================================================================= BORDERS GROUP BANKRUPTCY NEWS Issue Number 4 ----------------------------------------------------------------- Copyright 2011 (ISSN XXXX-XXXX) March 1, 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 ------------- [00047] U.S. TRUSTEE APPOINTS OFFICIAL COMMITTEE OF CREDITORS [00048] BORDERS' SEC. 341 MEETING OF CREDITORS SET FOR MARCH 22 [00049] DEBTORS' MOTION TO OBTAIN $505-MIL. IN DIP FINANCING [00050] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL [00051] DEBTORS' MOTION TO ASSUME NCC WESTWOOD LEASE [00052] COVENTRY RETAIL'S MOTION TO LIFT STAY TO EVICT DEBTOR [00053] DELL MARKETING'S MOTION TO LIFT STAY TO ALLOW SET-OFF [00054] RULE 2019 STATEMENT -- Dickstein Shapiro LLP [00055] RULE 2019 STATEMENT -- Kane Russell Coleman & Logan [00056] RULE 2019 STATEMENT -- Satterlee Stephens Burke & Burke [00057] NUMEROUS PARTIES SEEK TO APPEAR IN BORDERS CHAP.11 CASE [00058] BARNES & NOBLE INTERESTED IN SOME BORDERS STORE LOCATIONS KEY DATE CALENDAR ----------------- 02/16/11 Voluntary Chapter 11 Petition Date 02/24/11 U.S. Trustee Appoints Official Creditors' Committee 03/18/11 Deadline to Provide Utilities with Adequate Assurance 03/22/11 First Meeting of Creditors under 11 USC Sec. 341 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 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00047] U.S. TRUSTEE APPOINTS OFFICIAL COMMITTEE OF CREDITORS ----------------------------------------------------------------- Pursuant to Section 1102 of the Bankruptcy Code, Tracy Hope Davis, the United States Trustee for Region 2, appointed on February 24, 2011, seven creditors to serve as members of the Official Committee of Unsecured Creditors in the Chapter 11 cases of Borders Group, Inc. and its debtor affiliates. The Committee members consist of publishers and landlords of Borders Group: (1) Penguin Group (USA) Inc. Attn: Alexander Gigante Sr. VP Legal Affairs/Corporate Counsel 375 Hudson Street New York, NY 10014 Tel: (212) 366-2959 Fax: (212) 366-2867 (2) HarperCollins Publishers, LLC Attn: John Shrearer Vice President, Credit 100 Keystone Industrial Park Scranton, Pennsylvania 18512 Tel: (570) 941-1244 Fax: (570) 941-1590 (3) Random House, Inc. Attn: William C. Sinnott Vice President, Credit & Disbursements 400 Hahn Road Westminster, Maryland 21157 Tel: (410) 386-7480 Fax: (410) 386-7439 (4) The Perseus Books Group Attn: Charles Gallagher Chief Financial Officer 387 Park Avenue - 12th Floor New York, NY 10016 Tel: (212) 340-8133 Fax: (212) 340-8105 (5) Sony Music Entertainment Attn: Susan S. Danz Vice President of Credit & Collections 210 Clay Avenue Lyndhurst, New Jersey 07071 Tel: (201) 777-3643 (6) GGP Limited Partnership Attn: Julie Minnick Bowden National Bankruptcy Manager 110 North Wacker Drive Chicago, Illinois 60606 Tel: (312) 960-2707 Fax: (312) 442-6374 (7) Simon Property Group Attn: Ronald M. Tucker Vice President/Bankruptcy Counsel 225 W. Washington Street Indianapolis, Indiana 46204 Tel: (317) 263-2346 Fax: (317) 263-7901 Penguin Putnam Inc. is the Debtors' largest unsecured creditor with a $41,118,914 claim. Random House has a $33,461,062 claim against the Debtors. Harper Collins follows Random House in the largest unsecured creditors list with a claim of $25,793,451. Perseus holds a $7,776,292 claim against the Debtors and Sony Music a $4,273,824 claim. GGP LP and Simon Property are landlords to various Borders stores. GGP previously disclosed that it is the landlord to more than 30 Borders-owned stores, which represent 5% of Borders' total store count. Lowenstein Sandler has been appointed to represent the Unsecured Creditors Committee for Borders Group. Bruce S. Nathan and Bruce Buechler, members of Lowenstein Sandlers' Bankruptcy, Financial Reorganization & Creditors' Rights Group, are leading the team. ----------------------------------------------------------------- [00048] BORDERS' SEC. 341 MEETING OF CREDITORS SET FOR MARCH 22 ----------------------------------------------------------------- Tracy Hope Davis, the U.S. Trustee for Region 2, will convene a meeting of the creditors of Borders Group Inc. and its debtor affiliates on Tuesday, March 22, 2011, at 2:00 p.m. Eastern Time, at the office of the U.S. Trustee, 4th Floor, at 80 Broad Street, in New York. This is the first meeting of creditors under Section 341(a) of the Bankruptcy Code. The meeting offers creditors a one-time opportunity to examine the Debtors' representative under oath about the Debtors' financial affairs and operations that would be of interest to the general body of creditors. Attendance by the Debtor's creditors at the meeting is welcome, but not required. ----------------------------------------------------------------- [00049] DEBTORS' MOTION TO OBTAIN $505-MIL. IN DIP FINANCING ----------------------------------------------------------------- See prior entry at [00015] and prior related entries at [00031] and [00014] (Borders Get Interim Access to $400-Mil. in DIP Financing). Texas Tax Jurisdictions Object to DIP Motion The Tax Appraisal District of Bell County and the County of Denton, Texas, oppose any priming or subordination of their senior, perfected and unavoidable tax liens on the Debtors' property by either the DIP liens or the adequate protection liens being granted to the Debtors' lenders. Michael Reed, Esq., at McCreary, Veselka, Bragg & Allen, P.C., in Round Rock, Texas -- mreed@mvbalaw.com -- tells Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York that as of January 1, 2011, liability arose and a senior lien attached to the business personal property of the Debtors for the 2011 taxes of the Texas Ad Valorem Tax Jurisdictions. Thus, the Texas Ad Valorem Tax Jurisdictions require express clarification that their senior, perfected and unavoidable tax liens are not being primed by any liens being granted to lenders of the Debtors. The Texas Ad Valorem Tax Jurisdictions is ready to show the Court that granting priming liens without a demonstration on the record that the liens of the ad valorem tax creditors are adequately protected is prohibited by Section 364(d) of the Bankruptcy Code, Mr. Reed avers. ----------------------------------------------------------------- [00050] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- See prior entry at [00016]. Texas Tax Jurisdictions React The Tax Appraisal District of Bell County and the County of Denton, Texas -- collectively referred to as the Texas Ad Valorem Jurisdictions -- assert that the proceeds from the sale of their collateral in the Debtors' property constitute their own cash collateral. The Texas Ad Valorem Jurisdictions thus object to the use of their collateral or the proceeds of the sale of their collateral to pay any other creditors of the Debtors' estates. A senior lien is attached to the business personal property of the Debtors for the 2011 taxes of the Texas Ad Valorem Tax Jurisdictions, Michael Reed, Esq., at McCreary, Veselka, Bragg & Allen, P.C., in Round Rock, Texas, maintains. Pursuant to Section 363(c)(4) of the Bankruptcy Code, absent consent by the Texas Ad Valorem Tax Jurisdictions or an order of the Court permitting use of their cash collateral, the Debtors "shall segregate and account for any cash collateral" in their possession, Mr. Reed points out. He stresses that the Debtors have not filed a motion seeking to use the cash collateral of the Texas Ad Valorem Tax Jurisdictions, nor has there been notice or a hearing on the use of the Texas Ad Valorem Tax Jurisdictions' cash collateral. Accordingly, absent the Texas Ad Valorem Tax Jurisdictions' consent, a segregated account must be established from any sale proceeds or any non-ordinary course sale to comply with the requirements of Section 363(c)(4), Mr. Reed insists. ----------------------------------------------------------------- [00051] DEBTORS' MOTION TO ASSUME NCC WESTWOOD LEASE ----------------------------------------------------------------- Debtor Borders, Inc. and NCC Westwood Dome, LLC, predecessor-in- interest to Westwood CDIT, LLC and Westwood Dome, LLC entered into a lease agreement, whereby the Debtors lease the premises located at 1360 Westwood Boulevard in Los Angeles, California, for the operation of a Borders Superstore. Borders closed the Westwood store on January 8, 2011 and vacated the location on January 18, 2011. In July 2010, the Debtor, Ross Dress For Less, Inc., and Westwood entered into an Assignment and Assumption of Lease With Landlord Release, wherein the Debtor was scheduled to assign all of its interests and obligations under the Lease Agreement to Ross for the remainder of the lease term on February 21, 2011. The Debtor is in default under the Assignment Agreement because it failed to deliver the Premises as scheduled. Nonetheless, the parties agreed to enter into a First Amendment to the Assignment Agreement, whereby the delivery date has been changed to the first business day following entry of the Court's order: (1) approving the Assignment Agreement and all related amendments; (2) approving the assumption by the Debtor of the Lease Agreement, the Assignment Agreement and all related amendments; and (3) clarifying that the provisions of Rules 6004(h) and 6006(g) of the Federal Rules of Bankruptcy Procedure do not apply to the assumption and assignment of the Lease. The First Amendment provides that if the New Delivery Date does not occur on or before February 28, 2011, the Debtors will pay Westwood postpetition rent for the period from March 1, 2011 through the earlier of the New Delivery Date or March 4, 2011 at the rate of $3,799 per day. The Westwood Cure Claim, however, will not exceed $15,197. The First Amendment grants to Westwood and Ross allowed unsecured claims in the combined amount of an assignment fee of $588,680 and $75,000 broker's commission, which Ross and Westwood will divide equally. By