July 12, 2011 – By Nick Brown
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NEW YORK (Reuters) - Borders Group Inc <BGPIQ.PK> on Tuesday answered criticism from landlords who said the bankrupt bookseller has kept them in the dark on the future of their leases, saying it is providing as much information as it can under tight deadlines.
In court papers filed in U.S. Bankruptcy Court in Manhattan, Borders called for flexibility from the roughly 20 landlords who objected to its proposed auction plan on grounds that the plan gives insufficient notice on whether Borders' eventual buyer will be able to make lease payments.
Borders said the terms of its bankruptcy loan, a $505 million financing package from lenders led by General Electric Co's <GE.N> GE Capital, require it to complete the sale by July 29 to avoid default.
"The sale simply cannot take place in the timeframe required if there are any further delays in the schedule," Borders said. "If the sale does not occur on a going concern basis, landlords stand to recover significantly reduced amounts."
Borders said it will work to resolve as many of the objections as possible outside of court. A hearing on its proposed auction procedures is slated for Thursday before Judge Martin Glenn.
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The proposed process includes a July 19 auction for Borders' assets, though if no party submits an initial bid by a Sunday deadline, the auction would likely be canceled. In that case, private equity group Najafi Cos, which submitted a minimum or "stalking horse" bid of $215 million in cash and $220 million in assumed liabilities, would become the winning bidder.
Landlords filed their objections Friday and Monday, saying the plan gave no indication as to whether leases would be assumed or risked defaults.
The plan leaves landlords "in the dark," Glimcher Properties Limited Partnership said in court papers.
The landlords added that the plan gives too little notice for objecting to the fate of leases. The current deadline is Thursday at 4 p.m. EDT, just six hours after the hearing.
The sale "will result in landlords having no idea of whether their leases are part of any going concern package until after their deadline to object to the sale," landlord RREEF Management Co said in a court filing.
The tight time frame has already gotten the attention of Glenn, who questioned the schedule at a June hearing, saying it was possible the bidding procedures would not be finalized in time to accommodate objection deadlines.
Borders, which helped pioneer the concept of book superstores, filed for bankruptcy in February after years of falling sales. It has already closed 226 of the 642 stores it operated prior to bankruptcy.
The case is In re Borders Group Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-10614.
(Reporting by Nick Brown; editing by Carol Bishopric)