As you may have read, the Borders bookstore chain finally entered liquidation proceedings after a protracted period of trying to stay viable through a Chapter 11 bankruptcy proceeding. Borders was, after Barnes & Noble, the second-largest retail bookstore chain in the United States, with about 11,000 employees.
It was clear to many in publishing that Borders was in trouble a long time ago. In December last year, our distributor National Book Network (NBN) stopped shipping to Borders because they believed Borders was increasingly unlikely to be able to pay its bills. NBN asked us, and the other publishers they represent, if we wanted them to continue trying to sell our books to Borders. We chose not to, believing the risk was too high. NBN subsequently informed Borders that they would only sell on a cash-and-carry basis. That decision turned out to be the right one.
Publishers who did continue shipping to Borders have become Borders' biggest unsecured creditors. The six largest publishers on the list, according to a February article in the Wall Street Journal, are owed a staggering $182-million. Penguin Group USA leads the list, telling the court it believes it is owed about $45-million (Borders places that debt at nearer $41.1-million). Over 3,000 claims with a total value of around $1-billion have been filed with the courts, while the liquidation proceedings are unlikely to yield much more than one-quarter of that. Given the primacy of the secured creditors, it is unlikely the unsecured publishers will see even 25 cents of every dollar they are owed.
In the light of these developments, I am very glad that we decided against continuing to send books to Borders. It was a tough decision at the time: we want to sell as many books as possible for the authors we publish, but we also need to avoid risks when they are apparent.