this motion, the Debtors ask the Court to: (a) approve Borders Inc.'s assumption of the Lease Agreement, the Assignment Agreement and all related amendments; (b) authorize their entry into the First Amendment; (c) confirm that Rules 6004(h) and 6006(g) do not apply to the assumption and assignment of the Lease Agreement; and (d) authorize them to pay the Westwood Cure Claim. The Debtors stress that rejecting the Lease Agreement would create a claim for termination damages that could create a general unsecured claim of $2.2 million after application of a cap under Section 502(b)(6) of the Bankruptcy Code. At the Debtors' behest, the Court will consider the Debtors' Lease Assumption Motion on a shortened notice on March 2, 2011. Responses or objections to the Assumption Motion are to be made and considered at the hearing. ----------------------------------------------------------------- [00052] COVENTRY RETAIL'S MOTION TO LIFT STAY TO EVICT DEBTOR ----------------------------------------------------------------- Coventry Retail, L.P. asks the Court to lift the automatic stay to allow it to evict Debtor Borders, Inc. from certain premises located in Coventry Township, Chester County, Pennsylvania, and to take possession of the Premises. Before the Petition Date, Coventry and Borders were parties to a lease agreement, pursuant to which the Debtor occupies the Premises, which comprise of about 4,525 square feet of space in the Coventry Mall. The Lease expired by its own terms on January 31, 2011. Notwithstanding the expiration, the Debtor did not vacate the Premises, but instead chose to continue to use and occupy the Premises, Coventry Retail complains. A First Amendment and Extension of Lease Agreement provides that tenant will not be considered a holdover tenant for a period of 60 days following the end of the lease term so long as landlord and tenant are engaged in good faith negotiations for renewal of the lease. Coventry Retail informs the Court that negotiations for a renewal of the Lease have terminated. On February 23, 2011, Coventry provided the Debtor with a 30-day notice of termination of occupancy and Coventry's intent to take possession of the Premises. Representing Coventry Retail, Jeffrey C. Wisler, Esq., at Connolly Bove Lodge & Hutz LLP, in Wilmington, Delaware -- jwisler@cblh.com -- asserts that relief from the automatic stay is unnecessary because the Lease is not property of the Debtors' estates. He also contends that the Debtors have no equity in the Lease or the Premises, and neither are necessary to an effective reorganization given that occupancy can be terminated on 30 days' written notice. However, in the event the Lease is deemed not to have terminated prepetition and is in fact a property of the Debtors' estates, Coventry asks the Court to lift the automatic stay to allow it to pursue all applicable state law rights and remedies necessary to terminate the Lease, evict the Debtor from the Premises, and take possession of the Premises. ----------------------------------------------------------------- [00053] DELL MARKETING'S MOTION TO LIFT STAY TO ALLOW SET-OFF ----------------------------------------------------------------- Before the Petition Date, Debtor Borders Group, Inc. entered into two transactions with Dell Marketing for the purchase of various goods and services worth $64,012 and $92,346. Due to the cancellation by BGI of a software license, a credit is due to BGI in the amount of $92,346; however, that amount is still outstanding. Pursuant to Section 553 of the Bankruptcy Code, the debts are mutual debts and arose before the Petition Date, according to Dell. Dell says it is not aware of facts that would disallow its claim and the claim was not acquired under Section 553(a)(2) of the Bankruptcy Code. Accordingly, Dell asks the Court to lift the automatic stay to allow it to offset the net credit amount of $28,333 -- the difference between the credit to BGI of $92,346 and the amount still owed to Dell of $64,012. Dell says that upon entry of a final order of the Court granting its Lift Stay Motion, it will apply the credit to BGI's account and issue a check to the Debtor's estate. ----------------------------------------------------------------- [00054] RULE 2019 STATEMENT -- Dickstein Shapiro LLP ----------------------------------------------------------------- Pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure, Dickstein Shapiro LLP disclosed that as of Feb. 17, 2011, it represents Kin Properties Inc. and each of the KPI Landlords in connection with certain leases of non-residential real property leases and any claims arising under the leases. Each of the KPI Landlords acquired its interest as lessors under the Leases more than one year before the Debtors filed for bankruptcy. A list of the KPI Landlords is available for free at: http://bankrupt.com/misc/Borders_KPILandlords.pdf The KPI Landlords contact address is c/o Dickstein Shapiro