With a crucial hearing set for tomorrow in which judge Martin Glenn will rule on, among other things, Borders Group’s motion for an extension for an exclusive period to develop its reorganization plan, the retailer’s lawyers fired back at arguments made by the Creditors’s Committee that Glenn should deny the request. In reply, Borders attorney Andrew Glenn said the company has pursued a dual-track process of exploring the possible sale of its assets as well as a standalone plan of reorganization as suggested by the committee. If Judge Glenn denies Borders’ request for an extension, the future of the Chapter 11 process will be put in doubt.
The committee, Andrew Glenn added, is asking for a special exclusion from any exclusivity extension, even though the committee has no plan of its own. “If the Committee has a plan that it wishes to pursue that maximizes value, the Debtors welcome the opportunity to review and negotiate it. Until then, however, the Court should continue exclusivity to maintain the Debtors’ proper role as the gatekeeper in these cases,” the motion states. According to Borders, the sale process “is now at its most sensitive stage,” and terminating exclusivity will send the wrong message to buyers and create confusion in the process without any benefit to the estates. The motion adds that the chain has “no intention of abandoning the sale process. To the contrary, the Debtors plan to aggressively pursue the current bidders and to seek other potential bidders until a sale is finalized.”
Borders has also not ruled out reorganizing as a standalone company and is simply asking for more time to continue negotiations with landlords and vendors to create terms to incorporate in a reorganization plan.
Andrew Glenn brushes aside concerns expressed by the Creditors’s Committee about Borders’s continuing losses, noting that the March and April reports did not reflect the cost reductions made by the company that will start to be seen in May results. Moreover, Andrew Glenn noted, retailers often post losses in the nine months leading up to the holiday period and that it is not unusual for a company to report losses when it first enters Chapter 11.
In dealing with the committee’s complaints about Borders’s refusal to share draft plans of reorganization, Andrew Glenn writes that Borders has “prepared skeletons of plans of reorganization depending on the outcome of the sale process. The Debtors have solicited Committee feedback at every critical juncture of these cases. Once the Debtors have made further progress in formulating their plan and the sale process has run its course, the Debtors intend to provide the Committee with a copy of their plan, and welcome the Committee’s feedback and support."