• SmartMoney

Borders Customers: Unsure About Next Chapter

This may not be a good time to buy a Borders Gift Card, but if you have rewards credits and a gift card to redeem or book returns to make, visit one of the local 425 stores nationwide now. By the end of the month, there will be just 405 stores, according to Borders, and according to a recent report in The Wall Street Journal, the store is looking for a buyer to take over half of them.

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Citing unnamed sources, The Wall Street Journal recently reported that the store is in early talks with a potential bidder for just 225 of its locations to keep the bookstore operating as a going concern. The 41 million-strong army of Borders Rewards members is arguably one of the most tempting prizes for any bidder for a bricks-and-mortar store like Borders, which has suffered from competition from online booksellers like Amazon.com.

Borders spokeswoman Mary Davis says the company plans to emerge from the bankruptcy process in August or September. But in a worst case scenario, its gift card holders may be out of luck, says Allan Rosenthal, manager of the San Francisco-based Bankruptcy Center of John. D Raymond, which is not involved with the Borders Chapter 11 process. The company filed for Chapter 11 bankruptcy protection in February when it had 17,500 employees and 651 stores; it now employs 10,000 people, according to Davis.

And if the company has to close its doors, gift card holders come last in a long list of creditors, says Rosenthal, whose firm is not involved in the Borders bankruptcy process. “You’re definitely deemed a creditor, but an unsecured creditor. In bankruptcy, not all creditors are treated equally. As an unsecured creditor you come behind unpaid wages, secured creditors and the IRS.”

Responding to concerns that customers with store credit could lose out if the company closes, Davis of Borders said, “We are focused on moving forward with the execution of our business plan. We are continuing to evaluate interest in the company as expressed through the ongoing Chapter 11 process.”

Have you redeemed your Borders credits yet?

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