Business

Bankrupt Borders USA has no effect on Malaysia, ‘business as usual’

By Melissa Chi
February 17, 2011

File photo of a customer browsing through books at a Borders store in Kuala Lumpur. — Reuters picFile photo of a customer browsing through books at a Borders store in Kuala Lumpur. — Reuters picKUALA LUMPUR, Feb 17 — Bookstore chain Borders Malaysia said today that the bankruptcy protection filed by its franchisor in the US does not impact its business here in Malaysia.

The bookstore, owned by Berjaya Books Sdn Bhd, said a petition was filed on February 16 by Borders Group, Inc USA, for “reorganisation relief” under Chapter 11 of the Bankruptcy Code in the US Bankruptcy Court, Southern District of New York.

“Borders Group, Inc’s filing for relief under Chapter 11 in the United States has no impact on the operations of Borders Malaysia,” said Borders Malaysia chief operating officer Yau Su Peng in a statement today.

She said the franchise store of the second-biggest US bookstore chain is an independent entity and that the franchisor does not have any shareholdings in Borders Malaysia.

“All business strategy and day-to-day operations of Borders Malaysia are planned and managed by the Borders Malaysia team. Borders Malaysia does not rely on Borders Group, Inc and has its own arrangements in place with distributors worldwide for books and products supply. Its priority is to continue to provide its customers with quality books, educational materials and entertainment products,” she said.

Yau cited a statement by the Borders Group, Inc president Mike Edwards on the same day of the bankruptcy.

“This decisive action to file the Chapter 11 petition will give Borders (Group, Inc) the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganise in order to reposition itself to be a successful business for the long term.

“We are confident that, with the protection afforded under Chapter 11 and with the support of employees, publishers, suppliers and creditors, and the reading public, a successful reorganisation can be achieved enabling Borders (Group, Inc) to emerge from the process as a stronger and more vibrant book seller,” he said.

Yau said the only tie between Borders Malaysia and Borders Group, Inc is via a franchise agreement that allows Berjaya Books to use the Borders brand in Malaysia.

“It is business as usual in all of our stores as Borders Malaysia is not a party to the Chapter 11 filing in New York. This is not a new situation for global brand franchise holders. Over the years, we have seen a few big global brands with international franchisees go through similar situations in the worldwide arena and yet not be affected within the local market in which their businesses operate”, she said.

The first franchise worldwide opened in 2005 at Berjaya Times Square here.

There are now five more Borders Malaysia stores, located at The Curve and Tropicana City Mall, both in Petaling Jaya, The Gardens and Bangsar Village II, both in Kuala Lumpur, and Queensbay Mall, Penang.

According to a Bloomberg report yesterday, management changes, job cuts and debt restructuring, as well as stiff competition from Amazon.com Inc. and Wal-Mart Stores Inc, had contributed to the chain’s fate yesterday.

The report also said that Borders plans to keep operating and restructure with US$505 million (RM1.56 billion) in so-called debtor-in-possession financing from lenders led by GE Capital.

The 40-year-old chain listed debt of US$1.29 billion and assets of US$1.28 billion as of December 25 in its Chapter 11 petition filed in the US Bankruptcy Court in Manhattan.

The reorganisation is only possible if Borders immediately closes 200 of its 642 stores, according to an emergency motion to sell furniture and merchandise filed in Manhattan bankruptcy court.

It was also reported that the company said sales need to start no later than February 19 to take advantage of the President’s Day long weekend, and another 75 stores may need to close if concessions aren’t won from landlords.

 

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