Borders Files for Chapter 11: Meet the Lawyer Who Will Run It - Law Blog

Borders Group, the company behind Borders Bookstore, at long last filed for Chapter 11 protection on Wednesday morning in federal bankruptcy court in Manhattan. Click here for the WSJ story.

It’s sad news, for those who still like the increasingly old-school experience of browsing through a bookstore with your feet — not just with a computer mouse. The company plans to close about 30%, or roughly 200, stores over the next few weeks.

To run the show, Borders has decided not to go with a huge firm steeped in debtor-side bankruptcy work, like a Kirkland or a Weil Gotshal, but instead with Kasowitz Benson’s David Friedman, perhaps best known for his creditor-side work. Friedman has repped large groups of creditors or bondholders in several huge bankruptcies, including Enron, Adelphia and Calpine.

So how did Friedman land the gig?

The American Lawyer reported late last month that ties between Marc Kasowitz and Borders CEO Bennett LeBow may have sealed the deal.

LeBow is also chairman of the board at the Vector Group, the holding company for Liggett Group, which owns several tobacco brands.

The article also reported (through an earlier New York Law Journal story), that Kasowitz’s relationship to Liggett extends back to 1996, three years after Kasowitz left Mayer Brown to set up the firm that now bears his name. Liggett continues to be one of the firm’s larger clients.

In an earlier story, the American Lawyer reported that Borders had as early as 2009 lined up Jones Day to handle the its restructuring efforts. But in May of last year, LeBow invested an additional $25 million in the company, which made him the largest shareholder, and allowed him to become the company’s CEO and chairman.

In a statement made alongside the bankruptcy filing, Borders Group president Mike Edwards said: “It has become increasingly clear that in light of the environment of curtailed customer spending… and the company’s lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor.”

The Chapter 11 filing will allow Borders to access new capital and reorganize its operations, Edwards said.

It recently lined up a $505 million “debtor in possession” loan from GE Capital to help fund its restructuring.

- 11:56 am February 27, 2011
- Wave74 wrote:
I managed several bookstores after getting my degree in English. I, like Jay Cee cannot understand the length of the leash Borders was given in paying their debts. Just another example of the “good ‘ole boys club.” I hope we do see a return of “Mom and Pop” bookstores. I hope we see a return of MANY “Mom and Pop” businesses as it seems they possess much better business sense than the huge corpoations who can hide and shift debt here, there and everywhere. The difference being, “Mom and Pop” also have to run the family budget; which is usually much less than “Joe Corporations” family allowance. “Mom and Pop” live within their means in every aspect of their lives, and KNOW HOW TO BALANCE A CHECKBOOK. “Joe Corporation” doesn’t.

- 6:03 am February 17, 2011
- Jay Cee wrote:
I am astonished at the debt that Borders has incurred. As a former book store owner who left the business debt free, I can’t understand why the publishers would allow Borders such latitude in paying for their inventory. I am also be interested in how old some of the debt is. The huge stores such as Borders and the publishing industry laid the groundwork for small to medium size book stores to be pushed out of business and now they reap the benefits, such as enough debt to choke a horse many times over. FTA…..“It has become increasingly clear that in light of the environment of curtailed customer spending… and the company’s lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor.” I laughed heartily when I read that statement. I am sure that “curtailed customer spending” was recognized as a factor in the diminished receipts long before Borders considered bankruptcy. At that point, the powers behind the throne should have slashed the work force, reduced inventory, closed unprofitable stores, and done a host of other things to avoid bankruptcy. Publishers are also complicit by letting debt slide for the big boys in the book selling world. Ask any small book seller how long they had to clear up any bills to publishers and they will tell you 90 days and then they were not shipped any new books. It appears as if a lot of publishers will take a bath in this bankruptcy scenario. Maybe if Borders has to downsize to a reasonable debt limit , we will see the return of the neighborhood book store once again.