Borders agrees to settlement of Source Interlink retail supply claim

By Caroline Salls

Pittsburgh, Nov. 8 - Borders Group, Inc. requested court approval of a claim settlement with Source Interlink Cos. Inc., according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Source Interlink was the exclusive wholesaler of magazines and other periodicals to Borders under a 2007 retail supply agreement. Source also provided comprehensive managed inventory services on behalf of Borders.

The company said the agreement was terminated on Aug. 31 after it was clear that Borders would liquidate its remaining business.

According to the motion, Source filed a $5.96 million claim against Borders in May 2011 for goods delivered during the 20-day period before the latter filed for bankruptcy.

Borders said it disputed the claim amount and subsequently negotiated two claim reductions, including a $9,417 reduction and an additional $3,125 reduction.

Source agreed to the second reduction in exchange for payment of $746,875 of the allowed claim within seven days of court approval of the settlement.

Without the early payment, the claim would have been paid in full after confirmation of Borders' Chapter 11 plan, which the company said is scheduled for Dec. 20, the motion said.

Borders said the $5.2 million balance of the Source claim will be paid under the plan.

A hearing is scheduled for Nov. 29.

Borders, an Ann Arbor, Mich.-based retailer of books and other educational and entertainment items, filed for bankruptcy on Feb. 16, 2011. The Chapter 11 case number is 11-10614.

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