP COMMENTS ON BORDERS' BANKRUPTCY FILING ----------------------------------------------------------------- The American Booksellers Association issued a statement in relation to Borders Group's recent bankruptcy filing: Though Borders is not a member of the American Booksellers Association, we are always saddened when any bookstore closes. The industry -- whether independent bookstores, publishers, or readers - -- does not benefit from the diminishment of places to browse, discover, and buy books. However, despite the doom and gloom expressed by some about the future of full service bricks and mortar bookstores - and, while we don't under-estimate the challenges that lie ahead - ABA believes that the indie bookstore model is well positioned for the future. ABA membership numbers have stabilized; the vast majority of ABA members are coming off the best holiday season they've had in years; and, we've partnered with Google to allow our members to offer e-books through their websites. As book buyers and readers are facing a skyrocketing number of books vying for their attention -- with more and more demands on their time -- our members' customers are telling us, now more than ever, they appreciate the care independent stores take in choosing the titles to stock, and that the curated selection in our stores can't be found elsewhere. In addition, more and more consumers appreciate the fact that our members are locally-owned with long-standing and close ties to their community. They understand that by shopping in an independent store they are making sure that far more of their spending dollars recirculate back into the community. Shopping locally supports the small businesses that are creating jobs, directly fuels local growth, and helps preserve the special things that make each American community unique. Looking ahead, we know that indie stores will have to continue to work hard and stay nimble and innovative. No matter what may appear in the headlines today, and understanding that the circumstances leading to the current situation facing Borders is very different than those of independents, we believe that our members will continue to offer their customers a unique shopping experience they can't find anywhere else. *** End of Issue No. 1 ***