Restructuring firm reviews Borders UK’s store portfolio

Author: By James Thompson

The Independent has learned that Borders UK, which was bought by the private
equity company Risk Capital Partners in 2007, has been working with RSM
Bentley Jennison to review a range of potential restructuring options.

One option that has been floated would see Borders UK continue trading, but
with fewer stores. There is no suggestion Borders UK itself is in trouble,
though it is understood to be keen to reshape its store estate in order to
eliminate less profitable outlets in locations such as out-of-town retail

Risk Capital’s Luke Johnson, who is also chairman of Channel 4, refused to
discuss his plans for Borders UK. Tony Stockdale, the national managing
partner of RSM Bentley Jennison, also declined to comment yesterday.

Among the company’s total portfolio of Borders and Books etc stores, a number
of stores in popular locations are thought to be trading robustly, but
others are finding trading challenging, according to market sources.

Risk Capital Partners acquired a majority stake in Borders UK in September
2007. The deal was structured so that Risk Capital Partners paid an initial
£10m, with a further deferred payment of £10m to follow. The acquisition
included all 41 Borders superstores in the UK, the Borders superstore in
Ireland and all 28 Books etc stores in the UK. However, since the
acquisition, Borders UK has offloaded some of its Books etc stores.

According to its website, Borders UK currently has 41 of its core Borders
stores, eight Books etc outlets and two Borders Express shops. Speculation
has been swirling around Borders UK for sometime, partly over concerns about
credit insurers reducing cover to publishers to supply it with books.

However, last December, Mr Johnson denied that Borders UK was considering a
pre-pack administration specifically to reduce liabilities on its Books etc
stores, when contacted by The Independent.

At that time, he said in an email response: “We have been steadily
rationalising our Books etc store base and have exited a number of Books etc
sites, but there are no further disposals currently planned. We are
absolutely not planning any form of pre-pack administration of Books etc.”

Like many retailers, Borders UK has suffered from some of its suppliers’
credit insurance cover being scaled back by Euler Hermes, one of the UK’s
biggest insurers.

Last December, The Bookseller, the trade magazine, said that Euler Hermes was
withdrawing its cover for suppliers to Borders UK and the retailer The Book
People from 31 December. At least one distributor responded by advising its
clients to reconsider their trading limits, reported The Bookseller.

According to an email that The Bookseller claimed to have seen, Euler Hermes
UK said that “the information we currently hold does not justify
maintaining the historic levels of cover being provided on this company”
in light of the “challenging” economic conditions in the UK.

Amazon, the supermarkets and the death of Harry Potter

It was not only the author JK Rowling’s army of fans who shed a tear upon
learning that her final Harry Potter book would be published in 2007. The
UK’s booksellers have also mourned the loss of a blockbuster stream of

But there are many other reasons why specialist booksellers are finding life
tough in a market where overall sales are declining. The most notable
contributors to an unhappy storyline for UK booksellers are the big grocers,
such as Tesco and Asda, offering glossy best-sellers and the inexorable
shift to consumers buying their books online at

Jonathan de Mello, the director of the retail consultancy at Experian, said: “The
main reason is that the [bricks and mortar book] market has been massively
eroded by the internet. On the internet you don’t have to pay for fixed
costs, such as for stores and staff.” One of the sector’s stronger
players, Waterstone’s said that like-for-like sales declined by 4.5 per cent
for the 16 weeks ended 25 April, reflecting an overall book market down by
about 4 per cent.

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