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Borders Announces Chapter 11 bankruptcy

Another one bites the financial dust, this time it is the big name bookseller Borders. The company announced its decision to file for Chapter 11 bankruptcy this week as its efforts to refinance its debts failed miserably.

When the company failed to persuade its creditors and publishers to convert payments owed into interest-bearing loans, Borders realized that it had to take drastic measures. This is in spite of the $550 million loan it will receive from GE Capital, as well as securing additional financing to support itself during the Chapter 11 bankruptcy process.

Year of declining profits and management turnover meant that the move for bankruptcy was not a surprise to its publishers. In a desperate attempt to keep some cash on hand Borders stopped paying its publishers altogether in December of last year and would miss another scheduled payment in January of this year. It is now up to the individual publishers whether they will continue to ship books to Borders.

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