Borders filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court in New York on Wednesday.
Borders is hemorrhaging cash at the rate of $2 million dollars a day from underperforming stores. Borders intends to close 200 of its 642 stores nationwide. The closures will come in the next few weeks. Clearance sales could start as early as this weekend.
Borders will receive $505 million in debtor-in-possession financing from GE Capital Partners and others to help with the reorganization. Borders owes over $100 million to various publishers. Book sales nationwide fell 5 percent in 2010. Borders controls 14.3 percent of the book selling market. Barnes & Noble, on the other hand, controls 29.8 percent of the market which is helping them survive the economic downturn.
Borders has been in business since 1971, when it started out with one used bookstore in Ann Arbor, Michigan. Borders was owned by Kmart Corp. from 1992 until 2006. Borders committed a fatal error when it opted out of their e-commerce contract with Amazon.com in 2001. This decision made it possible for Barnes & Noble to eventually double Borders market share.