Failing Borders Wants to Pay $8.3 Million Bonuses to Top Execs

Check out this interesting timeline:

2/16/11 Borders filed for bankruptcy protection this morning, and said it will close at least 200 stores, plus the option for about 75 more — or about 30% of the company’s total.

3/17/11 Borders said it will close another 28 stores by late May. FYI: Here's a list of all the Borders stores that are expected to foreclose.

3/26/11 Borders announced they want bankruptcy court to approve a bonus payout of $8.3 million to its top executives, with $1.7 million to President Mike Edwards.

Peg Brickley from WSJ reported:

For Borders' five highest-level executives, the bonuses would mean extra pay of between 90% and 150% of their base salaries, depending on how quickly the company exits bankruptcy or is sold as a going concern.

The catch? The bonus won't be paid if Borders liquidates.

One investor laments the irony of the situation: "The idea of retention bonuses are killing me, but you'd have to pay a king's ransom for the next group. It irks me because it's money that won't go to paying creditors."

Update: Borders Looks To Restructure Firm

Since my last post about Borders declaring bankruptcy, Borders have taken some measures to restructure itself.

The Wall Street Journal reports:

"Borders Group Inc. is continuing talks to a secure a $500 million credit line and has hired bankruptcy and restructuring lawyers, said people familiar with the matter. Borders' restructuring lawyers met Thursday with publishers to pitch them on a plan to defer payments and is talking with GE Capital about providing a new revolving credit facility that would replace existing debt, this person said. Borders hopes the new financing can provide a bridge for the company over the next six to 12 months while it rearranges its business, this person said."

Borders Bites the Dust

The Wall Street Journal reports that Borders is preparing to file for bankruptcy within the next week:

Borders has abandoned efforts to refinance its debts, and is preparing bankruptcy papers and seeking financing agreements that would keep it operating during the Chapter 11 restructuring process, the people said.

Once a corporate giant, Borders had over 40,000 employees and more than 1200 stores during its prime time in 2005. Unfortunately, that is not the case today. Based on the data graph below, there's a sharp decline in both employees and stores within the last five years.

(Source: WSJ)

This is a hard blow to the book industry. As Americans eagerly embrace technology, iPad, Nook, and Kindle are ubiquitous. E-readers are doing to Borders what Netflix and videos on demand did to Blockbuster. Unless Borders can find a way to successfully restructure itself, it is only a matter of time before e-books will antiquate physical books and even book stores.

I am very sadden by the news as visiting bookstores were a favorite part of my childhood. I love to peruse through book stacks to see what catch my attention. Maybe I'm just an old soul that prefers physical books, but there's a sense of nostalgia to lounge in a comfy chair and hold a real book while reading.

Is this the end of an era?