Responding to objections from a powerful group of its landlords, Borders Group has asked that Direct Brands LLC be removed as a stalking horse bidder in next week’s auction sale of the company. Instead, the bookseller has asked that bidder be replaced by bidders who intend to liquidate the retailer.
The change came after a growing list of Borders Group landlords, including The Macerich Co., RREEF, The Related Cos., Centro Propertie, Cousins Properties, Federal Realty Investment Trust, Glimcher Properties, Taubman Properties, AEW Capital Management, Urban Retail Properties and as many as 50 others, asked the bankruptcy court to slow down or end the process of selling Borders to Direct Brands.
According to objections filed with the bankruptcy court overseeing Borders reorganization, the proposed sale to Direct Brands would have resulted in the landlords “having no idea of whether their leases are part of any going concern package.”
Direct Brands LLC, a direct marketer that owns the Book of the Month Club business, had bid $450 million, including debt assumption. It’s bid did not include a guarantee that Borders stores would continue to operate.
In the upcoming auction, the stalking horse bidder (the opening bidder) now becomes liquidators Hilco Merchant Resources and Gordon Brothers. The liquidation group also includes: SB Capital Group, Tiger Capital Group and Great American Group.
If the liquidation bid is successful, the sale of Borders stores and inventories could begin this month.
Under the liquidation plan, Hilco, Gordon and the others would receive 28% of the merchandise proceeds. The percentage is based on a merchandise value ranging from $350 million to $395 million.
Borders has said it is hopeful that a bidder emerges that would continue to operate the company as a going concern.
By Mark Heschmeyer, Costar