Borders' stock in downward spiral

The bookstore chain stops making payments to some vendors. Can it survive?

By Kim Peterson Dec 31, 2010 11:49AM
Money books © gulfimages / Getty ImagesShares of Borders (BGP) continued a disastrous plunge Friday, down about 18% at midday to just 95 cents each.

Why? It's not just that the company is delaying payments to some vendors. But that fact, combined with other financial troubles, is giving rise to more fears about bankruptcy.

Borders is in serious debt trouble and is trying to get new financing to avoid defaulting on previous credit agreements, Reuters reports. Now the company has stopped paying some vendors and is trying to restructure other vendor payments.
These are the last developments in a string of bad news for Borders and rival Barnes & Noble (BKS). Both companies have seen their traditional business slide as consumers have switched to electronic readers and begun buying more books online. (It doesn't help that Kindle books are now lendable; see this Smart Spending post for more.) Post continues after video:
Digital books now make up 8% to 10% of sales at some major publishing houses, The Wall Street Journal reports. Barnes & Noble is the largest bookstore chain in the country, and Borders is No. 2.

With new fears of bankruptcy at Borders, the question now is whether publishers will continue sending books to the chain. One of the vendors being told to wait on a payment is Lagardere SCA's Hachette Book Group, one of the largest publishers in the U.S., the Journal reported.

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1Comment
Dec 31, 2010 2:39PM
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Interesting times.  I am always amazed how dramatically things can change.  And if you can't keep up and adapt.  You get devoured.  I like Borders.  I have to admit, I have not bought a book from them in quite a while.  But I did buy a little stock today.  Complete speculation, for the underdog.  Sorry to see this happen to you guys.  May there be better times ahead?
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