LLP, 1825 Eye Street, NW, Washington, DC 20006. Jeffrey Rhodes, Esq., of Dickstein Shapiro, maintains that his firm does not hold any claims or interest against the Debtors. ----------------------------------------------------------------- [00055] RULE 2019 STATEMENT -- Kane Russell Coleman & Logan ----------------------------------------------------------------- Jason B. Binford, Esq., at Kane Rusell Coleman & Logan PC, in Dallas, Texas --jbinford@krcl.com -- told the Court that his firm is legal counsel to these parties: * Arlington Higlands, Ltd * IBV-Immobilienfonds International 1 USA, L.P. * IBV-Immobilienfonds International 2 USA, L.P. The creditors can be reached at: c/o Kane Russell Coleman & Logan PC Attn: Jason B. Binford 1601 Elm Street, Suite 3700 Dallas, Texas 75201 The Creditors assert undetermined claims as landlords of Borders stores in Texas, Pennsylvania and Virginia. Mr. Binford assures the Court that Kane Russell does not own or have a claim against or interest in any of the Debtors. ----------------------------------------------------------------- [00056] RULE 2019 STATEMENT -- Satterlee Stephens Burke & Burke ----------------------------------------------------------------- Christopher R. Belmonte, Esq., at Satterlee Stephens Burke & Burke LLP, in New York, informed the Court that it has been retained by these entities for representation in the bankruptcy cases of the Debtors: Entity Claim ------ ----- Random House Corporation Trade claim, 1745 Broadway approx $38 million New York, NY 10019 Oxford University Press, Inc. Trade claim, 198 Madison Avenue approx $0.5 million New York, NY 10016 The Firm maintains that it does not own, nor has it ever owned, any claim whatsoever against the Debtors. ----------------------------------------------------------------- [00057] NUMEROUS PARTIES SEEK TO APPEAR IN BORDERS CHAP.11 CASE ----------------------------------------------------------------- See prior entry at [00046] and prior related entry at [00030] (Mall Owners Seek to Appear in Borders' Bankruptcy Case). More parties have filed with the U.S. Bankruptcy Court for the Southern District of New York notices of appearances and requests for service of filings related in the Chapter 11 cases of Borders Group Inc. and its debtor affiliates. They are: (1) Verizon Communications, Inc. (2) Torrance Borders Partners, Ltd. (3) Eliason Combination Fund, LLC and 49 Waukegan Road Limited Partnership (4) Kimco Realty Corporation (5) The McGraw-Hill Companies, Inc. (6) Stoneridge Mobile Home Park LLC (7) National Book Network, Inc. (8) Blenheim DC I LLC (9) IBV-Immobilienfonds International 2 USA, L.P. and IBV- Immobilienfonds International 1 USA, L.P. (10) City of Burleson, Burleson ISD, City of Colleyville, City of Grapevine and Grapevine-Colleyville ISD. (11) Chicago Title Land Trust Company as Trustee under Trust No. 4671-AH, Uptown Goldblatts Retail, LLC, Chicago Title Land Trust Company as Trustee under Trust No. 45786 and Gateway Center Associates. (12) Schuler Books, Inc. (13) Donahue Schriber Realty Group, L.P. (14) Core Fund Loop Property, LLC (15) 3600 McKinney Limited Partnership (16) OCW - Retail, Hyannis LLC (17) Gateway-DC Properties Inc. (18) Gateway Woodside, Inc. (19) Official Committee of Unsecured Creditors (20) Ex-Point, Inc. (21) Baker & Taylor, Inc. (22) Rice Lake Square, L.P. ----------------------------------------------------------------- [00058] BARNES & NOBLE INTERESTED IN SOME BORDERS STORE LOCATIONS ----------------------------------------------------------------- Barnes & Noble, Inc. revealed in a recent conference call that it plans to take over locations that Borders Group, Inc. is planning to close as part of the bankrupt bookchain's restructuring process, Shira Ovide wrote for the Deal Journal of The Wall Street Journal. Barnes & Noble Chief Executive William Lynch said certain of Borders' closed stores appear attractive to the company given that landlords of those locations may be willing to negotiate for lower rental costs, Ms. Ovide related. Barnes & Noble disclosed that about 75% of the 200 closing stores are direct competitors of Barnes & Noble stores, Ms. Ovide noted. According to The Journal article, the disclosure left some analysts wondering why Barnes & Noble would spend any more money on bricks-and-mortar retail business when physical books are on the decline. To this comment, Mr. Lynch responded that Barnes & Noble stores continue to be profitable compared to Borders, which is said to be losing $2 million a week on the store locations that will be shuttered, the article added. Barnes & Noble also suspended distribution of dividends to take advantage of "market opportunities," the Deal Journal related. The suspension of the dividend will help fund Barnes & Noble's investment in digital business and possible takeover of certain shuttered Borders locations, Mr. Lynch said, according to Bloomberg News. *** End of Issue No. 4 ***