The Work

February 16, 2011 1:11 PM

Latest Chapter: Kasowitz on Hand as Borders Begins Chapter 11

Posted by Brian Baxter

Borders Following nearly two years of ongoing restructuring efforts, Borders Group finally filed for bankruptcy on Wednesday. And for help in its Chapter 11 reorganization efforts, the nation's second-largest book retailer has turned to Kasowitz, Benson, Torres & Friedman.

Borders has announced that it will reduce staff and close about 200 underperforming stores, including one location near and dear to The Am Law Daily. (Click here for the full list of Borders store closings; bankruptcy court filings by Borders can be found on this Web site set up by the company.)

The Wall Street Journal first reported last month on Borders's decision to retain Kasowitz Benson to negotiate with lenders in an ultimately unsuccessful effort to stay out of bankruptcy court.

The Am Law Daily followed up on that report by noting that founding partner Marc Kasowitz's ties to Borders CEO Bennett LeBow--a tobacco executive who hired Kasowitz Benson for litigation work during the nineties--had likely helped the firm land the Ann Arbor, Mich.-based bookseller's restructuring work.

David Friedman, a name partner at the firm and chair of its bankruptcy practice, has taken the lead advising Borders, aided by restructuring partners David Rosner, Jeffrey Gleit, and Andrew Glenn. Kasowitz Benson has not yet submitted billing statements with the bankruptcy court. Borders's top in-house lawyer is associate general counsel Matthew Chosid, who took over after longtime GC Thomas Carney resigned in January.

Baker & McKenzie has served as Borders's longtime outside corporate counsel and has continued doing work for the company amid its restructuring efforts, handling the sale of the ailing bookseller's businesses in Australia, New Zealand, and Singapore in June 2008. Borders closed its operations in the U.K. the following year after putting 45 stores in the country into administration in November 2009.

Borders lists assets of almost $1.3 billion against liabilities totaling roughly the same amount in its Chapter 11 filing made in U.S. bankruptcy court in Manhattan. The company said in a statement that it had secured $505 million in debtor-in-possession financing from GE Capital's restructuring finance unit. Baker & McKenzie advised Borders on DIP financing negotiations, while Morgan, Lewis & Bockius represented GE Capital.

The two largest equity holders in Borders are LeBow and Pershing Square Capital Management, the private equity firm founded by activist investor William Ackman. Bankruptcy court filings show that Pershing owns 31.3 percent of the company and LeBow 15.4 percent. Both could be wiped out in bankruptcy. Sullivan & Cromwell has advised Pershing on previous investments in Borders, while LeBow, who became CEO after investing $25 million in Borders last year, has turned to Latham & Watkins for such matters.

According to Borders's Chapter 11 filing, the company's largest unsecured creditor is book publisher Penguin Putnam, which is listed as being owed more than $41 million. The debtors' next five-largest creditors are also publishers: Hatchette Book Group, Simon & Schuster, Random House, Harper Collins, and Macmillan, which are collectively owed more than $141 million.

The beauty contest between firms vying for the creditors committee work in the Borders bankruptcy figures to be particularly fierce, especially given the latest numbers released by the American Bankruptcy Institute this week. ABI found that while total bankruptcy filings in the U.S. increased 8 percent over 2010, the number of business filings fell 7.5 percent.

With large corporate bankruptcies quickly becoming hard to latch on to--only 15 companies with assets of more than $1 billion entered Chapter 11 in 2010--creditors committee assignments in cases such as the one involving Borders will seem all the more plush.

Last month Milbank, Tweed, Hadley & McCloy and Lowenstein Sandler scored the creditors committee work in the bankruptcy case of The Great Atlantic & Pacific Tea Company. The grocery store chain, commonly known as A&P, became the ninth-largest company to file for bankruptcy in 2010 when it entered Chapter 11 in early December.



Book It: Kasowitz Takes Lead on Borders Restructuring
The Am Law Daily, January 28, 2011

Borders GC Resigns, as Four Am Law 100 Firms Surround Ailing Bookseller
The Am Law Daily, January 5, 2011

Borders General Counsel Thomas Carney Resigns
Corporate Counsel, January 5, 2011


Photo-The Am Law Daily (Borders at Broadway and Wall Street, NYC)

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