================================================================= BORDERS GROUP BANKRUPTCY NEWS Issue Number 5 ----------------------------------------------------------------- Copyright 2011 (ISSN XXXX-XXXX) March 14, 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 ------------- [00059] BORDERS TARGETS BANKRUPTCY EXIT IN SEPTEMBER, SAYS CEO [00060] BORDERS TO LIQUIDATE 75 ADDITIONAL STORES [00061] DEBTORS' MOTION TO OBTAIN $505-MIL. IN DIP FINANCING [00062] DEBTORS' 1ST MOTION TO EXTEND LEASE DECISION PERIOD [00063] BORDERS GETS COURT NOD TO LIQUIDATE 200+ STORES [00064] DEBTORS' MOTION FOR INJUNCTION AGAINST UTILITY COMPANIES [00065] DEBTORS' MOTION TO ESTABLISH LEASE REJECTION PROCEDURES [00066] DEBTORS' 1ST OMNIBUS MOTION TO REJECT UNEXPIRED LEASES [00067] DEBTORS' MOTION TO ASSUME NCC WESTWOOD LEASE [00068] DEBTORS' APPLICATION TO EMPLOY KASOWITZ BENSON AS COUNSEL [00069] DEBTORS' APPLICATION TO HIRE DICKINSON WRIGHT AS COUNSEL [00070] COMMITTEE'S APPLICATION TO RETAIN LOWENSTEIN SANDLER [00071] NYSE DELISTS BORDERS GROUP COMMON STOCK [00072] BORDERS MAY EMERGE FROM BANKRUPTCY IN SMALLER FORM [00073] MANGA PUBLISHER LAYS OFF STAFF, CITES BORDERS BANKRUPTCY [00074] BORDERS CELEBRATES MARCH AS KID'S READING MONTH 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 ----------------------------------------------------------------- [00059] BORDERS TARGETS BANKRUPTCY EXIT IN SEPTEMBER, SAYS CEO ----------------------------------------------------------------- [00060] BORDERS TO LIQUIDATE 75 ADDITIONAL STORES ----------------------------------------------------------------- See prior related entry at [00012] (Borders Gets Court Nod to Liquidate 200+ Stores). Borders Group, Inc. hopes to exit Chapter 11 by summer's end after getting started on liquidating 200 superstores, the company's President and Chief Executive Officer Mike Edwards said in an interview, according to Jeffrey A. Trachtenberg and Mike Spector of The Wall Street Journal. Borders held a conference call on March 11, 2011, to apprise its vendors on the company's business plan, and restructuring and finance status. Mr. Edwards disclosed that Borders hopes to present a formal business plan in its bankruptcy case in early April, The Journal relayed. Borders' ultimate goal is to exit bankruptcy in August or September to ready the business in time for the holiday season, according to Mr. Edwards, the report noted. "You got a window, and you have to move decisively," Mr. Edwards was quoted as saying. The Journal related that Borders will have 433 stores left after an initial round of about 200 superstores closing. The Company previously noted it may liquidate 75 additional stories. The final number of additional store closings will depend on the success of negotiations with landlords and may be closer to 20 or 25 stores, Mr. Edwards said, the report relayed. Borders is currently facing a dispute with its Official Committee of Unsecured Creditors over the proposed postpetition DIP financing, The Journal mentioned. The Creditors' Committee insisted that the $505 million DIP financing made available by the DIP lenders was more than what the company needed, and only resulted to about $16 million in unnecessary fees to the lenders, the report noted. Borders said in responsive court papers that it has made several changes to the DIP financing terms. Borders' request to obtain final approval of the DIP Financing Motion is scheduled to be heard by U.S. Bankruptcy Court for the Southern District of New York on March 15, 2011. In other updates, Mr. Edwards revealed that Kobo Inc., a Toronto- based e-book retailer in which Borders holds a stake, will begin sharing some of the proceeds of every Kobo e-book sold in the U.S. to the bookseller, The Journal stated. According to Mr. Edwards, the move will help Borders to effectively compete on the digital level with Amazon.com Inc., Barnes & Noble Inc. and Apple Inc., the report noted. In turn, Borders will do its part to promote Kobo, The Journal stated. Borders will continue to sell e-readers aside from Kobo, confirmed Mr. Edwards, The Journal cited. The No. 1 question, as Mr. Edwards recognized, is whether Borders can compete successfully online, The Journal noted. Mr. Edwards disclosed that Borders' Web site is attracting traffic but those people leave without buying anything, The Journal stated. The Journal mentioned that Borders may need to reconfigure its 25,000 square-foot superstores, which hold huge inventories of books that are available online or digitally. Borders to Close 75 Stores Borders said in a recent conference call that it will close more stores coming from a group of 140 stores that Mr. Edwards described as on the "bubble stores," a separate report by The Detroit Free Press related. Borders noted that 75 of 136 additional stores would close and the stores to be closed will be determined after the company attempts to reach better lease terms with landlords, The Detroit Free Press reported. According to the report, Borders is analyzing each store based on its profitability and whether rent reductions alone would make a difference to the store's performance. Landlords have until Wednesday, March 16, 2011, to indicate whether they would accept rent concessions from the bookseller. Borders is expected to announce the closings this week. The expected closings will hit only superstores and not the smaller format Borders Express stores or airport locations, The Detroit Free Press related. Mr. Edwards said, according to the report, those stores are performing well and had benefited from landlord concessions. Borders Chief Financial Officer Scott Henry added that the spared stores are drawing strong customer support with sales exceeding the company's expectations, the report relayed. Mr. Edwards disclosed that while Borders' largest vendors, which make up 63% of 2010 sales, are all shipping to the stores, they are not yet accepting returns of books that do not sell, The Detroit Free Press mentioned. Mr. Edwards said Borders is in talks with publishers to accept returns again, the report added. Being able to resume returns and normal trade terms with all vendors will be critical to our success, Mr. Edwards emphasized, The Detroit Free Press said. A voice recording of the March 11 conference call is accessible for free at http://www.bordersreorganization.com/index.php * * * Before the March 11 conference call was conducted, a Borders' merchandise executive was in New York last week to negotiate with publishers to resume direct shipments to the Company, according to Publishers Weekly. According to the report, Ingram is doing most of the shipping with publishers on a cash basis. Borders is asking for cash in advance terms for a month with more regular terms afterwards, Publishers Weekly relayed, citing sources. The report observed that in the months leading to its bankruptcy filing, Borders was buying and returning in quick succession. Creditors Meeting Borders convened on March 9, 2011, a meeting with its Creditors Committee. Publishers Weekly disclosed that Simon & Schuster and Hachette attended the meeting as members, but in a non-voting capacity. Simon & Schuster and Hachette belong to the top 30 unsecured creditors in Borders' bankruptcy case and participated in Borders creditors' meetings pre-bankruptcy, the report relayed. Simon & Schuster and Hachette were reported to be unhappy when they were left out in the Creditors' Committee membership, Publishers Weekly stated. ----------------------------------------------------------------- [00061] DEBTORS' MOTION TO OBTAIN $505-MIL. IN DIP FINANCING ----------------------------------------------------------------- See prior entries at [00049] and [00015] and prior related entries at [00050] and [00016] (Debtors' Motion for Authority to Use Cash Collateral) and [00031] and [00014] (Borders Get Interim Access to $400-Mil. in DIP Financing). Parties Ink 1st Amendment to DIP Pact Borders Group, Inc. and its debtor affiliates informed the U.S. Bankruptcy Court for the Southern District of New York that they entered into a first amendment of their credit agreement and their guaranty and security agreement with certain lender parties led by GA Capital LLC. As previously reported, the financing under the DIP Credit Agreement consists of a $450,000,000 Working Capital Facility and a $55,000,000 Term Loan B Facility. The Working Capital Facility is in turn comprised of a $410,000,000 million revolver credit facility, a $20,000,000 "first in last out" term loan, and an additional $20,000,000 cash management facility. Under the Amended Credit Agreement, certain terms were redefined: * "Aggregate Revolving Commitment" refers to the combined Revolving Commitment of all the Revolving Lenders, which will initially be in the amount of $410 million, including of the reimbursement obligations of the Revolving Lenders with respect to the Cash Management Letters of Credit. * "Cash Management Letters of Credit" refers to the 'Initial Cash Management Letter of Credit' and the 'Specified Purchase Card Letter of Credit.' The Initial Cash Management Letter Credit refers to the Irrevocable Standby Letter of Credit Number SE451027W in the stated amount of $18,300,000 for the benefit of Bank of America, N.A. The Purchase Card Letter of Credit refers to the Irrevocable Standby Letter of Credit Number SE451026W in the statement amount of $20,000,000 for the benefit of Bank of America, N.A. * "Excluded Cash Management Services" refers to obligations of the Credit Parties owing to Bank of America, N.A. relating to purchase card services, to the extent Availability is less than $40 million or an Event of Default has occurred and is continuing. * With respect to all FILO Loans, the Base Rate will not be less than 4.25%. The Amended DIP Agreement also includes schedules of certain of the Debtors' store leases (i) whose term will expire in 2011; (ii) whose landlord may have the right to elect, at any time prior to December 31, 2011, to terminate the lease; and (iii) with respect to Store Leases expiring between January 31, 2011, and March 31, 2011, with identified status, as of March 9, 2011, of the negotiations for lease extension with respect to those Store Leases. The Debtors are required to notify the DIP Lenders of any landlord's termination of those Store Leases. The Debtors submitted a copy of the Amended Credit Agreement to the Court on March 10, 2011. A full-text copy of the First Amended Credit Agreement is available at http://bankrupt.com/misc/Borders_1stDIPAmendment.pdf A blacklined copy of changed pages to the First Amended Credit Agreement is available for free at: http://bankrupt.com/misc/Borders_1stDIPAmndmnt_blacklined.pdf Parties Object The Official Committee of Unsecured Creditors says it objects to a final approval of the Debtors' postpetition financing. The Creditors' Committee argues that the DIP Motion and the DIP Facility include certain provisions that are unreasonable, overreaching and otherwise inappropriate. The DIP Lenders knew the Debtors were on the brink of collapse in the face of continuing large losses and used their leverage to impose objectionable provisions on the Debtors, Bruce Buechler, Esq., at Lowenstein Sandler PC, in New York, asserts, on behalf of the Creditors' Committee. Mr. Buechler relates that the objectionable provisions are: * The DIP Facility grants the DIP Lenders liens on the proceeds of Avoidance Actions and would allow the DIP Lenders to satisfy their Superpriority Administrative Claims from the proceeds of the Avoidance Actions. These provisions must be stricken, Mr. Buechler contends. In addition, proceeds of the Avoidance Actions should not be subject to the Adequate Protection Liens granted to the Prepetition Lenders nor should the proceeds of the Avoidance Actions be subject to the Adequate Protection Superpriority Claims of the Prepetition Lenders. * The DIP Facility provides for an aggregate $4 million carveout cap for the Debtors' and the Committee's professionals, including accrued and unpaid fees through an event of default plus fees incurred after a notice of event of default. For a case of this size and given the number of professionals retained by the Debtors, a $4 million carveout is unreasonably small and should be increased to no less than $6.5 million, Mr. Buechler asserts. In addition, a provision of the DIP Credit Agreement suggests that professionals would not be entitled to receive any of their fees or expenses from the carveout until after the "the application of all available funds of the Debtors' estates." This provision must be revised to allow or require payment of professional fees from the carveout before the exhaustion of the estates' funds, the Committee says. * The DIP Facility contains unreasonable and severe borrowing base limitations including, but not limited to, minimum availability reserves for the revolver facility of $30 million and an unreasonably low borrowing base value that fails to take into account the successful result of the "going out of business" sale. Moreover, if the minimum availability reserve drops below $25 million, another $15 million reserve block is added on top of that. These borrowing based limitations, the Committee argues, are unreasonable and excessive given that the DIP Facility is not providing any "new" money to the Debtors and the value of the DIP Collateral is substantially greater than the amounts that will be borrowed. These reserves must be substantially relaxed to avoid choking the Debtors' cash availability and forcing the Debtors to breach covenants that would trigger defaults leading to an unnecessary and premature liquidation of the Debtors' assets, according to Mr. Buechler. * The 10% variance covenants for both receipts and disbursements should be replaced with a 15% cumulative net operating cash flow variance and restructuring fees should be excluded from the variance analysis, Mr. Buechler insists. * The Unused Revolver Fee Margin is 0.50%. Given that the projected unused amount of the revolver is projected to be in excess of $200 million throughout the term of the DIP Facility, this fee is clearly excessive and should be reduced to 0.25%, the Committee complains. * In addition to the payment of over $1.0 million in fees to the DIP Lenders' professionals, the DIP Facility provides for the payment of approximately $15 million in aggregate financing fees. These fees include approximately $4.3 million to the lenders under the $55 million Term B Facility or approximately 6% of the amount of the facility. Moreover, the $4.3 million fee includes a $1.46 million Make-Whole Payment that would be waived if parties do not object to the DIP Motion or take other actions adverse to the lenders. The Make Whole Payment is essentially a penalty and poison pill designed to deter parties from raising objections to the DIP Motion and otherwise taking actions adverse to the lenders, Mr. Buechler says. In sum, the Term B Facility fees, including the Make Whole Payment, are unreasonable and excessive in light of both the minimally increased availability offered by the Term B Facility and the value of the DIP Collateral, he maintains. The proposed modifications to the objectionable features of the DIP Facility are necessary to strike a reasonable balance among the interests of the Debtors, the DIP Lenders, the Prepetition Secured Lenders, and the Debtors' unsecured creditors, Mr. Buechler emphasizes. Verizon Communications, Inc. and certain other entities also filed separate limited objections to the DIP Financing Motion. They include: -- Dallas/Fort Worth International Airport Board or DFWIAB, -- Lewisville Independent School District or LISD, and -- Burleson ISD, City of Burleson, City of Colleyville, Grapevine-Colleyville ISD, City of Grapevine, Clear Creek ISD, Woodlands Metro MUD, Woodlands RUD #1, and Baybrook MUD#1. Verizon delivers advanced IP, data, voice and wireless solutions to the Debtors through various telecommunications agreements, including a March 2010 master lease for the lease of Cisco data equipment and Microsoft Exchange Server software licenses. Verizon says it is owed $445,810 by the Debtors as of the Petition Date. Verizon objects to any priming lien that would take precedence over its interest in the Equipment and Software in the event the Master Lease is recharacterized as a purchase financing. It also seeks clarification in any final DIP order that if the Master Lease is recharacterized as a purchase financing, its interest in the Equipment and Software would be a prepetition permitted lien that would remain senior to any DIP lien and adequate protection lien. LISD and Burleson, et al., are political subdivisions of the state of Texas. The Texas Entities maintain that they hold claims that are secured by prior perfected continuing enforceable tax liens on the Debtors' property. LISD says it holds claims for $18,374 for 2011 business personal property taxes against the Debtors. Burleson ISD, et al., say that they hold claims for $126,000 for outstanding 2010 and 2011 ad valorem taxes against the Debtors. In this light, the Texas Entities object to any priming of their ad valorem liens by the granting of DIP liens or any adequate protection liens to the Debtors' lenders. The Texas Entities seek that any