January 5, 2011 2:57 PM
Borders GC Resigns, as Four Am Law 100 Firms Surround Ailing Bookseller
Posted by Brian Baxter
If you're like The Am Law Daily, you were happy to put a couple of 50 percent off coupons from the Borders Group to use over the holiday season. But any added sales the Ann Arbor, Mich.-based national bookseller might have seen hasn't been enough to ease its financial troubles.
Borders recently resumed discussions with publishers about deferring payments in order to refinance its debt, according to The New York Times. The book retailer's declining sales numbers have Borders stock trading at below $1, payments to some vendors have been delayed, and the company has been busy negotiating with lenders on debt payments to avoid a liquidity crisis and possible bankruptcy filing.
The company is also experiencing upheaval in its senior corporate ranks. Corporate Counsel, a sibling publication, reported on Tuesday about the resignation of Borders general counsel Thomas Carney over the weekend, which preceded that of chief information officer D. Scott Laverty on Monday.
The Am Law Daily has learned that four Am Law 100 firms--Baker & McKenzie, Jones Day, Latham & Watkins, and Sullivan & Cromwell--are involved advising various parties on the ongoing restructuring efforts by Borders, the second-largest bookstore chain in the U.S. after New York-based rival Barnes & Noble.
According to our previous reports, Borders hired Jones Day in early 2009 as the company began implementing its restructuring initiatives. Lyle Ganske, a corporate partner-in-charge of Jones Day's Cleveland office, has been serving as lead counsel to Borders's independent board of directors. Ganske didn't immediately respond to a request for comment, nor did New York bankruptcy bigwig Corinne Ball or restructuring practice founding partner David Heiman.
Baker & McKenzie corporate partners Craig Roeder and Christopher Bartoli in Chicago and consulting counsel Pauline Doohan are representing Borders on negotiations with bank lenders. The firm, which has been longtime outside counsel to Borders, also is handling general corporate and regulatory work for the company.
In May 2010, tobacco executive and corporate raider Bennett LeBow invested $25 million in Borders. Bloomberg reported the deal pushed LeBow past private equity firm Pershing Square Capital Management as the company's largest shareholder, allowing LeBow to become CEO of Borders and chairman of its board.
SEC filings show that Jones Day advised Borders's board on that transaction, while Baker & McKenzie represented the company. Roeder took the lead advising Borders on the investment by an entity controlled by LeBow and handled a related $700 million debt refinancing deal with a group of lenders.
M. Adel Aslani-Far, global chair of the M&A practice at Latham & Watkins, represented LeBow on his investment in Borders. Pershing, now Borders's second-largest shareholder, is being advised by Sullivan & Cromwell restructuring partner Andrew Dietderich. (Dietderich advised Pershing in March 2010 on its offer to invest $3.9 billion in then-bankrupt real estate investment trust General Growth Properties, which emerged from Chapter 11 in November.)
Bloomberg reported last month that Pershing had offered to work with Borders on a possible takeover of Barnes & Noble, which has retained a bevy of Am Law 100 lawyers in recent months for poison pill takeover defense litigation with Ronald Burkle's Yucaipa Companies. (Pershing cashed out of its stake in Barnes & Noble in early 2009.)
After another less-than-stellar earnings report last month, Borders announced that it is looking for replacement financing to "provide sufficient liquidity" through the beginning of 2012. Reuters reports that the company's discussions with publishers this week could seal its fate.
A Borders spokeswoman declined to comment on outside advisers retained by the company. The bookseller has denied that it faces a liquidity crisis.
Photo: Wikimedia Commons, Borders flagship store in Ann ArborMake a comment