Monday, November 23, 2009

Borders on Verge of Bankruptcy

Posted by Chris O'Sullivan

Article by Jamie Dunkley

The high street retailer is thought to be holding discussions with groups including HMV as the threat of collapse draws nearer.

Borders was bought in July from Channel 4 chairman Luke Johnson's Risk Capital Partners, in a management buyout backed by Valco, a private equity firm.

However, the company has been hit by competition from supermarkets and the increasing strength of online retailers as the recession continues to hurt consumer spending. Borders has also suffered from the tightening in the credit insurance market, which has made it difficult to obtain stock from suppliers.

The company's management is now worried that it does not have enough cash to trade successfully through the busy Christmas period.

In 2008, the retailer's pre-tax losses jumped from £10.3m to £13.6m. In the accounts, published in August, its auditor Ernst & Young, raised doubts about its ability to continue as a going concern.

Last week, WH Smith ended talks about buying the bookseller. The company had been hoping to sell 36 of 45 outlets to WH Smith while its subsidiary, Books etc, held closing-down sales at the remaining stores.

It is thought that the other companies it has approached are more interested in buying packages of stores. This lack of appetite for a takeover of the whole company means it could be put into administration this week. It would then attempt to sell stores to interested parties.

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