final DIP financing order clarify that any of their statutory tax liens will not be primed and provide that the first proceeds from the sale of collateral will go to a segregated amount for adequate protection for payment of their secured taxes prior to payment of any junior liens, including DIP liens and Adequate Protection Liens. The Texas Entities understand that the Debtors have already begun store closing sales at certain locations. DFWIAB and the Debtors are parties to a concession lease agreement for the lease of terminal space at the Dallas/FW Airport. To secure performance under the Lease, the Debtors were required to furnish a $30,000 security deposit or surety bond payable to DFWIAB. DFWIAB maintains that it objects to the DIP Motion to the extent that it attempts to seek a final order divesting DFWIAB of its rights under the Bond by granting a security interest in the Bond to the Working Capital Agent of the DIP Facility. DFWIAB also objects to the DIP Motion to the extent it seeks a final order granting the DIP Lenders a security interest in avoidance action under Chapter 5 of the Bankruptcy Code. DFWIAB emphasizes that proceeds of avoidance action should be preserved for the benefit of the Debtors' estates and their creditors. Debtors & Lenders Defend DIP Financing Counsel to the Debtors, David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, subsequently apprised the Court that the Debtors have succeeded in resolving all objections to the DIP Loan other than the objections of the Creditors' Committee and one other party. It should be noted that the Committee's Objection only includes the residual matters that were not resolved after extensive good faith negotiations among the Committee, the Debtors and the DIP Agent, Mr. Friedman relates. He stresses that the Committee has obtained a relief on certain important points that will empower the Committee's role in the Debtors' bankruptcy cases. In this regard, the Debtors amended the proposed final DIP order to provide these terms: (1) The Committee and the U.S. Trustee for Region 2 will have three business days to object to amendments, modifications or supplements to the DIP Loan Documents with those objection to be resolved by the Court, if necessary; (2) The Budget, as updated, will be delivered to the Committee; (3) The Committee and the U.S. Trustee will have three business days to object to payment of the DIP Secured Parties out-of-pocket expenses, with that objection to be resolved by the Court, if necessary; (4) The "investigation cap" pursuant to which the Committee may use DIP Loan proceeds to investigate the liens and claims of the prepetition secured lenders has been increased from $50,000 to $125,000, and that cap is not reduced by the Committee's objections to the DIP Motion; (5) The 60-day challenge period to assert claims against the prepetition secured lenders is now automatically extended to a date three business days following the adjudication of a timely filed Standing Motion. In other words, the Committee is "only" required to file a motion to obtain standing within the 60-day period -- not to obtain standing and commence an adversary proceeding. (6) The Committee will receive the reports, certificates, notices and other documentation required to be sent to the DIP Agents under the DIP Loan Documents. The Debtors believe that these additional protections are appropriate. Mr. Friedman asserts that the Committee's Objection now boils down to the Committee's request that the DIP Loan contain better business terms: lower fees, reduced covenants and more availability. The terms on this "wish list," however desirable, were all terms that were the subject of hard bargaining prepetition between the Debtors and the DIP Agents, and the Debtors are convinced that the terms contained within the DIP Credit Agreement are fair, reasonable and, most importantly, the best terms that are currently available to the Debtors in the marketplace, he maintains. A chart summarizing the DIP Motion Objections and the Debtors' response is available for free at: http://bankrupt.com/misc/Borders_DIPObjsSumm.pdf In support of the DIP Motion, General Electric Capital Corporation, as lender and working capital agent for the lenders under the DIP Credit Agreement, complains that the Committee seeks to rewrite the economic terms of the DIP Loan as the Committee would have them. "There is no basis for the Committee to substitute its business judgment for that of the Debtors," Wendy S. Walker, Esq., at Morgan, Lewis & Bockius LLP, in New York, counsel to GECC, argues. Ms. Walker clarifies that the terms of the DIP Credit Agreement do not "leverage the bankruptcy process" or "unfairly cede control of the reorganization to one party in interest." Indeed, the Committee's complaints are largely related to business terms that are standard for asset based loans on a postpetition basis, she points out. There is nothing unusual, for example, about the availability covenants, budget variances or unused commitment fees, she contends. Each is designed to protect the DIP Lenders against, or compensate them for, the risks of lending to a large retailer in a chapter 11 process; each was negotiated in good faith between the Debtors and the DIP Agents; and no better terms were available to the Debtors, she stresses. The Debtors required a DIP financing arrangement that was large enough to refinance the prepetition secured lenders and that would providing adequate protection acceptable to the prepetition secured lenders, Ms. Walker adds. The prepetition secured lenders would not consent to be primed, and the Debtors had no unencumbered assets to offer as collateral for the DIP Loan, she reasons. Accordingly, one of the factors leading the Debtors to choose the proposed DIP Loan was that it would avoid a "bet the company" priming fight on the first day of their Chapter 11 cases, she avers. In another filing, GA Capital LLC, as Term B Agent, complains that the Committee's Objection is premised on a fundamental misunderstanding of the structure of the DIP Facility. Counsel to GA Capital, Kevin J. Simard, Esq., at Riemer & Braunstein LLP, in Boston, Massachusetts -- ksimard@riemerlaw.com -- asserts that as a result of the Term B Lender's significantly enlarging the Term B Borrowing Base, the Debtors received additional liquidity both from the additional Term Loan advance in the amount of $6,400,000 but also from a decrease in the Term B Reserve. While the Committee would prefer not to have the Term B Facility, the DIP Facility as a whole is a cohesive and integrated facility complete with the Revolving Credit Facility, FILO Tranche and Term B Facility, Mr. Simard points out. The DIP Facility cannot be bifurcated for the convenience of the Committee, he stresses. Although the Term B Lenders are receiving fees in excess of their pro rata share, the Term B Lenders are the institutions taking the greatest risk in the DIP Facility and deserve the larger percentage of the fees to compensate them for their additional risk, Mr. Simard insists. Mr. Simard clarifies that the lenders under the Prepetition Term Loan Agreement's willingness to waive the Make Whole payment is conditioned upon approval of the final DIP order, indefeasible payment in full of all fees under the DIP Facility, and the passage of the Challenge Period without objection or challenge to the Prepetition Term Loan Agreement or the Prepetition Claims of the Prepetition Term Lenders. The offered waiver is not a "poison pill;" it is a voluntary waiver by the Prepetition Term Lenders of their contractual right to over $1,400,000 in liquidated damages for the prepayment in the first year of a four year term loan, he maintains. The final DIP hearing is scheduled for March 15, 2011. ----------------------------------------------------------------- [00062] DEBTORS' 1ST MOTION TO EXTEND LEASE DECISION PERIOD ----------------------------------------------------------------- Pursuant to Section 365(d)(4) of the Bankruptcy Code, the Debtors ask the Court to extend the period by which they may assume or reject unexpired non-residential real property leases, through and including September 14, 2011. The Debtors are party to about 681 commercial leases with 325 landlords, including about 674 leases for real stores. The Debtors operate all of their stores pursuant to these leases. A schedule of the Unexpired Leases is available for free at: http://bankrupt.com/misc/Borders_UnexpiredLeases.pdf Section 365(d)(4)(A) provides for an initial period of 120 days after the Petition Date during which a debtor may assume or reject unexpired leases of nonresidential real