Book giant Borders goes bankrupt

American giant bookseller Borders filed for bankruptcy protection today.

The 40-year-old company, sunk by crushing debt and sluggishness in adapting to a rapidly changing industry, plans to close about 200 of its 642 stores over the next few weeks.

All of them will be superstores, a Borders spokeswoman said.

Borders president Mike Edwards said cautious consumer spending, negotiations with publishers and other vendors and a lack of liquidity made it clear Borders “does not have the capital resources it needs to be a viable competitor.”

The company will receive $505m in debtor-in-possession financing from GE Capital and others to help it reorganise.

Last month Borders said it was considering a bankruptcy filing after it received a conditional $550m loan from GE Capital that required it to secure financing elsewhere.

It owes tens of millions of dollars to publishers, including Penguin Putnam, Hachette, Simon & Schuster and Random House.

It has been a long fall for the company, which 15 years ago appeared to be the future of bookselling. But big book shops have struggled as competition has become increasingly tough as books become available in more shops, online sales grow and electronic books gain in popularity.

Borders also suffered from a series of errors: failing to catch onto the growing importance of the web and electronic books, not reacting quickly enough to declining music and DVD sales.

Even as the book industry shifted around it, Borders seemed to be in denial and focused on adding superstores, said Michael Norris, senior trade analyst at Simba Information.

“Books and content just became so available at so many other locations, online and offline, the ’grow, rinse, repeat’ mindset just wouldn’t work any more,” he said.

In addition, Americans are simply buying fewer books. Sales fell nearly 5% in 2010.

At its peak in 2003, Borders operated 1,249 stores under the Borders and Waldenbooks names, but now it operates barely half that. Its annual revenue has fallen by about a billion dollars since 2006, the last year it reported a profit.