Borders Group has filed for Chapter 11 bankruptcy protection and has announced plans to close approximately 200 “underperforming” stores in the next several weeks.

 

The chain listed debt of $1.29 billion and assets of $1.28 billion as of December 2010 in the petition filed in U.S. Bankruptcy Court in Manhattan. The company plans to restructure and continue to operate with $505 million in “debtor-in-possession financing” from lenders led by GE Capital’s Restructuring Finance division.

 

“Borders Group does not have the capital resources it needs to be a viable competitor,” said Mike Edwards, Borders Group president. “This decisive action will give Borders the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganize in order to reposition itself to be a successful business for the long term.”

 

Borders Group currently has 659 stores under the Borders, Waldenbrooks, Borders Express and Borders Outlet names in the U.S., with three stores in Puerto Rico. The company employs approximately 18,000 full-time and part-time workers, and job cuts are expected as stores are shut down.

 

Previous job cuts, management changes, and debt restructuring in 2010 were not enough to make up for decreasing book sales. Since 1998 Borders’ market value has shrunk more than $3 billion. Analysts believe the company’s failure to keep up with e-commerce is to blame for the loss.

 

The chain only debuted its own internally-managed e-commerce site in 2008, making it unable to compete with the already successful Barnesandnoble.com and Amazon.com in online sales of products in key areas such as books, DVDs and music. Similarly, Borders is behind by not releasing its own eReader, making it more difficult to compete as the popularity of the Barnes and Noble Nook and Amazon Kindle continues to rise above traditional book sales.