property under which the debtor is the lessee. By virtue of their bankruptcy filing, the Debtors' initial period to assume or reject the Unexpired Leases will expire on June 16, 2011. David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, apprises the Court that the Debtors are still developing, negotiating and implementing a comprehensive operation restructuring plan. In conjunction, the Debtors need sufficient time to make critical decisions concerning the geographical footprint of the stores around which they will reorganize, he says. The Debtors thus seek extension of the period by which they must decide on the Unexpired Leases. The Bankruptcy Code provides that absent landlord consent, the Debtors must determine which leases to assume or reject on an accelerated basis. The Debtors have 120 days to make this determination subject to an extension of up to a 90-day extension for cause shown. Mr. Friedman argues that cause exists to extend the Lease Decision Period. He asserts that the Unexpired Leases are core assets of the Debtors' estates and without those leases, there would be no stores to operate the Debtors' business. Indeed, the Debtors are continuing to explore options to maximize the value of the Unexpired Leases through potential assumption and assignment to the third parties, he notes. Given the number of the Unexpired Leases, more time is needed to fully explore those options, he emphasizes. Mr. Friedman also contends that if the Debtors precipitously reject or assume the Unexpired Leases or are deemed to reject the Unexpired Leases, they may forego significant value in those Unexpired Leases or incur unnecessary rejection damages or administrative claims. The Debtors assure the Court that they are paying and will continue to pay for the postpetition rent obligations that arise under the Expired Leases. The Debtors' DIP Financing Facility requires the Debtors to obtain the proposed lease decision period extension within 60 days of the Petition Date or be in default under that facility with attendant consequences, Mr. Friedman relates. The DIP Facility also requires the Debtors to set certain reserves, including a "Lease Reserve" for inventory that remains at the Debtors' lease locations that are not assumed at least 120 days before the deadline to assume or reject. Any Lease Reserve will have a detrimental effect on the Debtors' liquidity, he points out. To save time and expense, the Debtors seek the Court's permission to enter into stipulations with landlords further extending the deadline to assume or reject those unexpired leases, through and including January 12, 2012. A full-text copy of the form of the stipulation with the landlords is available for free at: http://bankrupt.com/misc/Borders_LandlordStip.pdf Landlords React Several landlords object to the proposed extension of the Lease Decision Deadline, which include: * Simon Property Group, Inc. * GGP Limited Partnership * Faber Bros., Inc. * Inland Southwest Management LLC, et al. * TigrisWoods, LLC d/b/a The Stores at Riverwoods * The Macerich Company, et al. * Mt. Kisco Associates L.P. * First Interstate Mentor Centers, LP * Coventry Retail, L.P. * Camino Real Limited Liability Company Certain landlords complain that the Debtors are not current on their postpetition obligations to certain applicable leases: * Simon Property, GGP and TigrisWoods allege that the Debtors are in default of their monetary obligations under the applicable leases for failure to pay rent due for the month of February 2011. * Faber Bros complains that the Debtors had not paid any of Their obligations for the month of March, including rent of $28,406, common area maintenance of $1,940 and miscellaneous expenses totaling $6,518. * Inland Southwest, Inland American Retail Management LLC, Inland US Management LLC, Inland Commercial Property Management, Inc. and Inland Continental Property Management Corp. seek the Debtors' immediate payment of rent for the month of March. The Landlords thus ask the Court that the proposed extension be conditioned on the Debtors' performance of their postpetition obligations under the Leases. In other objections, a group of landlords led by Macerich wants the Court to clarify that the proposed extension (i) should not apply to the Leases where stores are closing or have already closed; and (ii) be limited so that the extension does not extend beyond confirmation of any plan of reorganization. The Macerich Landlords include RREEF Management Company; Related Urban Management; Cousins Properties, Incorporated, Corning Companies, PassCo Companies, LLC; AEW Capital Management, LP; Urban Retail Properties, Inc.; and Steadfast Companies. Mt. Kisco complains that granting the Debtors the proposed extension a mere two weeks into the Debtors' Chapter 11 cases undercuts the whole statutory purpose of fixing an initial period to decide on the unexpired leases. Counsel to First Interstate and Ledgewood Equities, LLC, Paul H. Silverman, Esq., at McLaughlin & Stern LLP, in New York -- psilverman@mclaughlinstern.com -- contends that the Debtors' Motion did not show cause for more than 120 days to decide on all the leases. The Debtors generalized that the Unexpired Leases are core assets when in fact Borders operate its site at Creekside Plaza so poorly that it is closing the store at this time, he points out. He further argues that to have the court pre-approve a stipulation form for further extensions of time upon landlord's consent is prematurely requested. Counsel to Camino, Robert K. LeHane, Esq., at Kelley Drye & Warren LLP, in New York, reveals that the Debtors have made and communicated their decision that their lease with Camino in a Goleta, California, store will be subject to store closing. Based on the Debtors' decision to close the store, there is no need for additional time to decide on the Lease. On behalf of Coventry, Jeffrey C. Wisler, Esq., at Connolly Bove Lodge & Hutz LLP, in Wilmington, Delaware, tells the Court that his client and the Debtors are engaged in discussions regarding Coventry's request to lift the automatic stay to pursue all state law rights and remedies to evict Borders from Coventry Mall. Nevertheless, Coventry contends that the Debtors do not have the right to assume or reject the underlying Lease. The Lease expired before the Petition Date and the Lease is not property of the Debtors' estate, he asserts. To the extent that the Lease is property of the Debtors, no cause exists to extend the current deadline to assume or reject the Lease because, among other things, the Debtors have no equity in the Lease or the Premises and is not necessary to the Debtors' reorganization, Mr. Wisler insists. Westfield LLC and its affiliates and "the Taubman landlords" filed separate joinders to the Macerich Landlords' Objection. A list of The Taubman Landlords is available for free at: http://bankrupt.com/misc/Borders_TaubmanLandlords.pdf Simon Property and the Debtors are parties to 29 non-residential leases currently open where the Debtors are operating in 24 going concern locations and five closing locations. GGP is party to 36 lease agreements with the Debtors for non- residential real property, including 32 going concern locations and four closing locations. Mt. Kisco is a lessor to an unexpired lease to Borders Inc. located at 162 East Main Street, in Mt. Kisco, New York. Faber Bros is a landlord to a lease agreement with Borders, Inc. for a property. Mentor owns Creekside Plaza of which Borders is an anchor tenant. Ledgewood owns Borders Plaza to which Borders is a lessor. Coventry is landlord to Borders in the Coventry Mall. The Macerich Landlords are parties to about 30 leases, a list of which is available for free at: http://bankrupt.com/misc/Borders_MacerichLeases.pdf Westfield and the Debtors are parties to 27 leases, a list of which is available for free at: http://bankrupt.com/misc/Borders_WestfieldLeases.pdf Inland, as managing agent for the owners of certain non- residential property, is party to about 17 lease agreements with the Debtors, a list of which leases is available for free at: http://bankrupt.com/misc/Borders_InlandLeases.pdf Debtors Talk Back The Debtors insist that the proposed lease decision extension will afford them an appropriate opportunity to conduct the analysis and negotiation that is necessary to make informed decisions concerning their lease portfolio. Indeed, no party in these Chapter 11 cases disputes that the Debtors' lease portfolio is crucial to their reorganization efforts, says David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman, LLP, in New York, counsel to the Debtors. If the Debtors are