Creditors Slam the Book on Bid for Borders

Borders Group may be forced to liquidate its bankrupt bookstore chain now that a committee of unsecured creditors has rejected a proposed takeover by Direct Brands, which owns the Book-of-the-Month Club.

The committee filed a motion with the federal bankruptcy court in Manhattan Wednesday saying members were concerned that the agreement could allow Najafi, the investment company that owns Direct Brands, to buy the company on the cheap at $215.1 million, and then liquidate Borders later—a deal that would not allow the creditors to benefit, the New York Times reports.

In the argument, the committee said it would be better off with a court-supervised liquidation, and that members would benefit more from a bid proposed by a group of liquidator firms led by Gordon Brothers Group and Hilco. The firms specialize in helping failed companies wind down, close shop and sell their property in an effort to let creditors get the greatest percentage of what they are owed.

Borders Group is set to begin a court-supervised auction on July 19, and while the Gordon-Hilco coalition will now be the stalking-horse bidders that will establish the opening bid, Najafi and other potential bidders can still bid.

Borders, the No. 2 bookstore chain after Barnes & Noble, filed for bankruptcy protection in February when the company also announced that it would close 200 of its 659 stores.

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