Borders gets financing but publishers balky

It’s been a while since we checked in at Borders, the financially troubled book chain. The latest efforts have been towards getting financing and convincing publishers to take notes instead of payment, Jim Milliot reports. The first has been accomplished — GE Capital is offering $550 million in funding, contingent upon Borders doing a number of things including shutting down several stores and getting publishers to agree to those notes. However, publishers are not going for it — they’ve refused to meet with Borders about the new plan and publishing execs feel that there is no viable recovery plan in place.

Despite this, the news of financing sent Borders stock up.

Thus, caught in a complete log jam, Borders has begun to talk about a structured bankruptcy for the first time says the Wall Street Journal:

Borders Group Inc. is in negotiations for financing that would keep it afloat during bankruptcy proceedings, said people familiar with the matter, as the bookstore chain ratcheted up pressure on publishers to agree to concessions that would keep it out of Chapter 11. The struggling bookstore chain is in talks with Bank of America Corp. and General Electric Co.’s finance arm for around $500 million in “debtor-in-possession” financing, the people said. Such loans, which usually carry high interest rates, are used to keep companies operating after filing for Chapter 11 bankruptcy protection.

Publishers feel Borders’ plan to fix its business is to do things the same way — while CEO Mike Edwards says they have some ideas:

The company’s new business plan will focus on five areas, none of them surprises to publishers: continuing to expand and enhance the Borders Rewards Plus program; strengthen the company’s position as a purveyor of content by aggressively growing Borders.com and e-book market share; expand and enhance the company’s overall retail mix, including non-book offerings, to improve profitability and offset the digital effect;aggressively reduce costs across the business, including costs in the supply chain network and store portfolio; make strategic investments in IT to improve the customer experience.

Once again, it’s not how entirely clear how the seemingly more likely every day Borders bankruptcy would affect comics publishers — most of them have been wary of the chain since its troubles began a couple of years ago, but a few — mostly manga publishers — still have a lot of product on the shelves. A Borders bankruptcy would probably mean returns of unsold stock instead of payment, and other outright write-offs. We’ve heard several people talk about Diamond being owed a significant amount of money by Borders, but the figures vary so much they all seem to be idle gossip at this point.

Still, no matter what the amount, the timing would be bad, given the overall market softness.

Diamond, like several publishers and distributors, stopped shipping to Borders nearly two weeks ago. This lack of product is why the chain is so eager to get publishers accept notes instead of payment.

We’ll keep an eye on this developing situation — anyone with any hot tips or insights feel free to use the tip line comicsbeat at gmail.com.