forced to address landlord demands on an individual basis as a condition of obtaining the relief sought in the Lease Extension Motion, the very purpose of the Debtors' Lease Decision Extension Motion would be frustrated, he emphasizes. In response to objectors' complaints on the non-payment of postpetition rent, the Debtors tell the Court that they have paid the March rent, and all stub rent will be paid on or before April 18, 2011, even though the Debtors could have contested the timing of the stub rent payment. To address other objections related to stores that are already subject to the store closing process, the Debtors are withdrawing the Lease Extension Motion solely as to those stores. The Debtors maintain that any delay in filing their extension request could jeopardize or even derail their reorganization efforts. The Debtors point out that under the DIP Facility, they must send bid packages to liquidators for store closing sales for any store with a lease that has not been assumed 15 weeks before the applicable deadline assume or reject. The Debtors add that they have other obligations as well, like commencing store closing sales at least 12 weeks before the Lease Decision Period expires. If the Debtors fail to get extensions of the Lease Decision Period, they risk being in default and losing borrowing availability for inventory at each location, Mr. Friedman points out. Since the deadline to send bid packages to liquidators already passed, the Debtors needed a waiver from the DIP lenders extending the deadline until March 15, 2011, the day of the hearing on the Lease Decision Motion, he points out. "If the Court does not approve the Lease Extension Motion, the Debtors will have defaulted under the DIP Facility, which will force these Chapter 11 cases into liquidation," he tells the Court. A chart summarizing the objections to the Lease Extension Motion and the Debtors' corresponding response is available for free at: http://bankrupt.com/misc/Borders_LeaseExtObjsSumm.pdf Judge Glenn will consider the Debtors' request in a hearing scheduled for March 15, 2011. ----------------------------------------------------------------- [00063] BORDERS GETS COURT NOD TO LIQUIDATE 200+ STORES ----------------------------------------------------------------- See prior entry at [00012] and prior related entries at [00013] (Borders Store Closing Sales to Commence on Feb. 19) and [00007] (Borders Group to Close 200+ Stores Under Bankruptcy). Collin County Responds The Collin County Texas Tax Assessor-Collector says it does not object to the sale of the property at issue per se, but proposes that any order granting the Debtors' Store Closing Sales Motion specifically provide that all ad valorem property tax liens claims and encumbrances against a certain property subject to the motion will attach to the proceeds of sale in the same order of priority that existed immediately before the Petition Date. Collin County holds statutory tax liens on the property that is the subject of the Motion by virtue of Sections 32.01 and 32.05 of the Texas Property Tax Code. The tax liens attach to all property owned or claimed by the Debtors as of January 1 of each tax year and are superior to any other lien or claim, regardless of the date that any other lien or claim may have been perfected, Michael S. Mitchell, Esq., at DeMarco Mitchell, PLLC, in Plano, Texas -- mike@demarcomitchell.com -- asserts. Specifically, Mr. Mitchell proposes that any proceeds from the sale of business personal property encumbered by Collin County's statutory liens should be used to satisfy Collin County's secured liens at the time of sale and prior to the satisfaction of any Debtor-in-Possession lenders or other junior secured lien holders. In the alternative, a separate escrow or segregated account should be created at closing from the proceeds of any sale in a sufficient amount to cover all ad valorem property taxes owed to Collin County, with its secured tax liens attaching to those segregated proceeds with the same validity, priority, and effect as under applicable non-bankruptcy law, he adds. ----------------------------------------------------------------- [00064] DEBTORS' MOTION FOR INJUNCTION AGAINST UTILITY COMPANIES ----------------------------------------------------------------- See prior entry at [00034]. Utility Companies React Several utility companies oppose the Debtors' Motion for injunction against utility companies. They include: * Virginia Electric Power Company d/b/a Dominion Virginia Power; The East Ohio Gas Company d/b/a Dominion East Ohio; Dominion Hope; New York State Electric and Gas Corporation; Florida Power Corporation d/b/a Progress Energy Florida; Carolina Power & Light Company d/b/a Progress Energy Carolinas, LLC; Consolidated Edison Company of New York, Inc.; Orange & Rockland Utilities; Southern California Edison Company; Toledo Edison Company; The Cleveland Electric Illuminating Company; Ohio Edison Company; Pennsylvania Power Company; Jersey Central Power & Light Company; Metropolitan Edison Company; Pennsylvania Electric Company; Georgia Power Company; American Electric Power; Duke Energy Carolinas, LLC; Duke Energy Ohio, Inc.; Duke Energy Indiana, Inc.; Duke Energy Kentucky, Inc.; Piedmont Natural Gas Company; San Diego Gas & Electric Company; Public Service Electric and Gas Company; The Connecticut Light and Power Company; Yankee Gas Services Company; Public Service Company of New Hampshire; PECO Energy Company; Commonwealth Edison Company; Allegheny Power; Arizona Public Service; The Detroit Edison Company; Cobb Electric Membership Corporation; and Tucson Electric Power Company * Nevada Power Company and Sierra Pacific Power Company doing business as NV Energy * Public Service Company of New Mexico * Florida Power & Light Company, Entergy and Central Maine Power Company, Potomac Electric Power, Delmarva Power, and Atlantic City Electric. Entergy includes Entergy Gulf States Louisiana, LLC, Entergy Louisiana, LLC; Entergy Mississippi, Inc., Entergy New Orleans, Inc. and Entergy Texas, Inc. * Puerto Rico Electric Power Authority Virginia Electric Power Company and its affiliates complain that the proposed $2,288,210 to be escrowed by the Debtors is not a form of adequate assurance of payment as set forth under Section 366(c)(1)(A) of the Bankruptcy Code nor the security asked by the utilities pursuant to Section 366(c)(2). The Debtors failed to explain (i) who would hold the Escrow Account; (ii) how the Utilities would access the Escrow Account, and (iii) whether the Utilities will still have access to the Escrow Account if the Debtors default on their obligations concerning their DIP financing, Virginia Electric Power contends. Public Service Company of New Mexico asserts that the Debtors should pay it a $60,000 postpetition deposit as assurance of payment under Section 366(c). PNM also asserts that the Debtors should pay all of the charges on or before the due dates set forth in PNM's postpetition invoices. If the Debtors do not pay either the Postpetition Deposit or the postpetition invoices timely and fully, PNM insists that it should be entitled to terminate electricity service, upon providing the Debtors with written notice of default in accordance with the New Mexico Laws and without returning to the Bankruptcy Court for authorization. Florida Power asks the Court to (a) enforce as written Section 366; (b) deny the Debtors' Motion; and (c) direct the Debtors to pay Florida Power their two-month adequate assurance demand immediately or be subject to disconnection on the 31st day after the Petition Date. NV Energy and Puerto Rico Electric seek adequate assurance of payments in the form of cash deposits: Proposed Adequate Party Assurance Amt. ----- ----------------- NV Energy $55,855 Puerto Rico Electric $171,887 The adequate assurance of payment required by NV Energy is equal to the charges for 45 days and two months average service based on the Debtors' account histories. Puerto Rico Electric's proposed adequate assurance of payment is three times the average monthly use of the Debtors. Debtors Address Objections Counsel to the Debtors, David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, relates that the Debtors have received and are resolving about 20 requests for additional adequate assurance and five formal objections to the Utility Injunction Motion. The objection filed by the Virginia Electric Group has been adjourned to April 7, 2011, and is in the process of being resolved by the Debtors. The objection of NV Energy has been resolved and will be withdrawn, he notes. The remaining three objections filed by Public Service