On Thursday, Borders asked Judge Martin Glenn and U.S. Bankruptcy Court for more time for its exclusive period to come up with a Chapter 11 reorganization plan, without which it will be in default of its DIP Credit Agreement. The request for an additional 120 days would move the deadline from June 16 to October 14.
The troubled retailer's attorneys note that Borders has made “significant progress” since the bankruptcy filing over the past three months. “The Debtors have worked tirelessly with their professionals and creditor constituencies to consummate a successful restructuring,” they wrote. And they created a long-term business plan that was presented to the Creditors Committee on April 6 and to potential buyers for a sale that they say is “still underway.” They term the offers “promising.”
In asking for the extension, Borders said it continues to "fine-tune" their business plan and solicit feedback from the creditors committee, negotiate lease modifications with their landlords, and trade terms with their vendors. "Because processes are still unfolding which will be key to any plan of reorganization, the Debtors require more time to work with their creditor constituencies in order to arrive at a
plan that will, as proposed, to the fullest extent possible, have the support of all major constituencies in these cases," Borders said in the motion.
In a recap of its activities to date, Borders’s attorneys note that the retailer has closed 237 stores since the commencement of the bankruptcies and shrunk the footprint from 642 to 405 retail locations. In addition they have reviewed 1,493 contracts, of which 648 are for non-residential real estate and rejected 240 leases.
Although it’s too soon for any responses to have been filed to the motion, which will be on the agenda at the June 2 hearing, there could be several sticking points. Among them is the viability of Borders going forward. April sales are rumored to have been disappointing and the retailer has not yet broken out figures from its store closing sales. In addition, publishers, who have yet to resume full trade terms with Borders, might raise concerns regarding the company’s assertion that it has demonstrated reasonable prospects for filing a viable plan and made progress in its negotiations with its creditors.
An additional motion seeks to reject a hundred contracts in light of the closing of retail locations and certain distribution centers. Among the contracts Borders would like to reject are for linen service, a commercial credit card, elevator and escalator maintenance, and its 2008 proprietary novel The Eighth Day by Tom Avitabile.