Audio Video News

Another packaged media store is heading for bankruptcy court and it's a big one. Borders Group is filing for Chapter 11 bankruptcy protection.

Last month Borders got a $550 million line of credit from GE Capital, noting at the time "the possibility of an in-court restructuring." Now that the deal is done, the initial effect will be closure of 30 percent of the chain's 650 stores. Borders will also delay payments to vendors, landlords, and other creditors.

However, it will continue to honor its rewards program and gift cards at the remaining retail outlets, presumably including the website. Borders operates its own website nowadays, having broken away from Amazon several years ago. Under its new business plan, Borders will expand the Borders Rewards Plus program, grow the website and its ebook market share, expand the retail mix with more non-book products, reduce costs in the supply chain and store portfolio, and make strategic IT investments.

Borders is in danger of losing its listing on the New York Stock Exchange because its share price has dropped below a buck. It has six months to remedy the situation.

See press releases on financing and bankruptcy.

Also see a detailed treatment in The New York Times, including this comment from an analyst: "They overexpanded."