Company of New Mexico, the Florida Power Group, and Puerto Rico Electric are in the process of being resolved by the Debtors. A chart summarizing the status of all Objections as of March 11, 2011 is available for free at: http://bankrupt.com/misc/Borders_UtilitiesObjsSumm.pdf Mr. Friedman insists that a two-week cash escrow account as adequate assurance is more than a mere nominal amount to mitigate any risk faced by utilities and properly balance the interests of the Debtors and their utilities under Section 366. The Objecting Utility Companies fail to recognize that Section 366 is not included in the Bankruptcy Code meant to secure all of a utility's exposure to non-payment, he contends. Mr. Friedman also asserts that the Objecting Utility Companies are not facing an unreasonable risk of non-payment where the Debtors are continuing to operate as a going concern in the majority of their locations and generating revenues. The Debtors are seeking final approval of their DIP financing, thus, sufficient funds will be available to permit them to pay the Utility Companies for postpetition services in a timely manner, he assures the Court. Some Objecting Utility Companies also assert that holding the adequate assurance deposits in the proposed escrow account is not appropriate and that the Utility Companies do not have sufficient information to access those deposits. The deposits in the escrow account provided for some Utility Companies or the maintenance of the existing deposits and bonds for other Utility Companies, Mr. Friedman asserts, constitute either a cash deposit or a surety bond, which are two of the recognized forms of adequate assurance provided for in Section 366(c)(1)(A). The Court will consider final approval of the Utility Injunction Motion on March 15, 2011. ----------------------------------------------------------------- [00065] DEBTORS' MOTION TO ESTABLISH LEASE REJECTION PROCEDURES ----------------------------------------------------------------- See prior entry at [00035]. Landlords Criticize Procedures In separate filings, The Macerich Company, Dallas/Fort Worth International Airport Board and Seattle's Best Coffee LLC oppose the Debtors' proposed procedures for the rejection of unexpired leases. A. Macerich Landlords A group of landlords led by Macerich asserts that the rejection of any lease should not become effective until the later of surrender and turnover of the premises, free and clear of any personal property interests or third party objections and 10 days after filing of the rejection notice. Counsel to Macerich, Adrienne W. Blankley, Esq., at Katten Muchin Rosenman LLP, in New York -- adrienne.blankley@kattenlaw.com -- asserts that rejection that relates back to the filing of the Rejection Date is inconsistent with the Rejection Notice itself and the Bankruptcy Code as it creates potential significant and unnecessary liabilities to the Macerich Landlords. Ms. Blankley contends that the Rejection Date should not occur if third parties like Seattle's Best Coffee have yet to remove their property from the Premises. Having parties entering onto the Premises during the potential gap period puts the Landlords at risk for liability for damage to persons or property before they have possession and control of the Premises, she stresses. The rejection procedures should also provide for the removal of all personal property prior to rejection with all property left at the Premises after rejection abandoned to Landlords, free and clear of claims and without any liability to third parties, she asserts. The abandonment of property can result in significant costs to Landlords as a debtor often leaves its vacated space cluttered with inventory, supplies and fixtures, she insists. Other objecting landlords are RREEF Management Company, Related Urban Management, Cousins Properties, Incorporated, Corning Companies, Passco Companies, LLC, AEW Capital Management, LP, Urban Retail Properties, Inc. and Steadfast Companies. These parties join in the Macerich Landlords' Objection: * Shelbyville Road Plaza, LLC * "The Cafaro Related Entities" * The Taubman Landlords * Westfield, LLC and its affiliates The Cafaro Related Entities are Governor's Square Company dba Governor's Square Mall; Howland Commons, LLC dba Howland Commons; Huntington Mall Company dba Huntington Mall; Kennedy Mall, Ltd. dba Kennedy Mall; Meadowbrook Mall Company dba Meadowbrook Mall; Cafaro Management Company dba Millcreek Mall; PA-Eastway, Inc. dba Millcreek Pavilion; Ohio Valley Mall Company dba Ohio Valley Mall; Sandusky Mall Company dba Sandusky Mall and Frenchtown Square Partnership dba The Mall of Monroe. B. DFWIAB Dallas/Fort Worth International Airport Board objects to the proposed Rejection Procedures to the extent the Debtors are attempting to seek an order (i) preventing DFWIAB from proceeding against a bond as a recoupment of damages in the event of default of the lease by orders; or (ii) requiring DFWIAB to seek further Court authority before pursuing its claim against the Bond. Counsel to DFWIAB, Rosa R. Orenstein, Esq., at Sullivan & Holston, in Dallas, Texas -- rorenstein@sullivanholston.com -- asserts that neither Borders, Inc. nor any of the Debtor has an interest in the Bond's $30,000 penal sum. It is improper to require DFWIAB to seek further Court approval to recoup its damages by way of a claim against a non-debtor, she asserts. Similarly, it is improper to require DFWIAB to seek further Court approval to recoup its damages by way of a claim against a non- debtor third party for funds to which the Debtors hold no claim, he argues. C. Seattle's Best Seattle's Best complains that the proposed order does not adequately protect its intellectual and other property rights in connection with the rejection of unexpired leases. Counsel to Seattle's Best, Hugh R. McCullough, Esq., at Davis Wright Tremaine LLP, in Seattle, Washington -- hughmccullough@dwt.com -- asserts that Seattle's Best should receive notice of each proposed lease rejection and related abandonment of property. Seattle Best's interests will be materially affected by the closing of the Debtors' stores, and Seattle's Best may need to take steps to protect those interests, particularly with respect to its trademarks, trade dress, and trade secrets, Mr. McCullough stresses. Any order granting the Rejection Procedures Motion should also expressly state that approval of the proposed rejection procedures is without prejudice to Seattle Best's rights under a master license agreement or applicable law with respect any lease rejection or abandonment of property, he tells the Court. The Court will consider the Rejection Procedures Motion on a hearing scheduled for March 15, 2011. ----------------------------------------------------------------- [00066] DEBTORS' 1ST OMNIBUS MOTION TO REJECT UNEXPIRED LEASES ----------------------------------------------------------------- See prior entry at [00036]. The Debtors filed with the Court a revised proposed order on the 1st Omnibus Rejection Motion to incorporate comments received from Hawkins-Smith Management, Inc., landlord party to a lease in Milwaukee Marketplace. The revised proposed order contemplates that rejection as of the Petition Date of four lease agreements, a schedule of which is available for free at: http://bankrupt.com/misc/Borders_RejectedLeases.pdf The revised proposed order further notes that if the Debtors have deposited funds with a landlord of a rejected Lease as a security deposit or other arrangement, that landlord may not setoff or otherwise use the deposit without the prior authority of the Court or agreement of the parties. Under the revised proposed order, the Debtors are authorized to abandon their Personal Property located within the premises that are the subject of certain of the Leases, free and clear of any interests, effective as of the Petition Date. The revised proposed order made clear that in the event of any abandonment, all applicable landlords will be authorized to dispose of the property without any liability to any individual or entity that may claim an interest in the abandoned property without prejudice to (i) any landlord's right to assert any claim based on the abandonment; and (ii) the Debtors or other parties-in-interest to object. Judge Glenn approved the Debtors' request and signed the revised proposed order on March 4, 2011. ----------------------------------------------------------------- [00067] DEBTORS' MOTION TO ASSUME NCC WESTWOOD LEASE ----------------------------------------------------------------- See prior entry at [00051]. Judge Glenn authorized Borders Inc.'s assumption of a lease agreement