The legal corner is a bit complicated to describe. I'll try to lay out the pieces.
- Borders leases all of its stores, mostly on very-long-term leases.
- One of the big reasons that Borders filed Chapter 11 was to be able to get out of some of the worst leases.
- In March, Borders was given until September 14th to decide which leases to reject and which to keep.
- Borders' "Debtor In Possession" financing requires that Borders begin store closing sales 13 weeks before the reject/keep decision date (to allow time for the Going-Out-Of-Business sale). For the September 14th date, Borders must begin store closing sales by June 22.
- Borders was given approval to negotiate delayed decision dates with the landlords — for those stores they haven't already decided to close and reject the leases, of course.
- Borders successfully got delayed decision dates from the landlords on most of its "not yet decided to be closed" stores — 365 of them.
- Landlords of 51 of Borders stores have not (yet) approved a delayed decision date.
- In many of those 51 cases, Borders is paying very low lease rates, and the landlords probably would like to see Borders leave so they can re-lease the properties at higher rates.
- It would seem that the simple solution is for Borders to say, "We choose to keep those 51 leases," which they very much want to do.
- Unfortunately, "various creditor constituencies have indicated that they would oppose any such assumption outside of the context of a sale of the business as a going concern or confirmation of a plan of reorganization." In other words, the creditors are seriously concerned that Borders might not survive, in which case the kept leases (on empty stores) will suck away what little money remains to be distributed to the creditors during liquidation.
- Therefore — unless a sale of the company happens very quickly — come June 22, Borders must begin store closing sales at those stores that still refuse to grant an extension.