Borders has 642 stores across the country. Shutting 30 percent of those would result in about 200 closures.
AnnArbor.com has a live blog going providing continuous updates as new details emerge.
Key details from the company’s release:
“In this regard, operating under Chapter 11, Borders has received commitments for $505 million in Debtor-in-Possession (DIP) financing led by GE Capital, Restructuring Finance. This financing should enable Borders to meet its obligations going forward so that our stores continue to be competitive for customers in terms of goods, services and the shopping experience. It also affords Borders the opportunity to move forward in implementing the appropriate business strategy designed to reposition Borders to be a potentially vibrant, national retailer of books and other products,” Mr. Edwards emphasized.
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The company noted that, among other initiatives and subject to court approval, Borders plans to undertake a strategic Store Reduction Program to facilitate reorganization and its repositioning. Borders has identified certain underperforming stores — equivalent to approximately 30 percent of the company’s national store network — that are expected to close in the next several weeks. At the same time, the company noted that a major strength of Borders is its national presence, and its extensive network of remaining stores as well as Borders.com, will continue to run in normal course. The company emphasized that the closings were a reflection of economic conditions, cost structures and viability of locations, among other factors, and not on the dedication and productivity of the workforce in these stores.
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The Chapter 11 petition for relief was filed in the U.S. Bankruptcy Court, Southern District of New York. Completion of the company’s DIP financing arrangements is subject to approval of the Bankruptcy Court and the satisfaction of certain conditions provided in the financing commitments received by the company from the lenders providing such financing.
Reuters reported some of the background on the DIP financing yesterday. In short, Borders has been in talks for a while with lenders about the size and scope of the loan. It had reached an agreement with GE Capital last month.
In a separate piece, Reuters ranked the largest retailer bankruptcies since 2000. With $1.28 billion in assets (and $1.29 billion in debt), this is the 11th largest retailer bankruptcy in that time period.
There are already tons of write-ups of the announcement in the mainstream business press. A list of some stories is below:
That trend has apparently taken hold of the CMBS market so quickly that one S&P insider has referred to some of the stuff that’s been going into the new pools as outright “crap,” according to a Bloomberg report.
Based on our conversations with long-time industry veterans, however, this is not a particularly surprising development. Many of them have said that it would be only a matter of months before the conduit lenders would begin to revert to their bad old habits. What’s your take? Did you think it would take more time for Wall Street to recover its confidence after the financial crisis?
Meanwhile, you can read more news about retail and retail real estate here:
This weekend went down fairly quietly, without too much news emerging about retail real estate. The news reports that did emerge, however, were disheartening. The Wall Street Journal reported that banks still haven’t worked through the piles of toxic assets on their books. As of Sept. 30, they held more than $360 billion worth of “Level 3″ securities–meaning assets that can’t easily be valued using market prices. In other news about retail and retail real estate:
The potential of a Borders bankruptcy filing has been generating a lot of buzz in the retail real estate industry in the past few weeks. The book retailer has clearly been struggling and many landlords might be bracing themselves for store closing announcements in the near future. The good news that emerged late last week was that Borders has secured $550 million in financing from GE Capital, which might help it avoid bankruptcy.
The bad news is that the loan comes with certain conditions, and now Borders has announced it will delay payments to both vendors and landlords to increase its liquidity. Meanwhile, a bankruptcy filing remains a possibility, according to analysis by The New York Times.
The Financial Crisis Inquiry Commission’s report is out.
There are a couple sections specifically about commercial real estate. The first is, “LEVERAGED LOANS AND COMMERCIAL REAL ESTATE: ‘YOU’VE GOT TO GET UP AND DANCE’” and the second is “COMMERCIAL REAL ESTATE: ‘NOTHING’S MOVING’”
The first section documents the explosive rise of the CMBS industry and how that coincided with spikes in property values. The second section from later in the document is about the standstill that eventually emerged in the commercial real estate investment sales market after the financial crisis.
With one week to go before Simon Property Group’s deadline to make a takeover offer for Capital Shopping Centres Group Plc, there is a new twist in the story. Yesterday afternoon, shopping center REIT Equity One announced the closing of an acquisition of Capital and Counties USA, Inc. (C&C USA) through a joint venture with Capital Shopping Centres.
Capital Shopping Centres will receive 4.1 million shares of Equity One common stock and 11.4 million joint venture units, after accounting for working capital adjustments. Capital Shopping Centres may redeem its units in the joint venture for Equity One common stock on a one-for-one basis, or cash, at Equity One’s option. Equity One will assume approximately $243 million of mortgage debt, including its proportionate share of debt held by joint ventures and following the repayment of an $84 million mortgage secured by Serramonte Center which occurred simultaneously with the closing of this transaction.
In December 2010, C&C USA sold two non-core properties consisting of South Figueroa, a vacant land parcel in Los Angeles, and 625 Third Street, an office building in San Francisco, for net proceeds of approximately $16.9 million.
It’s hard to say off the bat exactly this might affect Simon’s pursuit of Capital. For one thing, it lessens Capital’s overall debt load and gives it access to cash. Will that ultimately affect Simon’s offer or provide ammunition for Capital to ward off the takeover bid?