with NCC Westwood Dome, LLC, an assignment agreement and all related amendments. Judge Glenn also authorized the Debtor's entry into the First Amendment to the Assignment Agreement. Judge Glenn also confirmed that Section 365(a) of the Bankruptcy Code and Rules 6004(h) and 6006(g) of the Federal Rules of Bankruptcy Procedure do not apply to the assumption and assignment of the Lease Agreement. The Debtors are released from liability under the Lease Agreement, the Assignment Agreement and the First Amendment pursuant to Section 365(k), Judge Glenn held. ----------------------------------------------------------------- [00068] DEBTORS' APPLICATION TO EMPLOY KASOWITZ BENSON AS COUNSEL ----------------------------------------------------------------- See prior entry at [00040]. In a supplemental declaration, David Friedman, Esq., a partner at Kasowitz, Benson, Torres & Friedman LLP, informed Judge Glenn that his firm received several retainer payments, totaling $2,000,000, between January 11, 2011 and February 11, 2011. He related that the amount of Kasowitz Benson's prepetition fees and expenses applied against the retainer are in the amount of $1,798,092, and the firm has carried forward a postpetition retainer of $201,907. Mr. Friedman also disclosed that Kasowitz Benson performed certain services on behalf of the Debtors related to a discreet litigation matter for which, on several occasions, the firm was paid separately from the Retainer. The Firm was paid these amounts: Date Amount ---- ------- November 9, 2010 $34,220 December 3, 2010 $29,726 February 1, 2011 $38,886 Because the last two of these payments occurred within 90 days of the Debtors' Chapter 11 filing, Kasowitz Benson has agreed to return these sums to the Debtors and to waive any claim that could arise from them, Mr. Friedman said. To effectuate this return of funds, Kasowitz Benson has reduced its prepetition bill against the Retainer by $68,613 and has increased the amount of its postpetition retainer by a like amount. As a result, Kasowitz Benson's postpetition retainer is $270,520. Mr. Friedman further disclosed that: * his admission to the United States Court of Appeals for the Eleventh Circuit has lapsed; * Kasowitz Benson, from May 2010 through February 2011, employed as a junior paralegal an individual who is a relative of one of the Debtors' officers and directors. This individual performed no work relating to the Debtors, performed work consisting almost entirely of document management and file maintenance, and is no longer employed by Kasowitz Benson; and * the hourly billing rates for these Kasowitz Benson attorneys assigned to the Debtors' Chapter 11 cases have increased: Name New Rate per Hour ---- ----------------- Andrew K. Glenn $825 Alan Lungen $625 Julia Balduzzi $325 Mr. Friedman filed another declaration to disclose that beginning 2010, Kasowitz Benson provided legal services to Myeloma Health LLC and Signal Genetics LLC. The managing member of both these entities is Bennett S. LeBow, the chairman of Borders Group Inc. On February 11, 2011, Kasowitz Benson filed a lawsuit on behalf of Signal and its wholly owned subsidiary, Respira Health LLC, against Med Biogene, Inc. in the Supreme Court of the State of New York, he related. The action involves a dispute in connection with a technology license agreement and neither the action nor any other aspect of Kasowitz Benson's representation of these entities implicates the Debtors in any way. The fees generated in 2010 for this matter were $37,023 and the fees to date for 2011 are $23,338. The amount billed in 2010 is well below 1 % of the Firm's annual revenue for that year, and that the same will be true for 2011, Mr. Friedman added. Despite the disclosures, Mr. Friedman continues to believe and assures the Court that Kasowitz Benson is a "disinterested person" as that term is defined under Section 101(14) of the Bankruptcy Code. ----------------------------------------------------------------- [00069] DEBTORS' APPLICATION TO HIRE DICKINSON WRIGHT AS COUNSEL ----------------------------------------------------------------- The Debtors seek the Court's permission to employ Dickinson Wright PLLC as their special counsel nunc pro tunc to the Petition Date. The Debtors seek to employ Dickinson Wright with respect to: (a) day-to-day vendor, supplier, leasing and other types of commercial matters generally related to maintaining continuity of supply of goods/services and use of facilities; and (b) preparation, prosecution, protection and litigation of trademark and intellectual property rights. The Debtors will pay Dickinson Wright's professionals according to the firm's customary hourly rates ranging from $185 to $550 per hour. The specific Dickinson Wright attorneys who will be engaged in the Debtors' Chapter 11 cases and their customary hourly rates are: Attorney Rate per Hour -------- ------------- Michael C. Hammer $440 Kristi A. Katsma $370 Doron Yitzchaki $220 Samuel Littlepage $495 Nicole Meyer $365 The Debtors will also reimburse Dickinson Wright for the firm's reasonable and necessary expenses incurred. Mr. Hammer, Esq., a member at Dickinson Wright -- mhammer@dickinsonwright.com -- disclosed that his firm is owed $2,372 for prepetition services. Dickinson Wright has agreed to waive these fees and expenses in connection with its retention in the Debtors' Chapter 11 cases, he said. In a supplemental declaration, Mr. Hammer said Dickinson Wright represents these parties in matters unrelated to the Debtors' Chapter 11 cases: * Various UBS subsidiaries in unrelated municipal finance matters * Bank of America, N.A. in unrelated banking and finance matters * JPMorgan Chase, N.A. in unrelated banking and finance matters * Wells Fargo Bank, N.A. and Wells Fargo Business Credit, Inc. Mr. Hammer said the Debtors and those entities are neither adverse nor potentially adverse to each other with respect to the matters for which Dickinson Wright is to be employed. Notwithstanding these representations, Mr. Hammer maintains that Dickinson Wright is a "disinterested person" as the term is defined under Section 101(14) of the Bankruptcy Code. ----------------------------------------------------------------- [00070] COMMITTEE'S APPLICATION TO RETAIN LOWENSTEIN SANDLER ----------------------------------------------------------------- The Official Committee of Unsecured Creditors seeks the Court's permission to retain Lowenstein Sandler PC as its counsel nunc pro tunc to February 24, 2011. As counsel to the Committee, Lowenstein Sandler will: (a) provide legal advice as necessary with respect to the Committee's powers and duties as an official committee appointed under Section 1102 of the Bankruptcy Code; (b) assist the Committee in investigating the acts, conduct, assets, liabilities, and financial condition of the Debtors, the operation of the Debtors' business, potential claims, and any other matters relevant to the Debtors' Chapter 11 cases; (c) participate in the formulation of a Chapter 11 plan and provide legal advice as necessary with respect to any disclosure statement and Plan filed in these Chapter 11 cases and with respect to the process for approving or disapproving disclosure statements and confirming or denying confirmation of a Plan; (d) participate in any process relating to the sale of estate assets; (e) prepare, on behalf of the Committee, applications, objections, motions, complaints, answers, orders, agreements and other legal papers; (f) appear in Court to present motions, applications, objections and pleadings, and otherwise protecting the interests of those represented by the Committee; and (g) perform other legal services as may be required and that are in the best interests of the Committee and creditors. Lowenstein Sandler's professionals will be paid according to these hourly rates: Title Rate per Hour ----- ------------- Partners $440 to $825 Senior Counsel $390 to $575 Counsel $340 to $575 Associates $235 to $450 Legal Assistants $145 to $215 Lowenstein Sandler will be reimbursed for actual and necessary expenses incurred. Bruce Buechler, Esq., a member of Lowenstein Sandler -- bbuechler@lowenstein.com -- discloses that in early January 2011, several of the Debtors' largest creditors retained the firm to represent them in connection with a potential out-of-court restructuring with the Debtors. The Debtors executed a letter dated January 13, 2011, agreeing to pay the fees and expenses of Lowenstein Sandler and wire transferred a $200,000 retainer to Lowenstein Sandler on January 14, 2011. In connection with the Prepetition Representation, for the month of January 2011, Lowenstein Sandler