Borders could face liquidation in the United States after a committee of unsecured creditors rejected a proposed takeover by private equity firm Najafi Companies.
The creditors are concerned Najafi would buy the company at a low price and then liquidate it without benefiting them. The committee said in a court filing: "It neither maximises value for the benefit of unsecured creditors nor provides for the other benefits of a going concern."
Najafi's offer of $215m, through his Direct Brand company, was known as a stalking horse bid, which was an attempt to flush out other buyers. The creditors would prefer the bookseller was sold to a group of liquidator firms led by Gordon Brother Group and Hilco.
Najafi still has time to save his bid. There will be a court-supervised auction on 19th July, when Najafi and others can submit fresh bids.
The New York Times reports Borders president Mike Edwards, who said: “While we regret Najafi's withdrawal as the stalking horse bidder, we remain hopeful that they or other potential bidders who are interested in operating Borders as a going concern will choose to participate in the auction process on July 19."
A spokesman for Najafi said: "We regret to confirm that Direct Brand's proposed agreement to keep Borders operating is no longer supported by the deciding parties.
"However, we remain willing, ready and able to move forward should the deciding parties instead choose to work with us and our existing offer.”