At any rate, the story continues to move quickly. It’s been just over a month since we first got wind of a potential deal here and it seems like we’re rapidly moving towards a resolution within the next week.
Because of the holidays and the crippling blizzard last week, there’s not a ton to catch up on in the retail real estate world. The period between Christmas and this past weekend was a quiet one for the industry.
However, now that the holidays are over, things are starting to come back to life. That means the post-holiday shopping season shakeout is beginning. We’ll find out the real winners and losers and how that affects their futures.
On that front, the situation with Borders is continuing to evolve. The bookseller had a tough holiday shopping season and now bankruptcy may be in the cards.
Per Daily Finance:
Borders has been telling some of its key vendors — including some of the largest publishing houses — that it’s delaying year-end 2010 payments for inventory. One of those houses is Hachette Book Group (LGDDY), whose CEO David Young told the The Wall Street Journal that Borders has indeed delayed its most recent payment to the publisher, adding that Hachette “will decide shortly whether to continue shipping new books to Borders.”
Simon Property Group has taken its pursuit of British mall owner Capital Shopping Centres up a notch with a new offer to buy the company for $4.8 billion. Simon had sent another letter over the weekend reiterating its opposition to Capital Shopping Centres’ acquisition offer for Trafford Centre and offered an alternate method for financing that deal. Capital Shopping Centres rejected that proposition.
The $4.8 billion offer is 26 percent above Capital Shopping’s share price immediately prior to the offer period and 21 percent above the average price for the six preceding months. In the latest letter, Simon CEO David Simon wrote, “Our interest in making an offer for CSC is, of course, not new. By making this offer on the terms outlined in this letter, we are confident that we have now answered any objections you have previously expressed. We believe that we should work together to announce a recommended offer, and would urge you to listen to calls from your shareholders – many of whom we have spoken to – opposing the Trafford Centre transaction or asking you to adjourn your forthcoming EGM.”
More details on the offer can be found at the New York Times‘ Deal Book blog and at Property Week.
For previous blog posts on this saga, go here and here.
Update:Property Week is reporting that CSC has rejected Simon’s offer. However, CSC has also decided to postpone the shareholder vote on its proposed Trafford Centre purchase, meaning that there will very likely be more back and forth between the firms before this is all said and done.
Simon sent a letter to Capital this morning and made the text public. This is reminiscent of when it courted General Growth and also shared the text of those letters. Simon reiterates its opposition to Capital’s proposed acquisition of the Trafford Centre Group and says it is “disappointed by the profound value destruction.” In addition, Simon again requests “specific due diligence information with respect to CSC, which would assist us to formulate an acquisition proposal.”
Property Week is reporting that Capital has already rebuffed Simon’s latest overture. Capital refutes some of Simon’s analysis of the deal and concludes that it believes “the deal was in the best interests of shareholders, and that it reiterates its recommendation to vote in favor of the acquisition.”
Over the Thanksgiving weekend, it was revealed that Simon Property Group sent a letter to U.K.-based mall owner and operator Capital Shopping Centres asking Capital not to proceed with offering $1.2 billion in shares as part of an agreement to purchase the Trafford Centre shopping mall.
According to Capital, Simon wanted an “opportunity to present CSC with a potential cash offer for the Company at an unspecified premium to NAV.” Analysts estimate that an acquisition of CSC would cost more than $3.6 billion. The rumors sent CSC’s stocks soaring by nearly 20 percent. Even if Simon doesn’t move ahead, there is also speculation that Westfield Group, which already has a large U.K. presence, might also mount a takeover bid.
Simon, which mounted a bit to acquire General Growth Properties during the latter’s reorganization process, certainly has the buying power to complete such a deal. And, it should be noted, Simon already does own a 5.6 percent stake in CSC. The question is whether Simon will actually move forward or not. For its part, Simon has not issued any releases or SEC filings about this potential deal.
The New York Times Dealbook blog said hopes for a deal might have been dashed when CSC opted to move ahead with the Trafford Centre deal. However, the Telegraph reported today that Simon asked Citigroup to advise it on a potential acquisition. The Telegraph also identified the potential price tag as $5.5 billion–substantially higher than other estimates.
So here we go again.
Here are some other news and notes from around the retail real estate world.
Borders Files for Bankruptcy; to Close 30% of its Stores
by David Bodamer February 16th, 2011
Borders has 642 stores across the country. Shutting 30 percent of those would result in about 200 closures.
AnnArbor.com has a live blog going providing continuous updates as new details emerge.
Key details from the company’s release:
Reuters reported some of the background on the DIP financing yesterday. In short, Borders has been in talks for a while with lenders about the size and scope of the loan. It had reached an agreement with GE Capital last month.
In a separate piece, Reuters ranked the largest retailer bankruptcies since 2000. With $1.28 billion in assets (and $1.29 billion in debt), this is the 11th largest retailer bankruptcy in that time period.
There are already tons of write-ups of the announcement in the mainstream business press. A list of some stories is below:
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