Borders Delays Payments to Gain Time
Borders says it will postpone January payments to many vendors to conserve cash. It's not clear that the move will do anything more than delay a possible prepackaged bankruptcy or a breakup of the company.
In its announcement, reported in a number of media, the book chain said it "understands the impact of its decision on the affected parties." General Electric's (GE) financial division said it would provide Borders with a $550 million line of credit, but this involves conditions Borders may not be able to comply with.
Borders sales are now less than $500 million a quarter and could drop further if more stores are closed as part of a restructuring. By contrast, Barnes & Noble (BKS) quarterly sales are closer to $2 billion a quarter. Publishers may not need Borders sales to keep their own revenue at current levels.
Just as important, as sales of Kindle and Nook e-reader devices grow rapidly, e-book sales have begun to compete with book sales at bricks-and-mortar stores. Borders does not have any real market share in the new business. That may make it expendable.