Borders announced Sunday evening that it was delaying January payments to vendors and landlords in a move to conserve cash. The action will almost certainly end any hope Borders has of winning approval from publishers of its proposal to exchange missed December payments for notes. Borders had wanted publishers to approve the offer before the January payment was due, but many publishers were leaning towards rejecting the offer and some were waiting to see how the chain handled the January bills. Delaying payments was not something they wanted to hear. In addition to not paying the major houses, it is unclear if Borders paid any presses; in December Borders paid independent and small presses. Ingram is continuing to ship books to the company.
In a brief statement, Borders said it “understands the impact of its decision on the affected parties,” adding that it is “committed to working with its vendors and other business partners to achieve an outcome that is in the best interest of Borders ad these parties for the long-term.” Borders said the delay in payments “is intended to help the company maintain liquidity” while its seeks to complete a financial refinancing. That refinancing, however, needs the publishers to accept its financial offer, something that increasingly appears to be a remote possibility. Before Sunday’s announcement, some publishers were willing to let Borders file for Chapter 11 and Sunday’s move will likely reinforce that conviction. There is even a report that some publishers would not support a debtor-in-possession filing, something that raises the possibility of rather than a Chapter 11 filing Borders would be forced to file Chapter 7 and liquidate the company.