Hearing Date:July 14, 2011 at 10:00 a.m. (Prevailing Eastern Time)Objection Deadline (for Committee): July 13, 2011 at 12:00 noon (Prevailing Eastern Time)
25316/207/13/2011
17937041
.
2
Bruce S. Nathan, Esq.Bruce Buechler, Esq.PaulKizel, Esq.
LOWENSTEIN SANDLER PC
1251 Avenue of the AmericasNew York, New York 10020Tel: (212) 262-6700Fax: (212) 262-7402--and --65 Livingston AvenueRoseland, NJ 07068Tel: (973) 597-2500Fax: (973) 597-2400
Counsel to the Official Committeeof Unsecured Creditors
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORKIn re:BORDERS GROUP, INC.,
et al
.,
1
Debtors.Chapter 11Case No. 11-10614 (MG)Jointly AdministeredOBJECTIONOF THE OFFICIAL COMMITTEE OF UNSECUREDCREDITORSTOBID PROCEDURES AND BREAK-UP FEE CONTAINED INTHE DEBTORS’ MOTIONFOR AN ORDER PURSUANT TO SECTIONS 105, 363 AND 365 OF THEBANKRUPTCY CODE AND RULES 2002, 6004, 6006 AND 9014 OF THE FEDERALRULES OF BANKRUPTCY PROCEDURE (I) APPROVING THE SALE OFSUBSTANTIALLY ALL OFTHE DEBTORS’ ASSETSFREE AND CLEAR OF ALLLIENS, CLAIMS, ENCUMBRANCES AND INTERESTS AND THE ASSUMPTIONANDASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASESRELATED THERETO, (II) APPROVING THE SALE PROCEDURES ANDBREAK-UP FEE, AND (III) GRANTING RELATED RELIEF
The Official Committee of Unsecured Creditors (the “Committee”) of BordersGroup, Inc.,
et al
., the above-captioned debtors and debtors-in-possession (collectively, the“Debtors”), byand through its undersigned counsel, submits this objection (the “Objection”) to
1
The Debtors in these cases, along with the last four digits of each Debtor’s federal taxidentification number, are: Borders Group, Inc. (4588); Borders International Services, Inc.(5075); Borders, Inc. (4285); Borders Direct, LLC (0084); Borders Properties, Inc. (7978);Borders Online, Inc. (8425); Borders Online, LLC (8996); and BGP (UK) Limited.
-2-the Bid Procedures(including a Break-Up Fee),
2
which the Debtors seek to implement pursuantto the
Debtors’ Motion for an Order Pursuant to Sections 105, 363 and 365 of the BankruptcyCode and Rules 2002, 6004, 6006 and 9014 of the Federal Rules of Bankruptcy Procedure (I) Approving the Sale of Substantially All of the Debtors’ Assets Free and Clear of All Liens,Claims, Encumbrances and Interests and the Assumption and Assignment of Executory Contractsand Unexpired Leases Related Thereto, (II) Approving the Sale Procedures and Break-Up Fee,and (III) Granting Related Relief
(the “Motion”)[Docket No. 1130]. In support of thisObjection, the Committee respectfully representsas follows:
PRELIMINARY STATEMENT
1.The Committee does not object to, and in fact would welcome,the sale of substantially all of the Debtors’ assetsunder the terms of an appropriate asset purchaseagreement. The Committee, however, does not believe that the Stalking Horse Agreement,ascurrently structured,represents the highest and best bid or that the proposed Bid Proceduresaredesignedto maximize the potential value of the Debtors’ assets. The Committee would fullysupport the Bid Procedures and the Stalking Horse Bidder if the Stalking Horse Agreement wasmodified to, among other things, embody a firm commitment to provide for a going concernsale of the Debtors’assets. Unfortunately, it does not.2.As currently structured, the Bid Procedures and Stalking Horse Agreementprovide BB Brands, LLC (“BB Brands”), the Stalking Horse Bidder, with the option topurchase substantially all the Debtors’ assetsand then,over the course of the next severalmonths,reject executorycontracts and unexpired leases,liquidate the inventoryofthe entirechain of retail locations and retain valuable intellectual property (
i.e.
,the Borders name andrelated intellectual propertyrights) and other assets for less consideration than the Back-Up Bidcombined with the Debtors’ other assets such as intellectual property.
2
Capitalized terms used but not otherwise defined herein shall have the definitionsascribed to such terms in the Motion.
-3-3.In short, the Stalking Horse Bid is not a definitive going concern offerworthyof stalking horse protections.It neither maximizes value for the benefit of unsecured creditors norprovidesfor the other benefits ofa going concern –preservation of the business and thethousands of jobs that go along with that business. Instead, it expressly allowsthe StalkingHorse Bidder the option to elect to conduct a Full Chain Liquidation
after
the Sale Hearing isconducted and the Sale is approved.4.This is unacceptable because a Full Chain Liquidationconducted by the StalkingHorse Bidder will not maximize the value of the Debtors’ assets for the benefit of unsecuredcreditors. If the Debtors’ situation is so unfortunate as to require a Full Chain Liquidation, thepreferable course would be to have that Full Chain Liquidationofthe Debtors’ inventorythrough GOB sales under the terms of the Back-Up Bid, combined with one or more separatesalesofthe Debtors’remaining assets (including intellectual propertyand leases)conducted byrepresentatives of the Debtors’ estates.5.As described in greater detail below, although the Debtors seek approval of theStalking Horse Bidder, a comparison of the Stalking Horse Agreement to the AgencyAgreement (which serves as the Back-Up Bid) reveals that the Back-Up Bid will providegreater certainty and value to the Debtors’ estates than does the current Stalking Horse Bid.6.Accordingly, the Committee submitsthat unless the Stalking Horse Bid ismodified to provide for a real commitment to a going concern sale,the current Back-Up Bid inthe formofthe AgencyAgreement should be designated the Stalking Horse Bid. To clarify, theCommittee encouragesBB Brands participation in the Sale process and Auction. TheCommittee is hopeful that BB Brandswill submita revised bid prior to the Bid Deadline andproceed in the Sale process without the need of a Break-Up Fee or other bid protection with agoing concern sale proposal.Significantly,the Agency Agreement could be approved as theStalking Horse Bid without the need for the Debtors to commit to any break-up fee ora verylarge initial overbid.
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Borders' Unsecured Creditors Reject Najafi Bid
Court filing by Borders' unsecured creditors opposing the company's planned sale to the Najafi Companies.
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