billed the Debtors $156,676, which was paid by wire transfer received by Lowenstein Sandler on February 7, 2011. From February 1 though February 15, 2011, Lowenstein Sandler billed the Debtors an additional $89,341, which was applied against the $200,000 retainer. The Debtors and the U.S. Trustee for Region 2 have agreed, subject to Court approval, to permit Lowenstein Sandler to retain the remaining retainer of $110,658, which remaining retainer will be applied to pay the firm's first monthly fee request in these Chapter 11 cases and to any subsequent monthly requests to the extent any portion of the retainer remains. Mr. Buechler further notes that Lowenstein Sandler may represent or has represented matters wholly unrelated to the Debtors' Chapter 11 cases, a schedule of which is available for free at: http://bankrupt.com/misc/Borders_LowensteinClients.pdf Mr. Buechler also clarifies that Lowenstein Sandler does not represent the Debtors, their affiliates, or any of the current and recent officers and directors of the Debtors, nor does Lowenstein Sandler represent any of the shareholders of the Debtors identified in this list, available for free at: http://bankrupt.com/misc/Borders_LowensteinPotentialParties.pdf Despite the disclosures, Mr. Buechler assures the Court that Lowenstein Sandler does not represent any entity having an adverse interest in connection with the Debtors' Chapter 11 cases; is a "disinterested person" as that term is defined under Section 101(14) of the Bankruptcy Code; and does not hold or represent any interest adverse to the Committee with respect to the matters upon which it is to be employed. ----------------------------------------------------------------- [00071] NYSE DELISTS BORDERS GROUP COMMON STOCK ----------------------------------------------------------------- See prior related entry at [00028] (Borders Receives Notice of Delisting from NYSE). The New York Stock Exchange LLC filed with the U.S. Securities and Exchange Commission on March 9, 2011, a notification of removal from listing and registration of common stock of Borders Group, Inc. Pursuant to Section 240.12d2-1 of Title 17 of the Code of Federal Regulations, the NYSE has complied with its rules to strike the class of securities from listing or withdraw registration on the Exchange. The NYSE will remove the BGP symbol from the roster of company tickers on the exchange on March 21, Crain's Detroit Business said in a separate report. Crain's Detroit noted that taking the Borders symbol is a technicality as the NYSE suspended all public trading for Borders when the company filed for bankruptcy on February 16, 2011. ----------------------------------------------------------------- [00072] BORDERS MAY EMERGE FROM BANKRUPTCY IN SMALLER FORM ----------------------------------------------------------------- Borders Group, Inc. is likely to emerge from bankruptcy in a "smaller form" by selling some of its stores through a bankruptcy-authorized sale, Bill Rochelle of Bloomberg News reported, citing Mark Podgainy, a senior director with Getzler Henrich & Associates LLC. Bloomberg noted that although Mr. Podgainy does not believe that Borders has a reason for existence, it is likely that "someone will want the business." Mr. Podgainy's comments came at that time an official committee of unsecured creditors was formed in Borders' Chapter 11 case, which is composed mostly of publishers. Mr. Podgainy noted that "trade creditors have a vested interest in continuing business so they can have a healthy ongoing customer," Bloomberg relayed. In response, Borders maintained that Chapter 11 process represents the best route for it to reorganize and return to viability, Mary Davis, a spokesperson for the Company, said in an e-mailed statement to Bloomberg. ----------------------------------------------------------------- [00073] MANGA PUBLISHER LAYS OFF STAFF, CITES BORDERS BANKRUPTCY ----------------------------------------------------------------- Stu Levy, chief executive officer of North American manga publisher Tokyopop, cited the Borders Group, Inc.'s Chapter 11 filing case as reason for the layoffs of the publisher's editors, Anime News Network related, citing the ICv2 retail news source. "Borders -- our biggest customer -- went bankrupt, owed us a lot money, which they didn't pay us, and as a result we are in a very challenging situation, and have had to react quickly to the situation. We did need to let a few people go - and it's horrible for everyone involved to ever have to let people go. We will continue to do everything we can to evolve the manga business and we very much appreciate the support of our fans, our partners, our creators, and out retail customers," Mr. Levy said, the report related. ----------------------------------------------------------------- [00074] BORDERS CELEBRATES MARCH AS KID'S READING MONTH ----------------------------------------------------------------- ANN ARBOR, Michigan -- March 1, 2011 -- Borders Group, Inc. announced that its stores nationwide and Borders.com will be recognizing March as "Kids' Reading Month" with a number of events to celebrate and promote children's reading and engagement. Throughout the month, these events will give Borders' customers the opportunity to encourage child literacy through exciting and fun community activities that leverage Borders' significant nationwide presence and reinforce the company's decades-long commitment to literacy. Spring Charity Drive - March 1 through April 30 Borders stores are once again partnering with hundreds of charities and nonprofits nationwide to deliver hundreds of thousands of new books and stuffed toys donated by generous customers to children who may not otherwise have access to new books. Throughout the drive, store associates will encourage customers to open their hearts and donate books including such titles as Dr. Seuss' "Cat in the Hat," "Pat the Bunny," by Dorothy Kunhardt, Rick Riordan's "The Lightning Thief" and Mary Pope Osborne's "Magic Tree House Activity Book." Through its 2010 charity drives, Borders delivered more than 1.5 million books and stuffed toys to charities such as Rainbow House in Chicago, Raising a Reader Massachusetts and Boys & Girls Clubs of Greater San Diego, which then distributed the books and toys to families. In conjunction with the charity drive, Borders stores will invite their charity partners for in-store events March 12 and April 23 to raise awareness of how the charity benefits their community. Buy a Dr. Seuss Book and Help a Child in Need Borders is teaming with Random House and First Book, a nonprofit providing new books to children in need, to give customers yet another opportunity to promote literacy. Beginning today through March 21, when customers make a purchase of any Dr. Seuss book in stores and on Borders.com, Random House will donate a new children's book to First Book. Read Across America In-Store Event Borders is participating in the 14th Annual Read Across America event celebrating the birthday of Dr. Seuss with a free in-store event Saturday, March 5 at 2 p.m. The party will find kids enjoying "Cat in the Hat" storytime, a variety of Cat-themed games and activities, as well as delicious food samplings. Importantly, each child in attendance will be given the opportunity to write a review of their favorite book. One review from each store will be featured on the March is Kids Reading Month landing page at http://www.borders.com/online/store/ArticleView_march-is-kids- reading-month while other reviews will be included on the title detail pages on Borders.com. (Event is being held in Borders superstores only.) "Diary of a Wimpy Kid: Rodrick Rules" In-Store Party On Saturday, March 19 beginning at 2 p.m., Borders will host a party celebrating the major motion picture release of "Diary of a Wimpy Kid: Rodrick Rules," the much anticipated film based on the 2nd book in the beloved Wimpy Kid book series by Jeff Kinney. During the event, Wimpy fans will enjoy trivia, games and activities, food samplings and have an opportunity to pen their recommendation for their favorite book in the Wimpy Kid series. (Event is being held in Borders superstores only.) To find Borders superstore locations participating in the events, visit Borders.com and click on the Store Locator link. Activities and events may vary by store. About Borders Headquartered in Ann Arbor, Mich., Borders Group, Inc. is a 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 www.facebook.com/borders www.twitter.com/borders and www.youtube.com/bordersmedia For more information about the company, visit www.borders.com/media *** End of Issue No. 5 ***