NEW YORK (AP) – A judge has granted Borders Group approval on an interim basis to use $400 million of the $505 million in financing it has been offered to pay its vendors back and keep its business going, including honoring its loyalty program and gift cards.
The decision late Wednesday is the start of a lengthy and difficult process for Borders, which filed for bankruptcy protection on Wednesday. The No. 2 U.S. bookseller is attempting to successfully reorganize so it can emerge from bankruptcy protection a smaller and profitable company.
Borders is accepting bids in an auction for companies to run its store closings and clearance sales.
Hilco Group is the stalking horse bidder, meaning the liquidating service must be paid a breakup fee of $1 million if it is not chosen in the auction.
The auction was scheduled to begin Thursday. Store clearance sales are expected to begin on Saturday, according to court filings.
Chief Judge Arthur Gonzalez of the Southern District U.S. Bankruptcy Court in New York did not rule Wednesday on Borders' plan to close 200 stores. In a filing CFO Scott Henry said Borders might try to close up to another 75 stores.
Henry's document revealed just how precipitously Borders' revenue declined in 2010, down 18 percent to $2.3 billion, from $2.79 billion in 2009.
He said the company's strategy going forward includes enhancing its loyalty program, aggressively expanding Borders.com and its e-book market share, offering more non-book items, cut costs and improve its customer service.
A hearing to grant final approval of the financing will be held March 15.
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